The High Cost of Spending Money

I saw an article about the FIRE (Financial Independence, Retire Early) movement on the first page of my financial news today. While it wasn’t anything new, I was surprised at how it stuck to the facts and avoided the typical: These people somehow don’t spend all of their money on things, isn’t that weird? It got me thinking perhaps frugality is gaining popularity.

What I also found interesting is how frugality from an early age is an excellent predictor at future net worth. I think this gets to the core difference between people who retire early and those who do not. It’s easy when we are born with these skills, but being cheap can be learned by anyone with enough effort.

How I became Incredibly Cheap

For me, being cheap comes naturally. Spending a small amount of money makes me feel good, spending a lot of money makes me feel very bad. I bought a new car once when I noticed I had a lot of excess cash. I regretted it immediately and will never buy a new car again. Instead I learned how to maintain and do repairs on older cars to save money. This behavior is probably different from most people who feel good after buying new and exciting things.

I always look at the long term effects in life. Having money means I don’t need to get more money. Needing to get more money gives me anxiety because: What if I am unable to get more money? Thus every purchase is done through the lens that having money is better than spending money. I would only break this rule for things that I need or make a significant positive impact on my life.

Can Others Learn to be Frugal

I notice people that do not have this natural tendency have to maintain their ideal monetary restrictions with a “Budget”. I see them pitched everywhere for financial guidance. I have never once in my life done or maintained a budget. I also retired comfortably in my late 20’s.

I’m not saying budgets are bad, they can be a good indicator to show how well you are succeeding at your financial goals. However, they should not be relied on. I think Budgets set you on a “half-measures” path. Instead of really instilling a sense of frugality you are allowing yourself to indulge up to a certain point. Anyone who has eaten a bag of Oreos knows it is easier to simply not have a bag of Oreos than to stop eating after a single Oreo.

Instead think of it like this: Your budget for everything is $0. Ideally you would spend absolutely no money and save everything. Since it’s unlikely you can do that, you will need to put everything on a scale of how much you need it and how much it will improve your life. There are no categories here, every dollar you spend is a dollar above your goal of $0 and puts you in a worse position. If you need a costly car repair or your rent has increased significantly than the scale for everything you buy shifts more to only the absolute essentials.

And then this is the most important part on your journey. You keep saving until you have enough money to reliably cover your expenses for the rest of your life… and then you keep saving. It never ends. This is where most people have the hardest time with. It’s easy to briefly save up money before making a big purchase. You save up, then you splurge, then you save up again. The only way out is to cut out the splurging. Permanently.

You need to create a mental shift in your priorities where you can feel comfortable living frugally forever. It doesn’t matter if someday you will have more money than you could ever possibly spend, you will still want to save money. Spending money hurts, it’s taking something you worked hard for and throwing it away for impermanent happiness. The only thing that matters is that you are free. You can be free of needing to working, needing to do work for others, and capitalism in general. All you need is the will to have all the money in the world, and not spend a dime of it.