Is Frugality a Super Power?

I did not retire in my late 40s simply by making loads of money or by being a whizz at investing, contrary to what most people think.  In the beginning like most, I kind of sucked at investing and my returns were all over the place.  Also like most, I didn’t make a lot of money at the beginning of my career; it took years to build up my salary and eventually became above average as I entered management level.  Even so, were talking a public service government job, decent pay, but no jets or Ferraris… a normal income. 

The biggest contributor to my early retirement was frugality – always being careful with money.  Don’t get me wrong, maximizing your salary and investment income is necessary, as you need something to work with after all.  But managing money ties it all together.  It’s actually very basic, yet so difficult to achieve for most.  You simply need to spend less than you make, invest the difference wisely, get the snowball rolling and let time take care of the rest.  That is the secret sauce and its available to most everyone. 

So why is it so difficult to implement a basic money management plan?  There are so many reasons the odds are stacked against you.  Let’s just touch on a few obvious ones: Money management is not taught in school, which is kind of odd right?  You get out of school being able to solve a 3 sided triangle but know nothing about investing.  The next problem is that you are bombarded with hundreds of ads a day trying to make you buy something you do not need.  Add to this, most everyone around you drank the Kool Aid and now have shiny new things. The pressure is everywhere and its super difficult to resist all temptations. I bought a 20-year old corvette in my 20s, which was really fun, but financially stupid.  No one is immune to consumerism, its always around us, but it needs to be managed.  Let’s face it, without consumerism, life would be boring, we would live in hovels wearing old potato bags and shoes made of old tires.  Not quite a life for most, even me.  There has to be some acceptable balance where you can still buy fun things, do fun things, but yet still retire early enough to enjoy other fun things.  

So is frugality a super power?  Not really.  The super power is more in the attitude necessary to truly make frugality effective.  The “I do not care what others think” is really what can liberate you from society’s grip.  The kind of car you drive, the clothes you wear, the house you live in, etc. I am pretty sure people thought I was weird as most everything I did was different than everyone else.  For every purchase, I had an automatic check of: do I really need it?; can I buy it used; can I make it? To this day, even though I am retired, I still follow these rules.  A simple example that demonstrates this attitude  recently came up while I was traveling through Mexico. It was the use of helmets while rock climbing.  My girlfriend just laughs as everyone else has these fancy specific rock climbing helmets while I wear my cycling helmet.  It’s a helmet, right?  So I do not need another.  I apparently look kind of funny… but I do not care. Super Power? Maybe…

The Small, the Big and the Stupid

There are a lot of resources about how to be frugal and this article is not really about that.  What I am trying to focus on here is the concept and the power of harnessing frugality and the attitude that you need to make it work.  To do it in a big way, you need to be good with people thinking you are a weirdo.  Winning this game is about staying on top of small potentially reoccurring expenses like lattes or cable tv and big items like cars, boats, and homes.  Many of these purchases are unnecessary,  but masked as life necessities (do your really need a 3000 sqft home… some actually do… most don’t).  Avoiding stupid mistakes on these big financial decisions have big benefits to your future because of the time value of money.  Every dollar saved early in life can compound and snow ball into huge sums.

Let’s start with the small things… Eating out!  For the most part, I was very good at bringing my lunch to work and mostly avoided buying junk food at the cafeteria.  I remember several occasions over the years where coworkers would question why I did not buy a coffee or snack.  I would normally start talking about compound interest etc… and there you go, I am the weirdo.  There was a year where things got really busy at work and I actually started grabbing a meal every day at the cafeteria.  I thought it was great and now could see how cool this eat at work culture was.  I was making more money and my new work lifestyle reflected it.  At the end of the year I tallied up what eating a quick lunch cost…WTF, 4000$.  OMG I could not believe how this could be so much, and to make matters worse, that did not include eating out on weekends.  I also gained over 25 lbs.  I put a stop to all that, and became a weirdo again.   

The next example is about the big things like cars. I really like cars, especially sports cars, but I know that cars are an expensive depreciating asset.  Even though I like cars, I have never bought a new car, ever, and likely never will.  Again, there are plenty of websites on frugality, the point here is being able to do your own thing regardless of what everyone else does.   Because I refuse to buy new cars, you will often see me driving cars anywhere from 10 to 20 years old.  I have had many towed to the scrap heap over the years.  One day, at work, there was a need to transport some of my employees to an afterwork social event.  Oddly only a few people had their vehicles with them that day so we were a little short for carpools.  So I said no problem and walked 15 minutes to my cheap monthly parking spot and retrieved my 15 year old Toyota Tercel.  One of my up and coming employees mentioned that this is not the car that he envisioned someone at my level driving.  He paused, then said, and I quote “you do things differently don’t you…you know that is really smart”.  Then he went on to defend why he just bought a new car. A decision which mostly revolved around the safety requirements necessary for having a child.

I guess I need an example of the fun/stupid.  Well let’s go back to that corvette I bought in my early 20s.  It was an emotional purchase, expensive and not in line with my frugality at all.  Not only that, had I researched it more, I would have bought a better model that at least could have increased in value over time.  Luckily, that purchase was short lived as I needed the money go back to university, so i did manage to resell it at a somewhat reasonable loss.  But this could have been much worse.  Everyone makes mistakes, and these need to be minimized as much as possible.  Our emotions are always working against us when it comes to the forces of consumerism. 

How happiness is the answer

The earlier one can break away from society’s expectations, the easier it is to build wealth.  The three examples that I provided have made a big difference in my life with little if any loss to my happiness during that time.  There are many more things I did that also contributed to this approach, and I may touch on these in another article, but these three are the biggest ones.  People simply need to stop spending everything they make since it does not make them happier.  For most people, getting away from work and spending time doing what they love is the answer.

There is a balancing act where you must be comfortable with living now and living later, and that is entirely a personal one.  Some people are quite happy to work and spend everything they have knowing that they will need to work until they are in their mid 60s or later.  I have no problem with this, if this is what they truly want. I could have easily retired in my early 40s had I not travelled to Europe so much, or built my first house or bought the stupid corvette. Again, life would be boring without spending money and experiencing it when you’re young.  The right balance is tricky and personal. My message here is that it’s fine to spend money as long as you achieve your financial goals and do not end up old, poor, and alone.  In the end, everyone has to figure out how to be happy in life and the sooner they realize that it has little to do with how much much money they spend per month, the better off they will be.  Beware, however, that taking a step away from the consumerist system will make you a weirdo but at the same time it will free you from all of societies expectations.