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August 30, 2005
Taking a Step Back
I have taken a little bit of flack for a few of the articles I've written here that advocate penny-pinching and saving over spending. Most of it is along the lines of, "What good is it to have money if you're never going to enjoy it?"
There's something to be said for that, right? Why have money if you're not going to be happy?
What's My Motivation?
Well, the truth is that I do want to enjoy it. I want to jet off on exotic vacations, and get waited on hand and foot, and have a driver named James that will take me wherever I want to go (which would most likely be a very expensive restaurant where I would eat things that I'd never touch in normal circumstances). I want all of that!
The problem is that I want to sustain that lifestyle. I don't want it to end. I could go all out for a little while, if I spent all my money and went into debt. Heck, I work hard and make decent money now -- I could live in relative luxury (though I might have to let James go) without acquiring debt for as long as I keep my job.
Looking at the bigger picture
But when I decide it's time to retire, there wouldn't be anything left. I would have to rely on the government's management of my social security for the hope of a livelihood. Will there even be social security when I retire?
And hey -- I might even want to retire early. What then? If I've spent all my money, properly enjoying it as I went along, I don't have any option but to continue working to get more.
If, on the other hand, I sacrifice and save as much money as I can now, eventually I will reach a point where I have investments that produce enough passive income (interest, dividents, etc.) for me to live without working.
At that point, all of my income can be used to build that investment base even further, producing even more passive income. It's a cycle that builds on itself allowing much greater accumulation of wealth than I could expect relying on my active income (work) alone.
You see, there's a point to all this frugality, and it's not so that I can become a miser who lives in a shack only to leave millions to a goldfish. I live like this now to become rich later. If I do a good enough job of it, that might be long before I would otherwise be able to retire. Then, I'll be living like a king, and I'll be doing it indefinitely, with no worries about how to keep up the lifestyle. There will be a lovely "welcome back" cake for James.
Posted by Frank at August 30, 2005 8:43 PM
Comments
Posted by: Matt
at August 31, 2005 2:04 AM
I agree with you, HelloDollar.
Ramit from "I will teach you to be rich" has pretty much said the same thing.
Being rich means you are financially independent and can retire or continue to work, but you will NOT have to stay in a job that you hate, just because you cannot afford to quit.
Posted by: Gerard
at August 31, 2005 2:07 AM
I wonder if part of the anti-penny pinching sentiment comes from folks who are caught up in the "keeping up with the Jones's" syndrome and don't understand why others don't see affluance as a measure of who you are as a person.
Posted by: jim
at August 31, 2005 7:28 AM
I agree with you and the above, especially the "keeping up with the Jones'" comment. I'm all for spending money on me; I like that. But for me, saving money and being frugal is ultimately about spending the money wisely. Do I want to spend $4 on cup of coffee 3x a week, or do I want to put that money towards something more meaningful: a vacation, retirement, or a nice(r) piece of furniture? Saving is not just for its own sake, unlike a lot of spending (an attitude that apparently drives the anti-penny pinching sentiment).
Posted by: Todd
at August 31, 2005 7:48 AM
for me, savings = freedom. freedom to not have to work crappy jobs, freedom to take vacations, freedom to turn hobbies into careers. so i wouldn't really listen to the "anti-savers". there are enough of us who enjoy reading your site as-is. as todd said above, it's about spending money wisely. you do a great job of pointing out how relatively simple changes to your lifestyle can create savings over time. keep it up :-)
Posted by: rob
at August 31, 2005 8:03 AM
I completely agree with you. I pinch my pennies now so that I'll have a rainy day fund or retire a few years early. I still enjoy spending my money but at least this way I'll have something to show for it.
Posted by: Audrey
at August 31, 2005 9:50 AM
I have to agree 100% with what everyone has been saving (er, I mean saying). Saving a little now pays off big in the end.
I look at my own dad as a perfect example. When he was a kid, he was relatively poor. He lived on a farm. (They didn't think of themselves as being poor, but they didn't have the things I take for granted every day). He paid his way through college and became an engineer at Chrysler. Since he wasn't used to having any money, he was really frugal about it. He saved everything. Now, almost in retirement, he's building his dream house, golfing every day (weather permitting of course), going on cruises, ski vacations, etc.
Personally, I think the key is to live below your means. I feel my dad saved money simply because he didn't think he needed to spend it. In the end, it paid off.
Posted by: Jeff
at August 31, 2005 3:57 PM
Thanks for all the encouragement! Just to be clear, I'm don't advocate spending *no* money now. I have a comfortable life -- just well below my means.
Even long before I am able to retire, the freedom that provides from worrying about what I'd do if I lost my job, or from having to take a job I don't want, is well worth it. So it pays off now in mental health, as well as later.
Posted by: Frank
at September 1, 2005 9:05 AM
Once you get on the path to eliminating debt/building wealth, a lot of people treat you like you are crazy. In a way, you are behaving 180 degrees out-of-phase with our culture, so you appear irrational.
I have a friend that brags about his new McMansion with a 35-year interest-only mortgage and literally laughs off his two car payments, massive student loans and credit card debts. Meanwhile, I’m bragging to him about paying off my modest car or an old credit card. He defines material success as being seen in a big house or nice car (even though he will never own either); I define it as not owing a dime and building investments.
Our financial value systems are diametrically opposed which can create some tension. Expect this tension and welcome it. Convincing people to be as “crazy” as you is an invigorating and inexpensive form of entertainment!
Posted by: inkling
at September 1, 2005 9:24 AM
I agree with the people above who have said that you will have people that, to put it nicely, will call you crazy.
Everyone at works laughs at my car (a 8 year old compact car). But they don't laugh at my bankaccount, or my investments.
Posted by: Gerard
at September 2, 2005 12:21 AM
I think we need a well thoughtout frugal manifesto for all the frugies and conservors amongst us.
Posted by: HenryBemis
at September 8, 2005 9:06 AM
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Playing the antagonist - i just hope you're around to enjoy it.
On the other hand there are all kinds of reasons to have money saved and available other than for when you retire. You might not know what you want to do with it now, but if you're not saving then when you decide you want have it for when that moment arises anyway.