Confessions of a Cheap Bastard
My evolution from "YOLO" to "frugal" to "cheap". I may have taken this all too far.
Confession time. Lately, I’ve been sweating the small stuff - the little $10 decisions that we are confronted with every day. And it’s unhealthy.
Spend all you want, you’ll make more
In my know-it-all early twenties, I would freely drop money on whatever I wanted. As a consequence, I didn’t deposit a dime in my 401K for more than a decade.
“My capacity to earn is greater than my capacity to save,” I’d say. “I can only save so much,” I’d rationalize. “What’s the opportunity cost if I’m always stressed about saving a few dollars here and there?”
That was my mindset. Saving money had its limits. There was a hard floor. My income potential, in contrast, was boundless.
What I didn’t understand then was that a big salary, without saving, is the pathway to STUFF, not WEALTH.
I didn’t understand that savings can compound, and it is compounding, not a big salary, that makes you wealthy.
“A big salary, without saving, is the pathway to STUFF, not WEALTH.”
What I did understand then, if only subconsciously, was that 25-year-old Allen could (and should) do things that maybe 50-year-old Allen could not (and should not) do. To be honest, 25-year-old Allen should have done even more.
Fast forward to today, and I’m excited to find an orphaned Aldi shopping cart in the parking lot (If you know, you know). I’m thrilled to find a $2 shirt at Goodwill that fits. I drive ten miles out of my way to save $1 on coffee.
But sometimes I worry that I’ve gone too far; that I’m now thrifty to a fault. Dare I say that I’ve become… cheap.
The frugal path to financial independence
When you join the financial independence movement, there is a lot of focus on cutting your spending on the big three: housing, transportation, and food.
We don’t like to think that we are cheap, but rather that we are optimizers. House hacking, travel rewards hacking, $2 meals, the 8-year-old beater that you drive… this list goes on and on. I suppose we could cost-optimize everything in our life, but that doesn’t always mean that we should.
In 2023, our family of four spent approximately $51k on the big three. But it’s our discretionary spending, at more than $12k, that I’ve been thinking about lately.
Discretionary spending is the whimsical, the fun; it’s the moments of serendipity. It’s the stuff that we didn’t necessarily plan for, but presumably brought us some kind of joy.
Upon seeing $12k of discretionary spending in our 2023 numbers, my first instinct was to bludgeon it from our 2024 budget. “Why can’t we be happy without spending money,” I would grumble to myself.
Well, to tell you the truth, it’s not that easy to be happy in a capitalist country without spending money. It can be done, but kind of like cooking at home, it’s effortful.
Discretionary spending - why does that number bother me so much?
I mean really, why? Why didn’t I look at that category with gratitude for all of the ice-cream moments that I was able to share with my family and friends? Why was my first instinct to reel it in?
We have plenty of money. What I don’t have is plenty of time to create serendipitous moments of joy with my family.
I had fallen into a mindset trap, thinking that our nest egg was reserved exclusively for a future version of ourselves, and that any spending above our budget is robbing us of our idyllic retirement life.
In a recent newsletter, Chris Williamson, of my very favorite Modern Wisdom podcast, had two great quotes that really stuck with me:
“Personal growth and self improvement is liberating, fulfilling and exciting. But it’s also a trap that convinces you that you’re an unfinished article who doesn’t need to start enjoying life yet.” - Chris Williamson
“Deferred Happiness Syndrome is the common feeling that your life has not begun, that your present reality is a mere prelude to some idyllic future. This idyll is a mirage that'll fade as you approach, revealing that the prelude you rushed through was in fact the one to your death.” - Gurwinder Bhogal
What is saving and investing? It’s deferred happiness, in a way. It’s exchanging some of the good life today for the promise of a good life tomorrow.
But can we be too frugal? Can we take it too far? Where do we draw the line between frugal and cheap?
What I’ve come to understand about myself is that it isn’t the cost of something that gives me anxiety, but instead, whether we have planned for it or not.
A $10,000 expense that was in our financial plan gives me less anxiety than a $400 expense that caught me on my blindside. It’s perhaps a reminder that life is a future that we cannot fully control.
Doing better with a fun bucket
I know what we need to spend over the long run in retirement in order to never run out of money. When we run over that spending number today, it gives me anxiety. I have to remind myself constantly that we are in a transitional stage right now.
Costs today are simply higher as our kids prepare for their own independent lives. But our kids are still kids - there are still memories to be made with them at this age.
Right now, we are tethered to a larger home, cars, gas, teenage-insurance premiums, and so on. And on top of the necessities, our discretionary purchases tend to run higher as well.
It’s unsustainable in the long run, but that’s ok, because it’s not a true account of our long term expenses. It’s also one of the reasons why we intentionally are only half-retired, with my wife continuing to run her consulting business until some of these transient costs go away.
In the interim, I’ve decided to try Mark Trautman’s way of thinking over at Mark’s Money Mind to create a Fun Bucket to help us overcome our frugal mindset towards discretionary spending. I’ve met Mark at a few FI events, and he indeed has a great mind for personal finance and early retirement.
By creating and funding a fun bucket in our budget, some amount of spontaneity becomes part of the plan. I hope this helps me maintain the illusion that I can control the future :D. More so, I hope it helps us draw in more present day experiences (with some guard rails in place) while keeping my conscience clear that I’m not mortgaging our future happiness.
Thank you for continuing to share your writing and who you are with the world. It matters and I am thankful. I followed the podcast that you recommended and resonated with this quote, " I hope this helps me maintain the illusion that I can control the future :D." Keep on, keeping on Allen. I am cheering you and your family on!
Another good read, Allen. I can be too cheap sometimes—this was good for me to contemplate as I read your thoughts on spending. Thanks!