I was chatting with one of the members of my credit union's supervisory committee after our meeting today. We had just talked with the CEO about the ongoing banking bailouts, buyouts, and other assorted taxpayer deficit bonanzas, and we all recounted stories of investments becoming worthless amidst company bankruptcy.
Then my friend's tone shifted, and he said that his frugality was among the best return on investment he's gotten. Let's look at a few aspects of this:
- He kept a job for many years and has a pension. This by itself isn't frugality — and many fewer people have pensions waiting in the wings now — but the analogy can be made for making regular contributions to retirement accounts.
- He drives a 25-year-old car. He's just to the point of absolutely needing another one. "It's only after five or ten years that a car will ‘start paying you'" because the cost of ownership tends to be less after a while than it is at the beginning.
- He has lived in inexpensive housing.
- He eats in a lot. Eating in restaurants is usually much more expensive than preparing food at home.
- When he does eat out he makes the entree stretch for two meals. It usually can.
- He's sensitive to prices on utilities like phone and Internet.
- He cuts his own hair.
He had suffered his own share of investment losses but spending less than he's earned — and being used to a lifestyle that continues to let him spend less than he's bringing in — is what lets my friend do as he wishes with his time in his retirement.
I agree with the fact that frugality is the best way of ensuring a return on what you earn. In my post (see below) about budgeting, I said that it is much more likely you'll be better off by spending less than it is to invent a new product, win the lottery or create a successful business. It's something we can all do.
http://retire-at-40.blogspot.com/2008/09/budgetin…
Being frugal is a good return on your money and YOU are in complete control of how you spend your money. So no matter what happens on Wall street or to the economy, you can be in charge of your spending.
It might be a boring lifestyle, but sure it is one that will last.
Being frugal does pay off in the end. Depending on what you are being frugal for sacrifices are always necessary. If there is a relatively inexpensive item I want but know I don't have the direct cash, I will not go out on a weekend and use that money for the item. Granted that is a smaller situation but the same principles apply. Not everything your friend does would work for others (cutting my own hair), but its whatever works for your own situation.
Craig
http://www.budgetpulse.com
Being frugal can reign in humility and gratitude for what you have. While we all strive to maintain a more humble existence, we can't completely deprive ourselves of everything. We need to make sure we learn to experience some pleasures of life. They don't need to be expensive, just creative enough to have some fun along the way. The challenge is to live frugally, but feel like a million bucks along the way!
One of the great things about saving money is that it is "tax free". If you earn another dollar, you're going to pay taxes on it. But if you save a dollar, you keep the whole dollar. This makes frugality especially appealing to me.
I kept my last car 19 years and I hated having to give it up. It just didn't feel reliable any more. I'm a little jealous that your friend's car made it 25 years 🙂