I don’t know about you, but I don’t get excited about most frugality tips.
You know, things like: cut out the daily latte, bring your lunch to work in a Tupperware container and buy value toilet tissue. It all seems a bit, well, unglamorous.
I can see both sides. Cutting out the lattes and bringing your lunch into the office will save you a lot of money over a couple of decades. The little things add up via The Aggregation of Marginal Gains.
It’s just that people focussed on extreme frugality often have great defence but poor offence. Penny-pinchers hang onto what they earn (great) but don’t earn as much as they should (not so great). They often don’t get promoted at work and they fear the volatility of investing in the stockmarket.
So, even though I’m encouraging frugality around here, Ramit Sethi’s classic skit on penny-pinching makes a valuable point. It’s possible to be penny wise but pound (or $, €) foolish.
Getting to financial independence is not easy. So just cutting out the lattes is not enough. Not to mention that some people function better after a coffee at work.
So today I’m talking about going hard core. Going Medieval on your finances…or Gangsta…or Viking. Choose your preferred genre and remove the following words from your vocabulary: nice, normal, sensible, reasonable.
Here are The Escape Artist’s TOP 10 EXTREME FRUGALITY TIPS. These are the things that really move the needle…so its strange that conventional personal finance advice ignores them.
1. Be an environmentalist
The Escape Artist is an environmentalist.
But not a Swampy-style anarchist soap-dodger. Nor a wimpy, hand-wringing, metrosexual muesli muncher either.
For example, I love that The Woodland Trust is creating a new great Northern forest in the UK.
To be honest, if it were down to me, I would level Wolverhampton to the ground and plan trees and reintroduce bison, bears, golden eagles, lynx and sabre tooth tigers to The Midlands where they could roam free.
You can probably see why I won’t be running for Prime Minister.
When I read that the birth rate in some countries is below replacement rate, I say good…more room for nature and for wilderness. And maybe we are not all doomed after all?
I hate waste, litter and the plastic packaging that comes with stuff. Trying to cut spending is an uphill struggle if you think of it as depriving yourself. Better to tap into a powerful underlying motivation. Environmentalism does it for me.
2. It’s all just shit
Cutting spending is easy when you think about stuff the right way: its all just shit.
OK, I admit there are some possessions that I like. My 2 bikes. My Keep Calm and Carry On coffee mug. The birthday cards that my children made for me. But even that stuff is all just shit. It’s not me, it’s not my children. If my house was on fire, it’d be a mistake to run back into the burning building to get it.
The title of the classic book Your Money or Your Life says it all. Dick Turpin style highway robbers used to give victims the choice of giving up their possessions or their life. At gunpoint, most people hand over their stuff. So why can’t people see that, by getting trapped in consumer spending, they are choosing stuff over their life?
When presented with a choice between 1) buying more shit or 2) your life, CHOOSE LIFE.
Hint: you are presented with that choice every day.
3. Start investing
It’s never too early to start investing.
Last week, when my 15 year old boy had saved up £500 last week from his earnings washing up at the local pub, I showed him how to buy his first shares. When you understand the power of compound interest plus stockmarket returns, you realise that every £500 you don’t spend now could be worth £22,500 in 40 years time. No, that is not a typo.
And did I mention that you could easily save a million pounds of investing fees over a lifetime? Yes, I think I did.
Well, I already answered those questions.
As Mr T would probably say to all you procrastinators:
Fools, quit your jibber jabber…start investing NOW
4. Earn more
I know you’re smart enough to know that the more you earn, the easier it is to save. Only an idiot would say that was a secret.
The hidden frugality benefit of earning more is that you’ll have less opportunity to spend your money. One of the side effects of a full on, high-paying job or your own small business is that it can suck up all your leisure time.
The upside of that is that you’ll never need to buy in passive entertainment…there will always be enough drama in your life already without watching TV, going to the cinema or to Dismaland, Florida.
Plus, what doesn’t kill you makes you stronger.
5. Don’t buy the biggest house you can
OK, this is a trap that I fell into when I was young and stupid. But the idea behind this blog is that I tell you the mistakes I made, so maybe you learn from them the easy way?
Buying the biggest house you can is a sucker move. First, you pay dearly for more square footage…but extra square footage had no impact on my happiness. Second, you’ll pay more interest to the bank. Third, nature abhors a vacuum…so the more space you have, the more shit you’ll buy to fill it up.
And what if interest rates go back up to 15% as they did in 1993? Worrying about keeping a roof over your family’s head is one of the most stressful things imaginable. Remember what’s in The Bankers Jar.
So buy (or rent) smaller, and dig a well before you are thirsty.
6. Don’t have children
Yes, I know you’re allowed to have one kid. Or even more than one.
I have three and I love them dearly. But it’s hard work. My daughter has a stomach bug and last night I got woken up to find she’d been sick on the bathroom floor. Guess who ended up mopping that up? She’s 17 (years not months). I’d been lead to believe that this shit would be over by now.
The Escape Artist has done some things in life that other people say are hard. Some of them (e.g. running a marathon) are actually not that difficult. But being a good parent really is that difficult. Anyone that says otherwise is deluding themselves or doesn’t really understand the role. Having children is hard work…financially and emotionally.
Yes, I know that the population would shrink if most people stopped having children…but see point 1 above.
7. Avoid private education
OK, so you already have kids. Why not give them an elite private education without the cost?
Its natural to want to protect your babies from the big bad world and give them the best start in life. But I’m not convinced that paying for private education offers a decent return on the investment. And its a BIG investment.
What if you took that money and put it in a tracker fund for them? Or better, what if you taught them The Incomparable Advantage of Having to Work for what you get?
8. Get some Game
Let’s be honest, this one is mainly aimed at guys. Especially younger guys who haven’t yet found their Special Love Muffin.
Trying to impress women via spending is the ultimate sucker move. It usually doesn’t work. But even worse than when it doesn’t work is when it does. You are then a Walking Wallet.
Your have 2 choices here. First, you can go the consumerist way and buy stuff that promises to make you irresistible to women. It’s all bullshit.
Or second, you can learn some “Game“. I don’t mean magic tricks, tarot cards and wearing a feather boa. I mean learning about emotional intelligence (yes, that’s a thing), the science behind attraction and doing some work on yourself.
Just as most good financial advice boils down to self-improvement, so does most good dating and relationship advice.
9. Don’t get divorced
After you’ve found your Special Love Muffin, you need to keep working on it.
Humans are naturally lazy and the messages we get about marriage can be confusing. Just because you’ve got a piece of paper, doesn’t mean you own that other person. It’s so easy to take your SLM for granted as the years go by and life gets in the way. The trick (so my wife tells me) is to find ways to keep showing your love without just throwing money at the problem. It’s the thought (and the attention to detail) that counts.
Yes, sometimes divorce is the only way to go…sometimes we don’t get to choose. But it’ll be a disaster for your freedom fund. Divorce courts often penalise the higher earner in a couple. One of my coaching clients, a hard working career woman, had no children and still got taken to the cleaners, having to pay maintenance to her ex who was perfectly capable of working…WTF?
I can’t speak from experience but, from what I’ve heard, getting divorced using lawyers is like letting 2 competing packs of wolves into a petting zoo. It’s not pretty.
10. Be a health freak
Without really meaning to, I’ve turned into one of those strange people that go to the gym 5 or 6 times a week. It’s addictive and its also a great way to cut your spending without depriving yourself.
When you’re seriously into health & fitness, you’ll want to cook real food yourself and exercise more. You’ll also spend less time doing things like shopping, visiting food courts, and drinking in the pub. You’ll never be bored when you have the option of going to the gym. You can always justify not going out, as you’re trying to improve your physical health.
When you’re really into health, it’s no longer about giving something up…its about getting something better.