When somebody first starts to pay attention to their finances (which usually happens after they get into a large amount of debt), the default solution is always to cut back on spending.
There are a number of reasons why. It’s easier than making fun of my many shortcomings. Most people who aren’t the Early Retirement Extreme guy have plenty of excess fat to cut from their budgets. And it really feels like you’re sacrificing when you go without Starbucks or whatever your budget cut of choice is. That feeling is important to people, believe it or not. Go ahead, don’t believe it. See if I care.
This goes fine for a few months, then everyone gets the same realization. Frugality sucks. It sucks balls.
I’ve never been a big fan of frugality advice. Life advice that recommends people cut out things doesn’t usually work. Diets suck, which is why I’m going to eat a big bowl of trifle after I hit the gym tonight. Cutting the cord is all the rage, but the fact is I’d much rather have BNN and all the sports channels available to watch whenever I want. It sucks too.
Frugality sucks the most
It’s the whole reason why 99.92% of all budgets fail.
Money has a way of permeating into every aspect of our lives. We exchange it for fun things like buying Nelson his most treasured material item, a coffee mug with a kitten on it. Go ahead, mock me. I’LL FIGHT ANYONE I DON’T EVEN CARE. You can also use it to buy not so fun things, like new socks or your electric bill.
There aren’t many ways you can cut down on essentials short of sitting in the dark, goddammit it. IF THAT BILL GETS ANY HIGHER I SWEAR TO GOD AGNES, I’LL DO IT.
So we cut back on fun things. Meals out get substantially cut or eliminated. So do take-out coffees and new clothes and a million other things we like. It gets to the point where everything the least bit entertaining is eliminated.
Oh yeah. That sounds like a great way to live. And then we wonder why these things have a higher failure rate than Lamar Odom going to rehab (NOT THE LEAST BIT TOPICAL).
But at the same time, there needs to be a place for frugality in everyone’s lives. I don’t care how rich you are, you’ll eventually go broke if you insist on making it rain hundos at the club. Frugality sucks, but being broke sucks more. So we compromise. We only get coffee or do for dinner sometimes. Vacations are a treat, not a full-time lifestyle choice. We help out one World Vision kid rather than promising a whole third-grade class we’ll put them through college.
The secret to mastering frugality
Even though frugality sucks, it still needs a place in everyone’s life. At least until they start earning unlimited amounts of money.
I believe the difference between people who can successfully stay frugal even after they start amassing serious wealth is low expectations. They’ve trained themselves to get happiness over little things.
I’m like that. I like nothing more than hanging out with like-minded friends, watching a game or just talking about our lives. Other people might like hiking or reading or video games or some other hobby that doesn’t cost much. Cocaine and high-class hookers aren’t high on their list of priorities.
This comes naturally to many people. Many others will struggle with it for their entire lives.
The solution: making more money
It doesn’t matter if you’re naturally frugal or not. Making more money will help whether you’re cheap as balls or you’re a real spender.
Ultimately, personal finance comes down to two factors: income and expenses. Everything else is just noise.
If you can increase income, the expenses don’t really matter that much. And thanks to passive income, it’s really not that hard to convert savings into more dollars. Both can be going up, as long as one rises faster than the others it’s all good.
This is why I’ve never really sweated lifestyle inflation. It’s only natural to increase your standard of living if you’re making more money. What’s the point of hustling if you’re not going to get anything from it? As long as you don’t add $300 in monthly expenses when you make $200 extra, it’s all good.
We all need some sort of frugality in our lives. But there’s no reason to go nuts with it. Extreme frugality sucks, I don’t care who you are. Nobody is having fun washing Ziploc bags to use again.
Which is why 90% of my efforts are spent trying to earn more money, ideally passively. It’s a lot easier to scale up investing than it is frugality. Why spend time trying to save $10 when the same amount of time can be spent making $100?