Wednesday, October 7, 2015

Frugality is the Path We Took To Financial Independence

After we had our goals laid out, calculated our net worth, and tracked our expenses and  income, we  had the tools to reach our goals. We  knew what we were spending every month and how much we had left over to invest for our goals. It was what we needed to budget for them. 

However, we never really budgeted.  That statement will shock many people but with the exception of 401K payments being automatically deducted and the usual other deductions like health insurance, we didn't lay out a budget every month. We instead, spent as little as possible each month and invested the rest. The last day of every month found us deciding where to invest that money. As time went on and we got more comfortable with how much would be left each month, we did more and more automatic deposits into investments.

It actually became a game to see how much more we could invest every month without scrimping on our way of living. As goals changed and we had children, investment amounts would change. Children meant college tuition and the many other costs of raising them. You certainly can't invest as much when you are raising children. But you can save on the cost of doing so. Our best investment years were before the children came and after they went to college. However we invested as much as we could all of those years.

Frugality was the path we chose to get us from our first jobs to financial independence. Frugality seems to connotate cheapness.  But that is not the case. Frugality is a means of living below your means to get to the goals that are important to you. You don't have to buy cheap items that will fall apart within months nor feed your family the cheapest of foods.  You make substitutions that satisfy what you want.
 
You make choices in life and the biggest choice that we made was to not keep up with "The Joneses". We didn't care what they were doing or what they purchased. We did what was best  for our family and  purchased what we needed. Through experience, I can tell you that many of "The Joneses" looked enviable but they had credit card debt that never seemed to get paid off. We knew people who lived like that and they now are retired and struggling to pay for even the basic necessities. Believe me when I say that you do not want to be one of those retirees.

If you have debt work hard to pay it off. Then start building an emergency fund and then your nest egg. Is it easy? No, it takes hard work and discipline. You have to be always conscious of your goals and how you will get there. 

The first thing you have to do to be frugal is to cut your large expenses. Can you refinance your mortgage to a lower interest rate? Can you rent  a cheaper apartment?  Can you buy a used car instead of a new one? Can you buy a new car but not a luxury one? Can you go without a car and use public transportation? Do you need two or more cars for your family? Can you cut the insurance bills? These are just a few examples of the really large expenses that we all have. There are just a few large expenses.

However, after you take care of lowering the large ones, there are so many more small ones that you can work on lowering. These smaller ones over a years time can sink your goals.

I will be showing you how we cut the large ones and the smaller ones. You will see what we do on a daily basis to cut these expenses.  I will also share with you what we spend every month right down to the last penny. These will give you ideas. For example, in the photo above, I show you how I lowered my expenses yesterday.

Just 1/2 an hour before lunch yesterday, I had an appointment for a haircut. Then I had two errands to do. These errands were going to take a couple of hours. In my "old age", I need to eat at regular intervals to keep my sugar levels consistent. Since I ate breakfast at 8 AM, I knew I would need lunch before I ran the errands. On my 8 mile round trip, there are no less than 6 fast food places. I could have easily spent $10. or more on lunch. But instead I chose to take a peanut butter and SF jelly sandwich and a bottle of water with me. I also took a fruit bar in case I needed it later. The sandwich is healthier than a fast food choice and a whole lot cheaper. The water was less than a dollar since I didn't have a bottle to refill. I  rarely buy water since I usually just refill bottles with filtered tap water. But my bottles had become old so I needed to buy new ones last week. Next time I need lunch on the road, I will just refill a bottle. Anyhow this saved me from spending about $8.70 more. I ate my lunch in the car after my hair appointment and I was good to run the errands. 

I will also show you what percentage of our income we invest every month when I detail the expenses. Even though we are retired, we do have income from all of the vehicles that we invested for retirement. We aren't rich as I told you in my first post but we are very, very comfortable. Unless the U.S. economy collapses, we have plenty so that we never have to work another day.

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