Frugality is worth as much as wealth

[DallasGuy]

Being frugal was more important when I first started saving. The multiplier effect of a dollar saved when I was 25 was alot more important than the multiplier effect of a dollar saved at 50. I'm not as frugal as I was when I was younger.

Watching my investment portfolio lose or gain thousands in a day makes scrutinizing how much I spend on a small individual item seem ridiculous at times...the funny thing is that I catch myself doing it all the time. Old habits die hard.

 

[Keim]

I view it as two havles of the same coin.

 

[W2R]

I view it as two havles of the same coin.

Me, too. The difference between the yearly income and yearly expenditures is more important than either by itself (whether in accumulation phase or in ER).

 

[template]

Techniques I employed in being frugal:

• develop and maintain a bias toward saving and away from spending
• marry a hard working, frugal spouse
• avoid debt at all costs except home mortgage
• buy modest house using a large down payment and a fixed mortgage.
• make a shopping list before going to a store, then stick to buying the items on your list once inside.
• buy everyday household items when on sale. Be aware of off season sales. I bought new winter jackets and vests for 75% off late in winter.
• be open to trying and buying generic products vs. name brand products. (Examples: Facial tissues, bathroom tissue, etc. For years I bought generic Cheerios-type cereal for $1.29/box instead of $3.29/box for the brand name Cheerios).
• purchase used items for hobbies rather than brand new items.
• avoid buying expensive designer and custom items for your hobbies.
• dress simply. My wife likes to buy some of her clothes at resale shops.
• use Linux (or even BSD Unix) software instead of Microsoft products. (saved me hundreds of dollars in both software and hardware)
• repair vs. replace. I have my boots resoled several times because the leather uppers last a lot longer than the soles.
• never, ever be too embarrassed to pick up coins you find on the ground.

 

[youbet]

For those of us not yet FIREd, expense adjustment is critical to wealth accumulation. The earlier we realize that and actually accumulate, the earlier we can FIRE...and use whatever we want then.:

Absolutely agree Rambler. OP opened the thread talking about wealth accumulation vs reduced expenses in RE, another subject, but I'm switched over now to what he actually meant (but didn't say).

 

[youbet]

The other thing is, I am not very big.

Ha

You stand tall in my eyes Ha!

 

[Shawn]

I have a 1980 Toyota Corolla, still going strong. It gets very good gas mileage and the insurance is relatively low. I average less than $500/yr in non-routine maintenance (water pump, clutch, alternator, etc), which is much less than the depreciation on a newer car.

I shop at a store called the Grocery Outlet. It sells products that were recently discontinued, have bad packaging, were trial items from the manufacturer, are perishables about to expire, etc. I bought two containers of butter yesterday for 10 cents each (the identical product sells for $2.79 at the regular grocery store). Sure, they have an expiration date of December 10, but that doesn't mean everything suddenly goes bad at 12:01 am on the 11th.

I think a lot has to do with a person's choice of entertainment/recreation. My recreation is essentially free (running, bicycling, hiking, etc). There is some initial equipment expense, but good equipment can last a lifetime.

I usually shower at work.

My electric bill averages $10-15/month. I have no clue why some people have such high bills. Turn it off when it's not in use. Simple.

My house can get down to 45-50 at night, but an electric blanket works magic and is incredibly cost efficient.

I usually buy clothes at Wal Mart or Target.

I usually eat at home, but when I go to restaurants by myself, I love fast food. There are many good deals. On Tuesday where I live, one can get 4 pieces of chicken (2 thighs, 2 legs) at Popeye's for $1.98. Last time they even threw in two biscuits for free.

Local fruit/vegetable stands are also cost effective.

I pay cash for my day-to-day expenses. This helps constrain excessive frivolous purchases.

It works for me.

 

[Rambler]

Renewable Energy and Frugality

I want to build a 1200 sq.ft house with 2 bedrooms that is energy self-sufficient. I'm thinking about super insulation, windmills, solar cells and geo-thermal heat pumps.

Nun, I have a solar electric system. I love it...it is fantastic to watch your electric meter spin backwards on sunny days. I'm hoping to get a Skystream windmill sometime in the future as a supplement. Just be sure to plan well. If you don't, you could end up having too much electricity, and giving it away to the power company (that is what we are doing now as we are posted overseas and the house stays empty 75% of the time). You my know these systems are not cheap. If your state has generous rebates, the payback can be much quicker. Likewise, rising electric rates make the payback quicker, in theory. But if you are looking for something to boost frugality, make sure you look into efficiency first! You will save much more by investing in efficient electrical appliances than you will by investing in renewable energy, so do that first, then invest in solar when you know just how much you will need.

R

 

[nun]

You my know these systems are not cheap. If your state has generous rebates, the payback can be much quicker.
R

I'm going to plan them into my new house form the beginning and look for as many tax incentives/rebates as I can. Any utility system is a big part of a house cost. If we start building energy neutral buildings and ammortarizing the cost of the systems I don't think people will see them as expensive.

 

[Rambler]

Planning it from the beginning is how we did it...and glad we did. It allowed us to create a back-up system with its own subpanel, powered by battery storage. that is not impossible if done later, but it is harder. By the way, we are electric neutral, but the stove still requires propane.

I also agree that if they were built standard with all new homes, no one would think twice about the cost, AND, the cost would go down based on the increased volumes.

R

 

[growing_older]

Making a budget from gross income didn't work so well for me. It did attract my attention to the tax outlay, and I did get motivated to try to reduce that, but didn't see much improvement. My "budget trick" is to make my budget on net - after savings have been deducted. My 401k comes out before I see the paycheck. My autopay to other savings comes out before I divy up the rest. Because my budget is based on my spendable income I'm more aware of the cost of each item, and think I have a better idea what my expenses will be come eventual FIRE.

 

[Eyerishgold]

• never, ever be too embarrassed to pick up coins you find on the ground.

Never am!

 

[Sweetlip]

The big expenses in life, IMHO, are interest payments (mortgage, car, boat loan interest), depreciation, and the cost of raising and educating kids.

Whilst you can make savings on day to day living expenses such as food, the savings on those things will pale into insignificance compared with interest, depreciation and the cost of kids.

So, for many years, I have been taking the long view approach to buying and keeping cars for as many years as they are safe to drive, saving to pay cash for my cars and boat, and teaching my adult kids, who would like cash hand-outs from time to time, the concept that I learnt in the book, "The Millionaire Next Door", to not make my kids into "economic outpatients". That is, once they have all grown up and have established their independent lives, they are truly on their own financially.

Whilst the cost of a gallon of fuel irritates, that is the small cost in running a car each year - the big cost is depreciation.

My wife and I are thrifty on many of our daily living costs but in truth, the savings made on those are inconsequential to our standard of living - which is very good.

By getting the big expenses of interest, depreciation and raising kids in control, and living within my means and saving the surplus, I am now very comfortable in retirement several years ahead of my original life's expectations as to when I would retire.

As an afterthought, I have also minimised transactional costs pretty well by living in the same house for 25 years and not trading in the old wife at any time over the past 32 years. (After all, she was the best that I could get with the car that I had!)

 

[Rustic23]

Sweetlip... nice post.

 

[Walt34]

I guess we're middle-of-the-road. We eat out at restaurants about 2-3 times a month, lunch at the expensive-but-really-nice one. Bought a nice house and two new vehicles after cashing out from an expensive metro area, but they replaced vehicles that were 14 and 18 years old. Barring accident or theft I expect them to last 15-20 years with meticulous maintenance.

Most meals are made from scratch - I made beef stew in an 8-quart crock pot yesterday, we'll eat off that for a week along with some veggies, the rest in the freezer. When I was working I brown-bagged lunch about 90% of the time.

We've decided that if we had it to do over again we'd buy a smaller house, but we're here, this is no time to sell, and moving is a royal PITA. And a two-car garage is nice, never had that before! And I can see in just five years that the vehicles will last a lot longer being garaged. Both still look like they were delivered yesterday so maybe that's a "break-even". Time will tell.

I'm the one who would like to get in the car and "just head west" (we're on the east coast) but wife is more frugal and it's not worth the fight, so some day trips and a small fishing boat suffice for me. Both sides of the family say we're both much more relaxed than we were five years ago. We're not actively saving, but we're not withdrawing from the deferred comp. accounts yet either so that continues to compound. After a certain point saving becomes, well, pointless. I want my will to read "Being of sound mind and body I spent all my money while I was alive!"

 

[clifp]

The big expenses in life, INMHO, are interest payments (mortgage, car, boat loan interest), depreciation, and the cost of raising and educating kids.

Whilst you can make savings on day to day living expenses such as food, the savings on those things will pale into insignificance compared with interest, depreciation and the cost of kids.

As an afterthought, I have also minimised transactional costs pretty well by living in the same house for 25 years and not trading in the old wife at any time over the past 32 years. (After all, she was the best that I could get with the car that I had!)

I agree with you on the big picture. Although I would say the cost of toys, fashion, and eating out, can rival car payments for many Americans.

I also find that many very frugal people have an aversion to risk when it comes to investing. They'll be justifably proud of saving $20 with coupons and smart shop on groceries each week, but may have $50,000 CD at 3.5% in their local bank, instead of getting a 6% CD a Pen Fed, or better yet having a Vanguard stock index fund.

 

[Helena]

Tonight on the Dave Ramsey TV show,
he said when the top 400 wealthiest
people were asked what was their
number one wealth gathering advice...
the vast majority said: Stay out of debt !

 

[Helena]

Again, don't get me wrong, I squeeze value out of every dollar I spend. But I think accumulating adequate dollars so as to not have to squeeze too hard is a very good thing. And it's possible to learn to spend less as you go along in RE, while it's too late to accumulate more wealth.

It is not too late to accumulate more wealth in retirement.

I am retired... have a very modest income... but am still able
to add more money to my nest egg by living a comfortable,
frugal lifestyle.

 

[Helena]

I also find that many very frugal people have an aversion to risk when it comes to investing. They'll be justifably proud of saving $20 with coupons and smart shop on groceries each week, but may have $50,000 CD at 3.5% in their local bank, instead of getting a 6% CD a Pen Fed, or better yet having a Vanguard stock index fund.

You can't calculate your true net worth... until you cash out of the tulips

 

[Kronk]

Be very aware of recurring payments, they add up! In retirement, a 4% withdrawal rate means you need 300x a monthly payment in savings. Take an $80/month cell phone bill. You'll need $24,000 in savings in order to safely pay for that $80 per month.
I am much more wary of recurring payments, even small ones, than I am with one-time purchases.

 

[youbet]

It is not too late to accumulate more wealth in retirement.

I am retired... have a very modest income... but am still able
to add more money to my nest egg by living a comfortable,
frugal lifestyle.

Know what ya mean Helen. DW and I enjoy first class world travel, McMansions, luxury cars, fancy electronics, pricey entertainment, giving generously, and leaving the lights on when we're away. But, we do it all frugally, but comfortably, and therefore need next to no income. We also enjoy seeing our portfolio double annually.

 

[FinanceDude]

I agree with you on the big picture. Although I would say the cost of toys, fashion, and eating out, can rival car payments for many Americans.

I also find that many very frugal people have an aversion to risk when it comes to investing. They'll be justifably proud of saving $20 with coupons and smart shop on groceries each week, but may have $50,000 CD at 3.5% in their local bank, instead of getting a 6% CD a Pen Fed, or better yet having a Vanguard stock index fund.

I thought Pen Fed was for govt workers and military vets, am I wrong?

Banks make a LOT of money off their depositor's ignorance. One time I showed a guy who just rolls CD's how much money he could have had in a balanced fund for 20 years when compared to the average 5% rate he got on the CD's.........and there was a LOT of silence........

 

[SecondCor521]

I thought Pen Fed was for govt workers and military vets, am I wrong?

You can join if you're a relative of a vet, so I qualify because my Dad was USAF. Failing that, you can pay $20 to join some organization -- NMFA, I think -- and then join PenFed.

They're a top notch organization. I've had a second mortgage and a credit card with them and been very happy.

2Cor521

 

[SecondCor521]

whoops, double post.

 

[TickTock]

DW and I enjoy first class world travel, McMansions, luxury cars, fancy electronics, pricey entertainment, giving generously, and leaving the lights on when we're away. But, we do it all frugally, but comfortably, and therefore need next to no income. We also enjoy seeing our portfolio double annually.

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