Is it easy to save money or is it hard?
Well, that depends on your perspective.
If you watch TV News (I don’t recommend this) you’ll pick up the idea that modern life is tougher than ever, the world is a dangerous and expensive place and there’s nothing you can do about that.
If you consume enough of The News, it will destroy your perspective.
And if you commute, eat processed food and scrimp on sleep and exercise, well The Prison Camp has been messing with your mind and your body.
In short, you risk getting run down.
And if you get run down, you’re more likely to turn to retail therapy. Stressed people also think less creatively, miss opportunities to get stuff cheaper, avoid investing in shares (seems too risky) and buy too much insurance.
The first thing you need to do is take care of your basic physiological needs. I’m talking about the fundamentals:
- Plenty of sleep (8+ hours)
- Eat natural food (not processed carbs made in factories)
- Exercise
- Some variety and autonomy in your schedule
- Some quiet thinking time
These are easier after financial independence. But I hope you’ll agree they’re within the reach of just about anyone.
So step 1 for someone who’s run down would be to go to bed early tonight, cycle or walk to work for the first time tomorrow and replace their usual Sugar Pops cereal breakfast with scrambled eggs and bacon.
If you’ve been living like a battery hen for years, it takes a little time for your physiology to heal itself fully. But the sleep thing starts to work immediately. And, over a few months, adding sunshine (Vitamin D), exercise (including weights) and a paleo diet can work miracles.
One of the best signs that someone is returning to good mental health is that their sense of humour starts to come back. This is a sign they’ve regained perspective…the ability to zoom out from their own problems for a minute and look down and laugh at the general absurdity of life…and especially modern life.
Once you’ve reached this point, you’re more likely to look around and see the modern world as a place of abundance (as well as ridiculous spending).
And yet with your new found perspective you may notice that there’s still a lot of complaining going on.
As Louis CK puts it:
Everything is amazing and nobody is happy
Now let’s imagine someone that has recently stumbled across the concept of financial independence. They might currently be in a well paid but stressful job. And yet, despite earning a higher than average salary, they might be struggling to see where they could cut their spending.
The answer, as all experienced FIers will know, is that person has a million different opportunities to cut their spending. And the cumulative effect is amazing. I call this The Aggregation of Marginal Gains.
A few of those individual cost saving opportunities might be massive, like the savings available from firing a financial adviser that is screwing you (charging a % of your portfolio value rather than clear, flat fees) which could easily save a million pounds over a lifetime. Or the savings from living in a flat rather than a house. Or replacing an 4×4 offroad Money Incineration Unit with a sensible small car.
But many of the spending cuts are individually very small. Things like dropping “down” one notch on the supermarket price scale. So you might go “down” from Waitrose to Sainsburys. Or from Sainsburys to Tesco. Or from Tesco to Aldi. And so on.
Many would consider that an act of unfeasible frugality. But perhaps this shows a lack of perspective?
Another example of a tiny change with surprisingly large benefits over time is the simple trick of just “dropping down” a product range. So if you are currently on the Tesco Fancypants Finest Baked Beans, you drop down to Tesco Reassuringly Normal Baked Beans…or even down to the Tesco “We Are Giving This Stuff Away” Value Baked Beans.
This exercise may involve challenging your preconceptions. If you have been conditioned to think of yourself as a Nice Normal Middle Class person, the thought of dropping down to the Value beans might start to bring on anxiety. What would the neighbours say? Or your work colleagues? If you’re worried about things like this, you may need more perspective.
So try it. If you can’t taste the difference in a blind taste test (say 5 times in a row for statistical significance) then there is no difference. Its basically the same shit.
I illustrated this concept in How Much Would Sir Like to Pay for That? using the remarkable similarities between a Skoda Octavia and an Audi A4. Yet people say things like: “I would never buy a Skoda, I love the engineering of my Audi” Well guess what? Its basically the same shit.
There are 2 parts to this.
The first is information. The average punter can perhaps be excused for thinking that an Audi A4 is very different to a Skoda Octavia. The prices are certainly very different. But I’ve already given you the information you need here.
The second part is perspective. Perspective reminds us that the few tiny differences between a Skoda Octavia and an Audi are totally, utterly trivial in the grand scheme of things.
And this is not an isolated example, its everywhere. For example, you may need more perspective if you think:
- the iphone 18 represents a major advance from the iphone 17
- bottled water represents a sensible investment compared to tap water
- a diamond engagement ring is totally different to a cubic zirconia engagement ring
- having 10% extra square footage in your house is going to make any significant difference to your long term happiness
- etc etc
Where can you get this perspective thing from?
Well, it comes from thinking. And, to be more specific, from thinking for ourselves. Until you train your brain properly, it will remain a temperamental and wayward creature. Because getting perspective can be hard, we often need some help. So here are a few potential catalysts.
Catalyst 1 : History
There’s something you need to know about the good old days…they weren’t very good at all. I’m sorry to be the one to have to break this to you.
Concerned about the high cost of living? Yes, eating out is expensive these days. But let’s not forget The Escape Artist’s ancestors who we met in Get Rich with Perspective (Part 1). They would have had to work 6 days a week of backbreaking labour just to be able to afford turnip soup at home in their plague-ridden hovel.
When you look at the facts, its hard to argue with Morgan Housel’s conclusion that we’re living in the best time ever. And we can mostly choose to drop the shitty aspects of modern life: I call this cherrypicking from the modern world.
Catalyst 2 : Nature
Getting out and walking in nature is a great way of reminding yourself of how big the world is and how small many of our concerns are by comparison.
The bigger the scenery surrounding us, the punier our silly little pre-occupations seem. So the best places to be reminded of this are mountain ranges, deserts, forests and stormy seas.
Catalyst 3: Gratitude
Occasionally I catch myself thinking whiny little toddler thoughts about something that is not 100% perfect in my life. A quick self-administered slap usually sorts this out.
But even more effective is when I’m walking through a busy London rail station and I see someone with a guide dog and white stick.
I then remember that I can see…it’s instantly humbling. For me, its like a ton of perspective bricks being dropped on my head.
The Escape Artist 
Lol, Louis CK’s quote XD It’s definitely a perspective thing. I’m generally optimistic, but I do see a lot of the pessimism out there. But the fact of the matter is, we’re living in the best times (it’s all relative, like you point out about the back-breaking physical labor people had to go through in the olden days). Today, if you’re living in a developed country, you have all the basics met, and way more. Water, shelter, food. It’s only when we start playing the keeping up with the Joneses game where we start screwing with our mental health!
Interesting article. I have been following you for a while after I discovered you via other FI type sites and I enjoy most of your articles. I come from a slightly different generation as I will be 60 in 4 months time and set out to be able to “retire”, as we called it back then, by the time I was 55 with £1M in savings, pensions (& equivalent conversion of Final Salary pension). Setting out to do that 30 years ago, was a journey into the unknown from a financial savings products point of view, but I always had a philosophy of always taking my own lunch into work, not buying Cappuccinos on the way into work and my pockets were longer than my arms. But I always believed in a balance between spending and saving to ensure we had a life and from 1994 onwards always took 2 holidays a year abroad to ensure good family time and time to de-stress. For many years I had company cars and it was always a balance between performance, cost, badge, comfort and prestige – at one stage I used to do 60,000 miles pa – back in 1993 I don’t think Skoda was part of the VW stable, so I drove Audis as they provided better value for money than BMWs & my colleagues were always amazed when they borrowed my car. Currently I have a 13 year old VW Passat 1,9 TDI sitting on the drive with 190,000 miles on the clock and I will keep it until it is no longer viable to run due to the changes likely to come in respective of diesels and will probably get a Skoda!
Did I achieve my goal? Yes I did and exceeded it before my 55th birthday, I had amassed £1.2M in savings, pensions (& equivalent conversion of Final Salary pensions), but I had dipped to £1.114M by the end of the year, which was one of my first lessons in entering FI. I chose to terminate a contract that I was not happy with, but continued to take the occasional interim and consultancy work for the next few years as I could pick and chose what to do.
How has the world fared for me? I opted to for a natural withdrawal strategy and since the beginning of 2014 I have withdrawn £128K from my savings via this method, but my capital has increased by £400K since the end of 2012, and that has not been due to earnings from employment, but more due to investment performance, despite withdrawals.
I do not follow the line of “Passive investments”, but pick out the best of the Active Managers (primarily Equity Income sector) & split my portfolio 50:50 between Funds & ITs:Shares.
As to the old days, I agree that most products were crap, but I can remember the freedom that I had as a kid that most do not these days due to modern communications and fears, although the level of reported crime has not changed significantly.
Cheers
Gareth
Hi gareth
Great to hear from someone whose into drawdown and how you got there. Well done.
I love it! Thank you! My current favorite dose of perspective:
1) Go to https://live.givedirectly.org/. This is a charity that gives the extremely poor $1000 over the course of a year and asks them what they did with the money.
2) Click to “follow 10 ” (or any) of the people as they get the installments.
3) Whenever you read about someone who just built their first ever latrine, or a house large enough for all the family to sleep inside of it for the first time, or a mattress so they are not sleeping on the ground, stop for a minute and feel a sense of awe if plumbing, housing and mattresses have always been present in your life.
4)Repeat
“I then remember that I can see…its instantly humbling and its like a ton of perspective bricks being dropped on my head.”
I couldn’t have said it better, and have experienced that myself. Occasionally, I have to remind myself that while I may struggle from time to time, there are others less fortunate or have bigger boulders to shift.
Wow! Everyone should read this. The poor people of today live better then the kings of the the past. At least if they are lucky enough to live in a wealthy country and have the right perspective.
Another cracking article TEA!
As someone who has recently changed from a 2004 Audi A4 to a 2012 Skoda Octavia, I can indeed confirm that “Its basically the same shit”. I’m amazed at the fanciness of my new rocket-powered armchair every time I get in and drive it.
Also we have swapped many of our groceries from branded to own-brand or value and have found most of them to be just as good. And regardless of the difficulty of my day, it beats working hard all day in the fields just to earn a bowl of rice and beans.
I wish our country was being run by TEA.
I enjoyed reading the article and there’s some good advise / observations there. I think exercise is key and being fit ensures that you enjoy life more and everything else in life is enjoyable through being fit. Gaining perspective on the latest this or that is also key. I know cars are frowned upon, but let’s just say that I’ve owned my daily commute 186K miles BMW Tourer 10 years and I have a Porsche 993 Carrera 2 that’s at least holding it’s value if not gaining slightly…..I can’t give that one up at the moment. However, I feel I’ve been a good boy on the fiscal front and own 3 properties outright, 2 are let and I do my best to be a good landlord – I think my tenants agree 🙂 I’m 48 and I’m pushing the boat out with my pensions to get them in a good state for 55 being around 300K at the moment and I do have some savings and investments.
The car point is an interesting one as I feel people are just totally compelled to purchase a new car every 3 years. My own father fears an MOT failure and so changes. Why? I don’t get it? Also these days modern cars are more and more complex and as such can cost more to repair. Keep it simple stupid….well yes, but not too stupid it’s inefficient if you see what I mean. I just repair my 10 year old car as and when required and at 2004 model I feel it’s technically advance to be efficient while not too technical like the very modern cars.
One point on the supermarkets. Actually, you can still shop at Waitrose and even upgrade to M&S 🙂 !! Simply shop near closing time and particular on Sundays and there’s bargains to be had with large reductions. I know it’s a fact as I’ve become slightly addicted to it 🙂 Sad I know. So become a bit of a supermarket cruiser at the right time and I’d say there’s always deals to be had.
I do find perspective difficult sometimes though and really understanding / appreciating if I actually need xyz but I do agree that another persons circumstances can bring a sense of reality to your own.
Great article TEA. On the subject of how everything is better than it used to be, a good tech blog (with one article every 2 weeks) on how technology is slowing changing the world for the better is http://www.futurecrunch.com.au/blog/
Thanks Damo for that recommendation and to all for the comments