I was planning to blog about frugality. Taking in the bigger pictures, this got me thinking about certain unwritten rules I generally abide by that have got me to the stage I’m at now on my Path to Life 2. I say unwritten rules, because it’s only by reading about those early in their FI journey who are struggling with lifestyle adjustments, that has made me conscious of my thought process over buying stuff.
Needless to say, it’s easier to start off frugal than have to change your whole operating system to become more mindful about spending. If you’re near the start of your FI journey, it’s definitely better for your financial health to have got that wake-up call now than later. The FI diaspora can definitely help you create your new norms and values. Here, let me share with you a few rules that I live by. I’m not saying they’re special rules, as some people clearly live these out of necessity. The trick is to stick to these rules when you create surplus income.
Rule #1: Be very, very selective in your lifestyle creep
This conscious decision is possibly the single biggest contributor towards in current financial status.
From your first pay packet, you make purchasing decisions that soon become your new normal. That car, this gadget, real coffee. As you get paid more, your normal re-adjusts to fit your new income. Now THAT car, a gadget for every task, THIS real coffee, that house… no, that one with more bedrooms and two garages. They make you happy, right? Until they don’t; they become a requirement for living, and they make you unhappy when you don’t have them. People want the best, they work hard so deserve it, right? Even debt is normalised. So, you’re not even just living to your salary anymore, but you’ll willingly sacrifice a slice of your future work energy to maintain the mechanisations of your lifestyle. With comfort and convenience, your body and brain soften…
It probably helped that I was a student for most of my twenties. But since then and even until now in my early forties, I live within walking distance from an excellent bus route. I pay under a tenner a week for a bus pass and I often get work done or otherwise read on the bus, avoiding the stress of driving. This bus route serves almost all my usual transport needs day and night. People sometimes say I’m lucky that I can do this, and sure, I need a decent enough salary to live where I do (and not need to drive as part of work), but besides that, I intentionally chose the places I’ve lived in to be near that bus route and near shops. I don’t need a large house outside the city.
We’ve stayed behind the curve on all manner of lifestyle creeps, and they’re often inter-related, which may be why frugal newbies struggle to adjust. There are so many related moving parts. For example, for groceries, we get a few items from more expensive supermarkets (Sainsbury) but our main shop is in the ‘discounted’ store. Not having a car makes us mindful about what we buy as we have to carry it, so we don’t keep truckloads of food in the home, which sometimes leads to waste. Which also means not feeling a need for a massive American-style fridge freezer. Not needing a large house enables us to live conveniently for public transport.
This is why I think once you’re ready to make the plunge, focus on the big ticket items – home, travel, groceries (as MMM says) – and the rest will follow.
This is not to say I’ve shunned lifestyle creep. Far from it! But each one is a deliberate decision, because for each one you buy into, you buy into a new level of expectation of what’s good enough. And that is sometimes a heavier cost than immediately meets the eye.
Rule #2: For each luxury, consider the true value it creates, its maintenance costs and the offsets
I’ll illustrate with a few “luxuries” I allow myself. Of course, what value something creates is very personal to the individual; the key is intentionality. The idea of finding some kind of offset is also always in my thinking. What this gets at is the true cost of something.
Also, of note, the first two things here are not routines scheduled in for a certain time. Thus, I consistently view them as treats or luxuries depending on when I/we fancy it.
Luxury: Eating out during a weeknight (£17-20 for us three)
Value besides the food itself: Always a treat and a break in the routine of going straight home from work, time spent as a family focused around the table that would otherwise be partially spent cooking etc., easy neutral and relaxing space for conversation with the hubby, not having to cook and wash the dishes, enjoyment of types of food I couldn’t (easily) make at home. We enjoy chatting to the staff too; it contributes to a sense of community in our neighbourhood and (at our main restaurant) supporting a local, family business. It’s also like our family ritual but we limit this to weekly as we don’t want to fall into bad habits (too much of a good thing is a bad habit!).
Offsets: The average meal in the eateries we go to is £5-7 and drinks say £1. Taking into account the cost of eating at home, the real cost is pretty low. We’re regulars at one particular place where the cheeky Little Firelite always gets a free pudding!
Verdict: Fine dining this is not. All in, the adults are paying around £8.50 each for family time, relaxation and good food. Even more worth it since becoming a parent.
Luxury: Top-end daily disposable contact lenses (£120 for 60 pairs)
Value besides being able to see: I value a lack of plastic eye shield between me and the world, it buys me social confidence. I can also wear sunglasses and can put make-up on while being able to see at the same time! But since having a serious eye problem once, I hugely value my eye health. Monthlies/yearlies give me protein build-up. I favour the best.
Offsets: I’m now an occasional wearer. The cost stops me from using them more often. I buy £2.99 contact lens cleaner to use each pair twice. This simple act halves their cost (minus £2.99) and I don’t think the material is compromised.
Maintenance: Minimal storage space. Only having to wash them every other time is nice.
Verdict: £1-2 “a week” seems ridiculously cheap for good vision, eye health and aesthetics rolled into one. I donate to Sightsavers charity to thank my lucky stars for having eyesight.
Luxury: Getting a large house extension with skylights and bi-fold doors (£28k-ish, so £14k each)
Value besides the additional room: I’ve intentionally added in this quite contentious and indulgent one, as we umm’ed and arr’ed over this for a long time. We originally asked for a quote for a porch, not an extension, but the price per cubic metre made a porch unattractive. This was less than a year after moving into our 3-bed semi and while I was on maternity leave. We went for it and paid cash, giving us a bit of a discount.
The immediate value was making use of the space when I was on maternity leave and was at home a lot. In the longer term, we especially enjoy this space when it’s sunny and we have guests. It’s like bringing the outdoors in and I love this sense of fluidity between the indoor and outdoor environments. The other great thing is that we had a long garden with a lot of unused space. It’s nice to use it. However, for me the biggie is that the best is yet to come: Since the original space we had was enough for us already, the extension gives us space to “grow into” and we plan to stay here for a long time. Maybe until we ‘downsize’. We could’ve got the extension further down the line, but the earlier we got it, the more time we have to enjoy it while Little Firelite is little and growing, plus I was able to ‘supervise’ the work as I was on maternity leave.
Maintenance: The additional tidying and cleaning of a large room is certainly a cost to consider. We had our old garage knocked down to create some of the space (the 28k cost included knocking down the ugly old garage and removing it), so building the extension did mean not having the mess of stuff that had gathered there since we moved in anymore (as well as less garden to maintain)! I guess it almost balances out. Plus we have a big airy room that’s not the kitchen to dry our clothes in, which over the long-term may be better for the house.
Offset: Our house value has increased, probably not to the tune of 28k based on what our builders said, yet this Telegraph article suggests an increase of £33k to the average house! We’re in a sought-after area with a shortage of larger than average semi space. £300k was the ceiling for this area a couple of years ago; we’d paid £225k. Also, we’ll save money by not upgrading our home by moving (assuming we would’ve moved sooner). At a conservative guess, if the house price has increased £18k and not moving home saves £6k, then the real cost of the extension is £4k. On the other hand, it’s possible we’d make a profit too.
Verdict: £2k each for a large 4m living space that opens up into the garden while you’re raising a wild growing toddler and beyond – priceless. And we may even profit.
I can’t give you many examples of things I bought that were high maintenance (since my Tamigochi) as I have an aversion to anything requiring more than basic maintenance due to time cost, background stressiness, and sometimes cost. I don’t want to be ruled by my belongings. But you may value different things, and that’s fine. Just
Rule #3: Always have a ‘rainy day fund’ and avoid consumer debt – end of
Quite self-explanatory really. Savings are like an insurance. As a postgrad student on £5,200 a year (£8,680 in today’s money), I also worked 18 hours a week (paid £6.84 an hour gross in today’s money). Each month I put £50 (£83 today) away. I closed that account on 4 figures.
My use of credit card is purely for the added consumer protection or of spreading a large cost over to the next month. I use interest-free credit on large items when it helps my cashflow. If the idea of free credit is enticing to you for general spending, then be honest with yourself.
Rule #4: Clothes shopping follows a strict one in-one out policy
Some minimalists like a capsule wardrobe; I find that far too restrictive since I enjoy clothes as a form of expression. So this rule is for those who love clothes, but want to avoid spending on clothes you didn’t really like that much after all. It goes well with the wonderful Konmari method. No, I didn’t ask if the item sparked joy. My aim was to fit all my clothes in one set of drawers and a little hanging space. I asked: Do I wear this much? Do I love this?
For maintaining my decluttered wardrobe, I have a strict “one in, one out” policy. “Do I really like this dress more than the several favourite dresses I have left?” Since my thorough clothes audit, I know exactly what clothes I have, and whether the item I’m deliberating over is as good as those. It’s a pretty tough test to pass since I only have my faves left.
This rule stops me buying things ‘I really like the design of but ultimately the fit isn’t great on the shoulders, but it IS half price and there’s a nice event 6 weeks away it may be perfect for!’ I’ve tied myself in knots over such deliberations in the past. My head is rationalising away. My dopamine system is going ‘Go on, go on, I’m missing that hit of feel-good! I want to go home with something!’ But moving straight to my rule, this item clearly does not make the grade!
I’m strict with my one-in one-out rule and apply it even to underwear. I try to broadly stick to the same clothes categories, so if I get a new work top, I give up one for charity. It’s made my decision making much easier, and I think twice (or thrice) about 3 for 2 offers. I go to shopping centres and sometimes return with nothing! Yet I’m satisfied knowing I have a well curated wardrobe already and nothing I saw/tried on was able to infiltrate my one-in one-out policy!
If you’re not into clothes, then clearly this rule wouldn’t apply to you, but you may equate the scenario with any other collection of things you’ve amassed over the years that you suspect you spend too much on.
I’ll admit that this rule would’ve been much harder to implement in my 20’s and 30’s. First, you’re still experimenting a whole lot more with clothes and it takes a while to work out what suits you, what fabrics you like to have against your skin, what value you place on practicality etc. It takes time to build up various sections of your wardrobe too. Second, you tend to go out more with friends, you may follow fashion trends (consciously or otherwise), and don’t like wearing the same thing twice. The good news is that for most people this goes out of the window later on, especially if you end up having kids. The question of getting something new to wear then becomes one of having something clean to wear.
Rule #5: Spend on good investments
Wealth begets wealth, I think someone said once. This wealth may be financial or self-investment, and what you’re paying for is higher growth potential. Generally speaking, it’s best to go for the best when it comes to investment and that usually costs (more).
This is why I tend to buy books over reading stuff for free over the internet. I get the best advice you can reasonably afford (where necessary). Learn from the best. Also, I believe in getting the best university education – it’s not for the piece of paper, it’s for the reputation. They thought you were good enough to study there. Not that university is the only way, it isn’t, but for many it is.
Get the best property for what you are looking for, which doesn’t necessarily mean the most expensive, but choose the better neighbourhood you can afford, choose a flat with bedrooms rather than a studio, avoid the basement flats – You may need to save longer for the deposit (to keep it affordable), but it is more likely to grow. That’s my philosophy anyway.
It’s about following my values too. I value cultivating interests that stretch my strengths. I value personal relationships. So, investing money and time in these is important; in fact, you can’t really put a price on these for enriching your life. This may mean sometimes paying for that expensive coffee sometimes to enable that meeting of minds, it may mean paying for lessons that don’t turn out to grab you long-term leading you to know better where your passionate might lie. So often, spending gives more value than meets the eye, as exemplified by some of the examples in #2.
This has ended up being a much longer post than I envisaged! I wonder if this post sounds a bit smug. To balance it out, I’ll do a future post: ‘Ways I’ve tried to save money and failed’. 😀
I’m very keen to hear from others! If you’ve always been a bit of a saver, what are your unwritten rules for living (frugally)? If you’re new to saving/investing, how much does frugality figure in your strategy and why? And I’m always looking for money saving tips – care to share any?