“Live like no one else, and you can live like no one else.” Dave Ramsey
The American way is to not save (about 7 in 10 have less than $1,000 in savings), to take on debt (average credit card debt for households with a balance is over $16k), and to feel like we can “never retire” (one quarter of us over 50, in fact). For those of us on the journey of financial independence and/or early retirement, aggressively paying off debt, or saving to pay for a huge financial goal in cash, we have to get used to living like no one else we know in the real world. And that can be a challenge.
When everyone else you know spends all they make, and then some extra by taking on debt, it can feel isolating to choose a different path. Your friends are going out to eat multiple times a week, while you’re mostly eating at home with eating out a rare treat. An acquaintance posts on Facebook about the brand new SUV they purchased, while you’re still driving your 10 year old car with over 100k miles on it. A co-worker tells you all about their upcoming annual trip to Disney world, although just a few months ago they were telling you how they couldn’t afford to set aside the 6% in your company 401k to get the match, while you’re excited about your upcoming camping trip. And the list goes on.
Today I’ll talk about how frugality looks different for different people, your FIG factor, and embracing your frugal weirdo.
Frugality Is Different For Everyone
When people hear “frugality”, particularly outside of the personal finance community, they usually think of something like the Extreme Cheapskates or Extreme Couponing shows on TLC (because, of course, they probably have cable). But real frugality isn’t about squeezing a dollar until it screams for mercy. It’s about spending spending in alignment with what you value most, and not spending on the things that don’t matter.
I’ve always remembered a story told by Amy Dacyczyn, author of the timeless “Tightwad Gazette”, who had a conversation with a close friend one day. Amy was the married mother of six, whose family had big goals. They wanted to save to buy a large house in rural New England, she stayed home with the kids, and her husband worked in the military. She had developed hard-core, black-belt frugal tips and tricks to help them meet this goal while paying cash for everything (including new cars) on the way.
Her friend was different. She was also married, but with no kids. Her and her husband both worked full time, earning good solid incomes. Her husband was a chef, so they enjoyed eating out frequently at new restaurants. But they also had a big goal – taking a year off of work to travel the world. They had been saving aggressively for this goal, but not in the same “black belt” way as Amy. Her friend was almost embarrassed to admit that “we’re just not frugal like you”.
Amy leaned over and excitedly told her friend, “But what you’ve told me is the essence of frugality.”
You know how they say that “personal finance is personal?” Frugality is also personal. It can look different for different people, in different life situations, and different goals. This is why the “one size fits all” kinds of articles, filled with advice, usually don’t work for everyone.
Frugality looks different for the single mother of three making $40k per year and working to pay off $20k in credit cards and car loans over the next two years, than the married dual income couple with no kids, making $100k combined, who want to save $40k for a down payment on a home in five years. Your need for a specific level of frugality is a direct function of your income and your goal. I’ve dubbed this the FIG factor.
Your FIG Factor: F = I – G
- F = The amount you need to live on in order to achieve your goal – representing the level of frugality you would need to live off this amount
- I = Your net income
- G = The amount you are putting aside for your goal(s)
Yes, it’s a simple formula – but it’s early in the morning as I write this, and who wants to do complex math first thing in the morning?
The bigger your goal in relation to your income, the more frugal you need to be. For many in the Financial Independence community, they have an aggressive goal, potentially one that consumes 50% – or more – of their current income. This means they need to be much more frugal than someone who has a smaller goal, one that they’re working toward over a long period of time, or a larger income.
I’ve talked before about how getting to know your dreams is one of the first steps on a solid financial path. How can you get where you want to go, if you don’t know where you’re going? Sure, you can just randomly save money (which is a fine thing to do), but without a specific goal or dream you’ll have no idea if you’re on track. Would you be able to ratchet up your spending and still achieve your dreams? Or do you need to cut down your lifestyle to be able to achieve what you really want? Perhaps you could accelerate your goal by increasing your income, or increasing your frugality.
Embracing Your Frugal Weirdo
To achieve financial independence and early retirement, you will need to live differently than others at your income level who are spending everything they make. This doesn’t necessarily mean you need to separate two-ply toilet paper into a single ply, wash and reuse aluminum foil, or refuse to turn on any lights after dark. You can still live a fun, joyful life without spending everything you make.
On this path you need to build up a thick skin to the judgement of others. Some people just don’t understand others who don’t spend everything they make. In fact, sometimes they’ll take your frugality as a personal attack on their lifestyle choices. They may think that you’re “less successful” because you don’t drive a fancy car, or “not cool” because you’re not going out to eat all the time. They just don’t understand why someone would want to make a different choice, to spend in alignment with their values, and save in alignment with their goals.
Growing up we learn that it’s bad to be different. Those of us that are different than our peers get mocked in school, where being like everyone else is the way to “fit in”. It continues in the working world, where standing out and being different than your peers can be risky. Isn’t it better to just blend it, be like everyone else, and never need to risk being mocked for being different?
No, I say.
So embrace your dream, and your frugal tendencies. Remember that if you do what everyone else does, you’ll have what everyone else has – debt, no savings, and no way to retire. So instead do what no one else is willing to do, so you can achieve what no one else does.
I Want To Hear From You!
What’s your FIG factor – are you high on the “need for frugality” scale in order to achieve your dreams on your income? Or perhaps you don’t need to be as frugal because your income is higher or your goal is lower than others in the finance community? Have you embraced your Frugal Weirdo? Let me know in the comments.
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