“Financial freedom by retiring at age 40” was a headline from a journal article. I find the idea of not having to work until 67 or even longer interesting, so I read on. “Frugalism involves saving with Spartan methods,” was the second part of the title, which somehow sounded less exciting.
But the idea that it is up to me to decide when to retire sounds tempting, regardless of what our government is going to legislate on in the coming years, or how the demographic trend will continue. After all, I can barely influence both.
Frugalists save a large part of their income – preferably 60 to 70 percent – in order to become financially independent so that they can afford to retire early from the labor market. “What? Then I can spend only 30 to 40 percent of my income! That’s not possible!”
Was my first reaction. Who would be overwhelmed by feelings of pleasure when it comes to the topics of saving and limiting? On the other hand, my heart beats for topics such as freedom, independence and self-determination.
Bitter realization: for frugalism to work, one must take the combination package “saving and independence“.
Say goodbye to consumerism
When I think about it, I notice that in the media usually they try to tempt us by awaking desire and to get us aroused by beautiful things. Sometimes even funnier, but certainly not cheap, for gadgets that we don’t even need. Like the relaxing spa weekend in the mountains for couples, the pretty luxury handbag for the wife or the particularly snappy car for the husband. Not to mention the great fashion, the smart cosmetics articles, or rather even a surgical beauty intervention?
“This is the latest craze on mobile phones, and that of the secret hide-away” is fueled in us by the desire to consume and we are lured with rows of dollar bills in the bag. The consumption urge goes so far that almost one in ten adults in the Western World is over-indebted!
Frugalists can do without the many must-haves of consumerism, but still seem to have a nice life. “As a student, I always got by with a few hundred dollars a month and had a great time. Why should I spend so much more now that I’m working and earning money?” The 29-year-old frugalist Oliver asks in his blog too. Well, the word “frugal” comes from the Latin word “frugalis”, where it is translated with good, tidy and economical.
The topic had touched me when I saw a television report about micro-living. There were reports about people who are very efficient, but also minimalist living in large cities in the smallest possible space. Thus, the money they saved from the apartment they convert into micro-residents in their free time, because they have to work less.
Their eyes sparkled as they talked about all the nice activities they do in their free time. When they talked about how great it feels to have leisure and less exposure to things, I was almost a bit jealous. I thought of the circumstances that I feel when I sort out my winter fashion in spring and put it in the cubby and get my summer fashion out of it.
Minimalists just have to exchange two or three sweaters for two or three t-shirts, stow the winter boots and put on the strappy sandals, and they’re done! Maybe less is not less?
Frugalism: first save a lot, then be financially free
Frugalists do it a little differently than the micro-dwellers described in the TV report who had reduced both their residential expenses and their working hours. Frugalists seek one or more well-paid jobs to earn a lot of money. And every one of the earned dollars, which is not absolutely necessary, wanders on the high ridge.
“Savings rate? Everything under fifty percent is BS!”
Oliver writes in his frugalist blog. The savings move into ETFs and other funds and, through the compounding effect, grow over time into a comfortable financial cushion. Frugalists thus gain the freedom to change to a part-time job later, take a longer break or simply continue working and then retire at the age of 40 or 50 on their own terms.
Tempting: farewell to the standard life plan
This Oliver is still young. His goal is to be “financially independent” at the latest on his 40th birthday, which he defines for himself with a fortune of around $350,000 to $500,000. Honestly, for me, “financial independence” under one million would not be sustainable, but that can probably be determined by everyone for himself.
But to Oliver’s young age: The blogger “Financial Wise” explains that fortunes are made in ones 20s.
“Never again in life will revenue rise so quickly in such a short time. From apprentice to journeyman salary, from student jobber to junior engineer or junior consultant, that puts parts of the revenue aside “, so his understandable reasoning. “Whoever manages to…
- a) keep his costs as long as possible at the apprentice or student level,
- b) invest the saved money surplus sensibly and
- c) has time for the compound interest effect,
…will inevitably have a stately fortune at the age of 40 or 50, given the use of practical frugalism.”
I choose the middle ground
These are good and interesting insights for readers in the 20th, and as I’m in the same age. I draw my consequences from the engagement of frugalism. I do not want to be a typical frugalist, because I enjoy life and having fun!
On the other hand, I realize that I can either save or spend every single dollar I make, and that too many things are burdensome in the end. And a little braking may be needed. So, I’m going to visit and read all the frugalist blogs I stumble over at least once a week in the future to learn all my options. That will ground me and hopefully save me from the worst consumer sins so that I too will be financially free through frugalism, just like Oliver, but in my 30s.
But for now, I’m going to eat with friends first and tomorrow I will work on my path towards financial freedom! In the meantime, you can share your thoughts with all of us in the comment box below.