I recently told you that if you spend less, you can live more. What I didn’t tell you is that living stingy can be a temporary thing.
That’s what the other Leif that blogs about FIRE — Leif from Five Year FIRE Escape — is here to tell you.
If you’ve managed to get through college, medical school, residency, and perhaps fellowship, you ought to know very well what it’s like to live without a lot of money. If you’re smart, you’ll take the lessons you learned during those years to heart and use them to benefit your finances forever.
You don’t have to live like a resident forever, but it helps to know that you can live on a modest salary. After that, selectively increase your spending in ways that will make your life better. I’ll let the other Leif tell you more about how to make this work for you.
I have a friend who told me about his dream to take his wife on a long romantic vacation to Italy someday, only to lament that he could never afford it.
I heard this story many times, but something never added up. The two of them have great jobs.
Plus, this same friend gets takeout a few times a week, has two nice cars, had an extravagant wedding, and always seems to have the latest and greatest when it comes to video games.
On the outside, he’s living the life, but in his bank account, there is another story unfolding.
I know he was in debt after his mega wedding, and to be honest, I don’t think he’s ever been out of debt since. It hurts me a little bit inside every time he talks about money, so I have been trying to help him turn his life around secretly.
He’s like a little lavish financial guinea pig that I’m experimenting with, and through him, I have figured out the ULTIMATE way to get ahead in life financially. It all hinges around a disruptive event like covid (I know this article is about a year too late…). No, it’s not the benefits of staying home more.
It’s far stranger than that. It involves toothpaste!
Saving is More Important Than Anything
First off, here is a significant fact you need to know to make sense of this bombshell of an idea I’m about to release.
How much you save (as a percentage of your income) is more important than any other financial metric you could imagine.
- Great at saving but bad at investing? You’re still a winner!
- Great at saving and great at investing? Your finances will take off like an Apollo rocket! (Apollo 11…not one of the boring or exploding ones).
- Horrible saver, the great investor? What are you going to invest in??
Seriously. I retired in my early 30s, and the key is just spending less. You have more money to invest if you spend less, and you need less money to support your life if you spend less.
It’s the key.
That’s why the ultimate key to becoming a millionaire is to become a good saver.
But I think you should be more than good. You need to test out being a SUPER SAVER.
What the Heck Do I Mean by Super-Saver?
Ok, I’m just dolling it up. I mean, become a cheapo. A big cheapo. Only dispensing the minimum amount of toothpaste cheap. Pushing the limits of expiry dates cheap. So cheap, you kind of hate it.
Everyone says that’s not what finances are all about, but I say they are wrong. All because they don’t know my trick!
Here’s the twist. I espouse this path in life. But I have:
- Three personal assistants
- Someone who cleans my house
- Another person who cuts my lawn
- No job
- And I will happily pay others lots of money to do most things for me.
And I swear it adds up!
The Magical Trick!
Everyone needs to be a big cheapo, just for a little bit!
That’s important. No one really likes being cheap, but if you go painfully cheap for a short stint in your life, you can gain all the benefits of being cheap and still live it up for 99% of your life!
You may think that this will stop you from living some exciting life, but it won’t. Your adventures will happily be waiting for you. Really that’s because I recommend a 1-2 year stint of seeing just how much of a penny pincher you can be. Like really drive your budget into the ground.
When you go offensively cheap, three big things happen:
1. You Have More Money
This one is obvious. If you save the money you were going to spend, you have more money. Even better, if you invest that money, it is going to grow.
The beauty here is that saving and investing that money somewhat early in your life means that you can really take advantage of compounding to let that money grow big while you go live your life.
Also, seeing that big pile of growing money should create motivation as your life moves along to save even more.
The concept of saving and investing is a nice idea. Seeing hundreds of thousands of dollars growing in your bank account is real enough you can taste the money.
2. You Learn How to Save
Remember how I said that saving is the most important thing ever?
Well, if you save money as your life depends on it, then you’ll learn to be an amazing saver. Saving is more of a habit to get into than anything else. So, by saving way too aggressively, you can put that habit in overdrive.
Then for the rest of your life, you’ll know how to save and EXACTLY how much toothpaste to put on your toothbrush.
Furthermore, you’ll know it’s possible. Suddenly you need to save up $50,000 for a new house!? Pfff that will be nothing compared to that insane year you had. Remember how insane that was?
3 . You Learn What You Hate
This is where the real magic happens and what ties this all together. If you save to a painful level, you will experience some pain.
Oh, you will hate doing some of the frugal things you get up to. You will seethe when that topic comes up. For me, I realized how above everything, I hated cutting my lawn. I would happily do my taxes before I cut my lawn. And cleaning the house wasn’t much better!
(I also hate the news and read morning brew instead, highly recommended!)
Isn’t that bad? Actually no. It’s amazing.
Because you will discover the super saver things that you started doing that you didn’t hate, and you can do those things forever, then all the stuff that you do hate, you can knowingly pass off to another person and feel justified.
That’s how you exit your super saver year. You get spendy on the stuff you really don’t want to do. Then, you will feel like royalty doling out those tasks to others by knowing how much you hate doing them.
Really, you are saving enough money by cutting out things that don’t bother you that you can splurge on the things that make you happy. I have assistants and cleaners, but you know what my trade-off was? I still work a bit! Maybe that doesn’t resonate with many people, but it was a real decision I had to make. My job was fun. Cleaning my house wasn’t. Now I have part-time work and an incredibly lazy retirement.
Why Was a Disruptive Event Important?
As I described. I really recommend going to a painful amount of savings. It’s hard to convince yourself to do it, though, unless…
Unless your life is going through some extreme and temporary change.
Like the changes brought on by COVID, going to school, getting married, deaths in the family, etc…
Those things are extreme! The entire year of covid is nuts. You’re stuck at home hitting that Amazon Buy Now buttons like it’s about to break or working like a dog dealing with the mind-boggling case count. Best of all, no one will judge you for eating in, A LOT.
Then even better. COVID is temporary (right??)! It should only last a few months to 1 year more, and you can use this crazy period in life as your trial period. Then when you emerge from your cocoon, you’ll be a beautiful financial butterfly.
That’s what my buddy got all wrong. They went big on their wedding, and the momentum was all in the wrong direction. “I have piles of debt, so why not add a little more,” is what I imagine he says to himself.
The Bottom Line
Can you still spend money that year? Of course! But see how far you can push it!
Then every decision in your post-COVID life will have some guidance from the knowledge of what you hate, the motivation from that growing bank account, and your well-honed saving skills.
So if you are suffering from COVID fatigue, spice your life up and be oppressively cheap. Push the limits. Also, visit me at my site. I have plenty more where this came from!
p.s. That friend is doing better now. He had frugal months. He wasn’t great at it. He’s no FIRE candidate, but his finances are certainly under control now.