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I admire OP's financial project and appreciate his sharing it. I imagine quite a few people may benefit from it. But make no mistake about it, the #1 reason fo

by edw519 15y ago

I admire OP's financial project and appreciate his sharing it. I imagine quite a few people may benefit from it. But make no mistake about it, the #1 reason for any "How I did <anything regarding money>" is really, "I am cheap." We only get one chance at this life, and the thing that bothers me the most is, "What are you missing that you're too frugal to consider?" Some of the greatest pleasures of my life came as a result of a discretionary purchase. Incredible people, experiences, even business opportunities came my way because I bought a product, went to an event, or took a trip that most frugal people I know wouldn't have. Once you decide to be frugal, you'll probably be stuck that way for life because you'll rarely be in position to take advantage of those opportunities that would break the cycle. If that works for you, fine. But not for me. I may not be extravagant, but I don't want to miss any wonderful opportunity because I was too worried about my bank balance. In the grand scheme of things, how sad that would be. </sipsLatte> [EDIT: Yes there is a difference between "cheap" and "frugal". Every time I mention "frugal" above, I really meant "cheap", but I was trying to be nice. I will leave it that way to make the thread below make sense. Also, I failed to mention that there's a big difference between being cheap because you have to and being cheap because you choose to.]

mailanay 15y ago
I am sorry, but I think I disagree with your viewpoint. My idol in being frugal (but not cheap) is Mr. Warren Buffett. I don't think he lost an opportunity by being frugal or has any regrets. Obviously it is a very personal choice. Some people do get pleasure by discretionary purchases, and some (like me) by knowing that there is money in the bank.
leviathant 15y ago
I've found it's not that hard to balance frugality with, well, spending money. They can actually work quite well together. So while most of my wardrobe is still acquired from thrift-shops, I also bought my most recent car without taking out a loan. I liked not having car payments, but needed a new car for a road trip we're taking next year, so I tuned my budget and saved cash to buy a car outright. Just because you're frugal doesn't mean you can't have nice things. My wife just bought me a $600 leather jacket (that I've admittedly been too frugal to pull the trigger on) -- for $450, new, via eBay. My 10 year old set of Sennheisers were showing their age, so I bought HD595s. MRSP $329, Craigslist price? $100, new in the box. My other car's radiator was shot - and if I can develop loan disbursement software and ecommerce stuff, surely I can handle changing the radiator in my car, and did, saving myself hundreds of dollars. And these are just things I buy, not even going into the stuff I do. On that last one though, there is definitely a balance you have to find between doing stuff yourself and better spending your time. My father would always wash his own car, but I can drive two blocks and spend $20 to have 8 guys and a giant machine wash it more quickly, and I'll pay someone else to change the oil. In short, I think that your idea that "you'll probably be stuck that way for life" is absurd, and you're mistakenly mixing up the terms frugal and cheap.
- timr 15y ago
  "I can develop loan disbursement software and ecommerce stuff, surely I can handle changing the radiator in my car, and did, saving myself hundreds of dollars." Only if your time is worthless. I say this not to be snarky, but because I found myself having to re-think these same decisions as I moved on from graduate school (where my time really was almost worthless...on a monetary basis), to having a real job that consumes most of my week. Life is too short to spend part of a weekend day (or more) changing a radiator. Much better to pay someone skilled at radiator replacement to make the problem go away (or in my case, to outsource the problem of owning a vehicle to Zipcar). More generally, the older I get, the more stuff I try to outsource in an effort to viciously guard my spare time. Sometimes it feels a bit bourgoise (e.g. am I really so important that I'd pay someone to clean my apartment?) but it definitely helps to be able to put a dollar value on each hour of your life, and answer the question "would I pay someone $X an hour to do this?" If the answer is no, it's probably better to outsource.
  - burgerbrain 15y ago
    You unreasonably discount the possibility of someone deriving enjoyment from working on their car. I personally find it to be rather cathartic.
    - philwelch 15y ago
      On the other hand, if you don't enjoy working on your car, presumably a professional mechanic would enjoy it better. And he would certainly enjoy the money.
    - sliverstorm 15y ago
      Indeed. Working on a car can be pleasant. Admittedly I do not currently- partly because bikes are more fun to work on, partly because I don't have a good space in which to work- but I hope someday to resume doing some repairs.
    - timr 15y ago
      A fair point. If you find something enjoyable, then I agree the economic calculation is obviously different.
ismarc 15y ago
I live, by most comparisons to people within the same bracket, very cheaply. The thing is, I'm not watching every penny, I'm not buying the cheapest thing there is. I just refuse to pay more than what I value something at (and dollars, not intrinsic value of the time). There's some things that are significantly under what I would value them at dollar wise and have no trouble paying for, but there's a large number of things that are priced over what I would value them at and just don't buy them. Additionally, the immediate price isn't the only thing to consider in the cost, there's the lifetime value of the item as well. So, I would disagree that the sole response is being cheap, I'm completely confident the same things are capable of being accomplished by having an understanding of the total cost and total value of things you're spending money on and being smart about purchases and use of money rather than buying expensive things because they're "nice".
webwright 15y ago
"the #1 reason for any "How I did <anything regarding money>" is really, "I am cheap."" I read it as "what happens when you invest intelligently in a booming real estate and stock market" (especially the former). I don't think this path is open today.
- angstrom 15y ago
  That's exactly what I read: Step 1: Be born at the right time to take advantage of market conditions. I see no reason to escape work. Rather my goal has always been to enjoy what I do. No matter the money pile, you'll never be able to repurchase your youth.
  - veyron 15y ago
    That is true of almost all success stories though ...
- todsul 15y ago
  Opportunity abounds at every point in time. Most of all, at times like this when markets are flailing after a severe and (somewhat) protracted period of chaos. Even if we were at the peak of markets (arguably the worst time to invest), there are so many opportunities that oppose real estate and public equities. I'm not talking about selling stocks short, but potentially commodities, natural resources, agriculture, business, and so much more. The thing is, we're not at market peaks. Not even close. If anything, I'd cite this pessimism and cynicism as a good indicator to start buying.
  - AJ007 15y ago
    There absolutely are always opportunities, but those opportunities are not always available to those that won't or can't treat the investments as a full time job. As long as there is inflation, all you need to do is buy assets to make money. When there is stagnation or deflation, making money becomes very hard work and luck plays a bigger role. That is because the number of wrong answers exceeds to number of right ones.
wglb 15y ago
The thing that "cheap" and "frugal" characterizations miss is one that I think is significant (and is noted in other comments in this thread, e.g., ebay) is "resourceful".
todsul 15y ago
> the #1 reason for any "How I did <...>" is really, "I am cheap." I couldn't disagree with this more. In fact, I find the opposite true. Living lightly and investing well on average creates much greater opportunity and enjoyment than indiscriminate spending. Sure, some wealth comes with being cheap/frugal. But real wealth comes from investing your time & money well and spending intelligently. Notice I said "time & money". Discretionary items are just as much a time sink as they are a money sink. Forget the self-help articles that harp on about minimalism and the latest lifestyle design fads. Try to live lightly and gauge the results for yourself. You won't miss anything, you'll have more time, you'll think clearer, and of course you'll have more money. Then you'll decide to launch a startup and lose your mind :)
- TDL 15y ago
  To piggyback on your comment. Being frugal allows people to have capital when opportunities come along. Being cheap is generally undercutting someone else in order to save a nickel or a dime. Being frugal is delaying gratification in order to save up for some specific purpose or to have capital when an opportunity presents itself. Regards, TDL
nivertech 15y ago
How much can you save per month by being frugal? Top several thousands dollars per month. I prefer to focus my efforts on maximizing my income, which is theoretically unlimited, instead of minimizing my personal expenses, which are limited to $2K/month.
- billswift 15y ago
  On the other hand, as todsul pointed out, cutting your expenses can give you more money to invest. Cutting costs that also eat up your time also gives you more time to increase your earnings potential. Owning many things brings to mind the definition of a boat as "a hole in the water into which you pour money" and your time.
- alexallain 15y ago
  It's worth noting that you are better off tax-wise saving one dollar than earning the same dollar. I didn't expect it to impact your argument that much, but given that the 2010 income tax rate in Israel is 44% for anyone making over ~90K/yr, 2K in savings is roughly equivalent to 3.5K in marginal income. From what I gathered last time I was in Israel, that was a pretty significant amount of income.
- kamaal 15y ago
  There is only X amount of time and Y amount of energy you can use to 'maximize your income'. Now come to think of this. If you choose to go this way More expense imply more work. How long can you can you continue doing this. Unless you have a business which you can milk like a cash cow, a salaried employee can only go so far with 'Work more earn more' attitude to match his increasing expenses. The only approach is to know to how to save and invest appropriately.
CoreDumpling 15y ago
Story of my life, Ed. I am your poster boy who lives "cheap" and not "frugal" by choice. I clip coupons and browse slickdeals before committing to a purchase. I never buy anything at MSRP. I monitor airfare prices for weeks before booking a ticket. This is a difficult problem to escape because it's one that I behaved myself into, and that it's self-reinforcing for a variety of reasons: - When you're already on a fixed salary, the opportunity cost of spending time on being cheap is not obvious. You're not taking time away from that $500/hr side consulting gig that you don't have. Instead, you're at a situation where the marginal rate of return on clipping coupons (say, $10/hr) is significantly better than spending the next hour working on that iPhone app that is months from release and has no interested buyers (how long is it going to take to recoup the Apple developer fee?). - Some people get a rush out of saving money, a feeling of "Ha! I beat the system." To them, saving money is a form of entertainment [1], and there's certainly far worse hobbies to have from a well-being perspective. Unfortunately, there are people who take this too far and end up as total misers or compulsive hoarders. I'm not a pathological case, but I've done things that would make some people cringe. - Seeing people successfully live frugally can be a motivator to follow in their path. My parents are immigrants who worked hard and saved for 20 years before they were finally able to afford a house in an expensive neighborhood (and nearly paid for it all in cash). They drive Toyotas, shop at Costco, and cook at home. They are basically the epitome of the "millionaire next door" [2]. - There's also a moral justification for this. "Why do I have to keep up with my spendthrift neighbors? So what if I don't drive a Maserati or carry a Hermès bag? No thanks, I shall be comfortable in my own skin, since envy and greed are evil." This is now an identity statement [3], and while it's a good position to take from a financial perspective, it can be crippling in the way it makes some people closed-minded. Of course, this doesn't necessarily stop them from pontificating about retirement at 30. I do still think that my years of being cheap are starting to pay off, mostly because I'm finally getting comfortable with the sort of "discretionary" expenses you mentioned in your post. The difference is that it probably took a much larger bank balance for me to consider them "affordable." I just flew across the continent purely on a whim to visit some friends that I hadn't seen in years, I no longer cringe at expensive bar tabs if they were time well spent with buddies, I can afford to make an impulse electronics purchase just to see what it's like, and I'm preparing for that self-funded sabbatical [4] to reboot my life. Was it worth it? Well, it was really, really hard to re-orient myself this way, and it took much more sacrifice than necessary, but the good news is that aside from lost time, most of the rest hopefully can be recovered. [1] http://www.budgetsaresexy.com/2009/08/saving-money-trumps-sex/ http://www.budgetsaresexy.com/2009/08/saving-money-trumps-se... [2] http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/dp/0671015206 http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/d... [3] http://www.paulgraham.com/identity.html http://www.paulgraham.com/identity.html [4] http://www.joelonsoftware.com/articles/fog0000000076.html http://www.joelonsoftware.com/articles/fog0000000076.html
Androsynth 15y ago
What you're saying is that you spend money and it increases your luck surface area; but there are plenty of free ways to do this. You don't need to go on vacation, make extravagant purchases or even go to the coffee shop to meet new people, make contacts, etc. It sounds like you need money to get outside of your social comfort zone. If that works for you, fine. But it's not necessary. Also, don't confuse using money to increase your luck surface area with blatant consumerism. Flying to a conference in Finland is much different than buying a new TV.
deleted 15y ago
[deleted]
colanderman 15y ago
We only get one chance at this life, and the thing that bothers me the most is, "What are you missing that you're too frugal to consider?" And I ask instead, "What are you missing because you have to spend so much time working?"
ricardobeat 15y ago
This is not about being cheap. This guy won't cheap out on food and drinks on a night out, because he doesn't do it very often. He will buy better shoes and clothes than you, because they have to last longer. He will have a nicer house than you, because he has put time into it, and the end, can afford better stuff than you do. Spending wisely and being cheap are very, very different things.

by edw519 15y ago

mailanay 15y ago

I am sorry, but I think I disagree with your viewpoint. My idol in being frugal (but not cheap) is Mr. Warren Buffett. I don't think he lost an opportunity by being frugal or has any regrets. Obviously it is a very personal choice. Some people do get pleasure by discretionary purchases, and some (like me) by knowing that there is money in the bank.

leviathant 15y ago

I've found it's not that hard to balance frugality with, well, spending money. They can actually work quite well together. So while most of my wardrobe is still acquired from thrift-shops, I also bought my most recent car without taking out a loan. I liked not having car payments, but needed a new car for a road trip we're taking next year, so I tuned my budget and saved cash to buy a car outright. Just because you're frugal doesn't mean you can't have nice things. My wife just bought me a $600 leather jacket (that I've admittedly been too frugal to pull the trigger on) -- for $450, new, via eBay. My 10 year old set of Sennheisers were showing their age, so I bought HD595s. MRSP $329, Craigslist price? $100, new in the box. My other car's radiator was shot - and if I can develop loan disbursement software and ecommerce stuff, surely I can handle changing the radiator in my car, and did, saving myself hundreds of dollars. And these are just things I buy, not even going into the stuff I do. On that last one though, there is definitely a balance you have to find between doing stuff yourself and better spending your time. My father would always wash his own car, but I can drive two blocks and spend $20 to have 8 guys and a giant machine wash it more quickly, and I'll pay someone else to change the oil. In short, I think that your idea that "you'll probably be stuck that way for life" is absurd, and you're mistakenly mixing up the terms frugal and cheap.

timr 15y ago
"I can develop loan disbursement software and ecommerce stuff, surely I can handle changing the radiator in my car, and did, saving myself hundreds of dollars." Only if your time is worthless. I say this not to be snarky, but because I found myself having to re-think these same decisions as I moved on from graduate school (where my time really was almost worthless...on a monetary basis), to having a real job that consumes most of my week. Life is too short to spend part of a weekend day (or more) changing a radiator. Much better to pay someone skilled at radiator replacement to make the problem go away (or in my case, to outsource the problem of owning a vehicle to Zipcar). More generally, the older I get, the more stuff I try to outsource in an effort to viciously guard my spare time. Sometimes it feels a bit bourgoise (e.g. am I really so important that I'd pay someone to clean my apartment?) but it definitely helps to be able to put a dollar value on each hour of your life, and answer the question "would I pay someone $X an hour to do this?" If the answer is no, it's probably better to outsource.
- burgerbrain 15y ago
  You unreasonably discount the possibility of someone deriving enjoyment from working on their car. I personally find it to be rather cathartic.
  - philwelch 15y ago
    On the other hand, if you don't enjoy working on your car, presumably a professional mechanic would enjoy it better. And he would certainly enjoy the money.
  - sliverstorm 15y ago
    Indeed. Working on a car can be pleasant. Admittedly I do not currently- partly because bikes are more fun to work on, partly because I don't have a good space in which to work- but I hope someday to resume doing some repairs.
  - timr 15y ago
    A fair point. If you find something enjoyable, then I agree the economic calculation is obviously different.

ismarc 15y ago

I live, by most comparisons to people within the same bracket, very cheaply. The thing is, I'm not watching every penny, I'm not buying the cheapest thing there is. I just refuse to pay more than what I value something at (and dollars, not intrinsic value of the time). There's some things that are significantly under what I would value them at dollar wise and have no trouble paying for, but there's a large number of things that are priced over what I would value them at and just don't buy them. Additionally, the immediate price isn't the only thing to consider in the cost, there's the lifetime value of the item as well. So, I would disagree that the sole response is being cheap, I'm completely confident the same things are capable of being accomplished by having an understanding of the total cost and total value of things you're spending money on and being smart about purchases and use of money rather than buying expensive things because they're "nice".

webwright 15y ago

"the #1 reason for any "How I did <anything regarding money>" is really, "I am cheap."" I read it as "what happens when you invest intelligently in a booming real estate and stock market" (especially the former). I don't think this path is open today.

angstrom 15y ago
That's exactly what I read: Step 1: Be born at the right time to take advantage of market conditions. I see no reason to escape work. Rather my goal has always been to enjoy what I do. No matter the money pile, you'll never be able to repurchase your youth.
- veyron 15y ago
  That is true of almost all success stories though ...
todsul 15y ago
Opportunity abounds at every point in time. Most of all, at times like this when markets are flailing after a severe and (somewhat) protracted period of chaos. Even if we were at the peak of markets (arguably the worst time to invest), there are so many opportunities that oppose real estate and public equities. I'm not talking about selling stocks short, but potentially commodities, natural resources, agriculture, business, and so much more. The thing is, we're not at market peaks. Not even close. If anything, I'd cite this pessimism and cynicism as a good indicator to start buying.
- AJ007 15y ago
  There absolutely are always opportunities, but those opportunities are not always available to those that won't or can't treat the investments as a full time job. As long as there is inflation, all you need to do is buy assets to make money. When there is stagnation or deflation, making money becomes very hard work and luck plays a bigger role. That is because the number of wrong answers exceeds to number of right ones.

wglb 15y ago

The thing that "cheap" and "frugal" characterizations miss is one that I think is significant (and is noted in other comments in this thread, e.g., ebay) is "resourceful".

todsul 15y ago

> the #1 reason for any "How I did <...>" is really, "I am cheap." I couldn't disagree with this more. In fact, I find the opposite true. Living lightly and investing well on average creates much greater opportunity and enjoyment than indiscriminate spending. Sure, some wealth comes with being cheap/frugal. But real wealth comes from investing your time & money well and spending intelligently. Notice I said "time & money". Discretionary items are just as much a time sink as they are a money sink. Forget the self-help articles that harp on about minimalism and the latest lifestyle design fads. Try to live lightly and gauge the results for yourself. You won't miss anything, you'll have more time, you'll think clearer, and of course you'll have more money. Then you'll decide to launch a startup and lose your mind :)

TDL 15y ago
To piggyback on your comment. Being frugal allows people to have capital when opportunities come along. Being cheap is generally undercutting someone else in order to save a nickel or a dime. Being frugal is delaying gratification in order to save up for some specific purpose or to have capital when an opportunity presents itself. Regards, TDL

nivertech 15y ago

How much can you save per month by being frugal? Top several thousands dollars per month. I prefer to focus my efforts on maximizing my income, which is theoretically unlimited, instead of minimizing my personal expenses, which are limited to $2K/month.

billswift 15y ago
On the other hand, as todsul pointed out, cutting your expenses can give you more money to invest. Cutting costs that also eat up your time also gives you more time to increase your earnings potential. Owning many things brings to mind the definition of a boat as "a hole in the water into which you pour money" and your time.
alexallain 15y ago
It's worth noting that you are better off tax-wise saving one dollar than earning the same dollar. I didn't expect it to impact your argument that much, but given that the 2010 income tax rate in Israel is 44% for anyone making over ~90K/yr, 2K in savings is roughly equivalent to 3.5K in marginal income. From what I gathered last time I was in Israel, that was a pretty significant amount of income.
kamaal 15y ago
There is only X amount of time and Y amount of energy you can use to 'maximize your income'. Now come to think of this. If you choose to go this way More expense imply more work. How long can you can you continue doing this. Unless you have a business which you can milk like a cash cow, a salaried employee can only go so far with 'Work more earn more' attitude to match his increasing expenses. The only approach is to know to how to save and invest appropriately.

CoreDumpling 15y ago

Story of my life, Ed. I am your poster boy who lives "cheap" and not "frugal" by choice. I clip coupons and browse slickdeals before committing to a purchase. I never buy anything at MSRP. I monitor airfare prices for weeks before booking a ticket. This is a difficult problem to escape because it's one that I behaved myself into, and that it's self-reinforcing for a variety of reasons: - When you're already on a fixed salary, the opportunity cost of spending time on being cheap is not obvious. You're not taking time away from that $500/hr side consulting gig that you don't have. Instead, you're at a situation where the marginal rate of return on clipping coupons (say, $10/hr) is significantly better than spending the next hour working on that iPhone app that is months from release and has no interested buyers (how long is it going to take to recoup the Apple developer fee?). - Some people get a rush out of saving money, a feeling of "Ha! I beat the system." To them, saving money is a form of entertainment [1], and there's certainly far worse hobbies to have from a well-being perspective. Unfortunately, there are people who take this too far and end up as total misers or compulsive hoarders. I'm not a pathological case, but I've done things that would make some people cringe. - Seeing people successfully live frugally can be a motivator to follow in their path. My parents are immigrants who worked hard and saved for 20 years before they were finally able to afford a house in an expensive neighborhood (and nearly paid for it all in cash). They drive Toyotas, shop at Costco, and cook at home. They are basically the epitome of the "millionaire next door" [2]. - There's also a moral justification for this. "Why do I have to keep up with my spendthrift neighbors? So what if I don't drive a Maserati or carry a Hermès bag? No thanks, I shall be comfortable in my own skin, since envy and greed are evil." This is now an identity statement [3], and while it's a good position to take from a financial perspective, it can be crippling in the way it makes some people closed-minded. Of course, this doesn't necessarily stop them from pontificating about retirement at 30. I do still think that my years of being cheap are starting to pay off, mostly because I'm finally getting comfortable with the sort of "discretionary" expenses you mentioned in your post. The difference is that it probably took a much larger bank balance for me to consider them "affordable." I just flew across the continent purely on a whim to visit some friends that I hadn't seen in years, I no longer cringe at expensive bar tabs if they were time well spent with buddies, I can afford to make an impulse electronics purchase just to see what it's like, and I'm preparing for that self-funded sabbatical [4] to reboot my life. Was it worth it? Well, it was really, really hard to re-orient myself this way, and it took much more sacrifice than necessary, but the good news is that aside from lost time, most of the rest hopefully can be recovered. [1] http://www.budgetsaresexy.com/2009/08/saving-money-trumps-sex/ http://www.budgetsaresexy.com/2009/08/saving-money-trumps-se... [2] http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/dp/0671015206 http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/d... [3] http://www.paulgraham.com/identity.html http://www.paulgraham.com/identity.html [4] http://www.joelonsoftware.com/articles/fog0000000076.html http://www.joelonsoftware.com/articles/fog0000000076.html

Androsynth 15y ago

What you're saying is that you spend money and it increases your luck surface area; but there are plenty of free ways to do this. You don't need to go on vacation, make extravagant purchases or even go to the coffee shop to meet new people, make contacts, etc. It sounds like you need money to get outside of your social comfort zone. If that works for you, fine. But it's not necessary. Also, don't confuse using money to increase your luck surface area with blatant consumerism. Flying to a conference in Finland is much different than buying a new TV.

deleted 15y ago

[deleted]

colanderman 15y ago

We only get one chance at this life, and the thing that bothers me the most is, "What are you missing that you're too frugal to consider?" And I ask instead, "What are you missing because you have to spend so much time working?"

ricardobeat 15y ago

This is not about being cheap. This guy won't cheap out on food and drinks on a night out, because he doesn't do it very often. He will buy better shoes and clothes than you, because they have to last longer. He will have a nicer house than you, because he has put time into it, and the end, can afford better stuff than you do. Spending wisely and being cheap are very, very different things.