Enjoy retirement with 30 or 40 years – many dream about it. The so-called frugalists’ lifestyle fulfills this dream.
Frugalists are the foxes among the savers. In no time they try to build up a fortune, so they can get out of the job as soon as possible. The trend comes from the USA. There it is currently formed under the term “FIRE”, the abbreviation for “Financial independence, retire early” and “Mustachianism”, after the thought leader «Mr. Money Mustache ». The term “frugalist” or “frugalism” derives from the word “frugal”, which itself comes from the Latin frugalis, which meant honest, useful, proper, and economical.
Frugalists are not about having a big bank account or being able to put their feet up for the rest of their lives. Behind frugalism lies a new philosophy of life. It is about contentment, non-consumption, conservation of resources, health awareness, minimalism, and above all, financial independence; the liberation from the economic compulsion to be a slave to work. Frugalists want to escape the growing pressure of the world of work and decide independently about their lives.
Reduce costs and invest
Retire at the age of 30 or 40 – how should this work? To achieve this goal, frugalists pursue different approaches. In one sentence, you reduce your expenses to a minimum and invest every dollar you can spare. Instead, they ride bicycles instead of cars, live in shared apartments, cook for themselves, instead of going to restaurants, and new things are not bought, but borrowed or at least purchased second-hand. They refrain from parties, holidays and shopping and to any luxury items such as cigarettes or alcohol. Some frugalists manage to save up to 70 percent of their income.
But frugalists not only save, they invest their money in bonds, funds and real estate – everything that generates the highest possible income. These are in return reinvested immediately.
Saving does not mean giving up
The word “save” usually has a bitter aftertaste, as it is equated with renunciation and a reduction in the joy of life. For having a long-term fortune in sight is generally not nearly as attractive as meeting a short-term desire. However, frugalists manage to interpret the saving positively. They consciously consider what they want to spend their hard-earned money on and question their way of life. For example, those who prepare their own muesli in the morning, instead of getting a chocolate croissant from the bakery, are not only cheaper, but also healthier. Riding a bike is not only economical but more environmentally friendly and a good workout. The question that frugalists face in life is not “How much does this cost me?”, But “What’s in it for me?”.
Frugalists not only lead a very modest lifestyle during the savings phase, but also expect a low cost of living during the retirement phase. If you quit in your mid-30s, you may have to live off your accumulated fortune for more than 60 years. However, frugalists do not seek to raise their feet as early as possible. Many stay at work because they enjoy their work. Others work part-time or on a project-by-project basis. Still others make themselves independent and realize their dreams. Financial independence allows them to do what they want when they want. Being able to work, but not having to, that’s the point of all this.
Nothing for average earners
Those who now believe that they can work for a few years and live up to a conscious lifestyle in order to retire early and enjoy their lives are wrong. Because not everyone can do it like the frugalists and save 70 to 80 percent of their income. The frugal lifestyle is only for those with a relatively high income. Low earners can barely reach the savings rate to retire 20 or 30 years before the statutory retirement age.
In order to build up considerable assets in a few years, frugalists depend on investments with the highest possible return. In that case hardly any way leads past risky investment forms, such as stocks.
Nevertheless, even normal earners can look a bit off the frugal lifestyle. How to handle your money more consciously and where you can save above all else
Are you interested now, and would you like to take the frugalist lifestyle path too? Then contact me and I will do my best to help you to the best of my abilities and of course follow my blog regularly to learn everything around FIRE.