Recently Mrs. Full Time Finance and I have been talking about whether I am a little too stringent on finances. Now, this does not mean she feels I should spend more money, it just means she wonders if I stress too much about whether we will meet our savings goals. This discussion usually evolves into a reminder that our goal for this year is to save 1x our projected retirement expenses, and that we are no where near in trouble financially. We usually end with an interesting twist, a reminder to both of us with a question, are we frugal?
Now, I’ve spoken before on this blog of not being a fan of the word frugality. The word frugal implies self imposed deprivation. However, as you’ve seen repeatedly on this blog I much prefer a focus on only purchasing what we truly value, rather than depriving ourselves. That being said the question of whether living focused on value means I am not frugal is an interesting one.
So What Is Frugal Financially?
Frugal can mean a lot of things to different people. As a purely percentage based analysis we are frugal. We have a savings rate equaling or exceeding 50% depending on which items we consider as income or savings. Note the caveat means 50% is the conservative number. I exclude certain income from both income and savings, like RSU’s as they simply roll directly from company stock to investments elsewhere. I also do not tend to count interest payments on our mortgage or any car payments as savings. In any measure this savings rate far exceeds the norm. So on an expense to income analysis we are what most people would call frugal.
Now some of you recall we are a higher income family. That being said, even in raw dollars we are probably what most people would consider frugal. Consider our monthly variable discretionary expenses. For the purposes of this article I will exclude these expenses from my monthly variable discretionary expenses: Mortgage, Electricity/Heating Gas, Car Payment, Taxes, Health Care, Day Care, Insurance, and large Home Repair/Car Repair (but not normal maintenance or small repairs). Everything else averages about 1K a month or about 12K a year after accounting for things like credit card hacking and other cash back schemes. This means we spend less than 1K a month on things like phone, internet, tv services, gym, food, eating out, gasoline, entertainment, trash, vacations, maintenance and beautification of our home/cars, etc. I’m sure you’d agree that meets most peoples definition of frugal.
Do We Appear Frugal?
However, take a step back and look at say our Facebook page or what we do with the money. Last year for vacation we went to Maine, Germany, and Martinique. We also did some camping trips. This year is looking to be similar.
We eat out once a week, have 3 cars (one of which was bought new 2 years ago and one of which is a newer Corvette), live in a decent size home (albeit 40 years old), and have 2 kids. From the outside looking in we appear to be the big spending Jones. I confirmed as much recently when commenting on a post the other day on what do Personal Finance Bloggers Drive. Guess who had one of the most expensive set of cars… Similarly, at my high school reunion one of my classmates openly asked me if I was rich given all the pictures on my Facebook of exotic locations and high end expensive cars. So by outward appearances we’re not Frugal.
So What is Going On?
How can we only expend 12 K a year on discretionary variable monthly expenditures and yet live such outwardly flashy lives? Easy, we choose things we value and splurge on them. Other items we either do not purchase or we spend very little on. To name a few:
- We eat out once a week. What I did not mention before is we tend to eat out more for convenience than different foods. My wife is an excellent cook and we’re generally not wanting of an expensive dinner while eating out as a result. We also tend to eat out at cheaper times of day like breakfast or lunch. As such we’re spending very little on food as a family of 4.
- We have services like Netflix and Amazon prime instead of cable TV.
- We do a lot of credit card hacking and cash back schemes like Ebates to pay for the travel aspects of our life.
- We purchase new cars but we do so about once every 10 years or so. My Corvette is 9 years old at this point for example.
You get the idea.
So the point here is you can live a happy life based on what you value with little money, so long as you remember to focus on those things and exclude/limit the rest. You can be what some other people call frugal, without depriving yourself of fun and happiness. All you need to do is learn to choose what brings you the most happiness. To do that, take a step back from your life. Do not think about I want this latest item. That leads to too much influence from marketing or your latest whim. Do not even think about a specific thing.
Instead think about how you spend your time. At what times are you the most happy? It’s different for everyone, for my family it’s hiking at some natural wonder. It’s also driving a nice car on a deserted road. Guess what? That’s what you value. Buy more of that and cut the rest out. It really is that simple to get ahead and be happy.
Do you consider yourself Frugal? Do you see me as Frugal based on what I’ve written? Do you know what you value? We’d love to hear your thoughts in the comments.