A Return To Frugality

Finding Frugality

A Return To Frugality

Grant Sabatier

Founder of Millennial Money. Dubbed "The Millennial Millionaire" by CNBC, Grant went from $2.26 to over $1 million in 5 years, reaching financial independence at age 30. He's passionate about helping others build wealth and is addicted to Personal Capital.

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Frugality has always been a deep part of my life, but this year I ran from frugality with reckless abandon. And I’m officially adding “Losing Frugality” to my list of top millennial money mistakes. I hope you don’t make the same mistake. Seriously. For as much as I write about personal finance and have made a lot of smart decisions about money the past 5+ years, this past year I lost the frugality that has been one of the core drivers of building my net-worth. And my financial future has suffered because of it.Return To Frugality

Since this year I’ve always been a very frugal person. I inherited my frugality from my father, who is one of the most frugal people I’ve met in my life. We both share the rare distinction of only buying 1 or 2 new pairs of pants every year. My father grew up with very little and has passed on that frugality to me through many life lessons over the years. I also credit my frugality (and automated savings), as the two greatest factors in me achieving financial independence and becoming a millennial millionaire by the age of 30.

But, this past year something changed. My frugality disappeared. Instead of buying $12 bottles wine, I started buying $50+ bottles (yes they taste better but I only bought $50+ bottles). I stopped cooking and ordered $75 in takeout on a Wednesday night. I stopped flying coach and upgraded to business class on most flights (sometimes with miles sometimes paying extra). Instead of booking a normal hotel room or Airbnb, I opted for the rooms with a view.

What happened to packing my lunch at home, limiting my grocery trips to less than $50, buying my shoes on eBay, only buying my jeans on sale, and the frugality that helped me become financially independent?

How did I seriously spend $12,000 on a weekend in Napa Valley? Even though I could technically “afford it,” my spending and savings rate has gotten way out of whack and I’ve abandoned the frugality that’s gotten me where I am today.

Sure, I’ve had a really fun year that’s included traveling all over the world, an oceanside wedding in California, and bought some cool stuff. But it’s gotten way out of hand. I’ve lost my way. I’ve lost the frugality that was not only better for me, but better for the earth too.

It used to be the “take what you need an leave the rest” frugality that made me happy. Not buying the best. It’s also frugality that I know is essential to helping me continue to increase my net worth over the coming decades. It’s scary looking into the future as I see my spending habits growing significantly and getting out of control.

For a deeper perspective checkout the Millennial Money podcast episode on lifestyle inflation and the paradox of frugality.

I’ve never spent more money in my life than in 2016 – with my spending rate increasing an astronomical 134% over last year, and peaking at over $210,000! Yeah, I just pulled these numbers from Personal Capital last week and couldn’t believe the totals. I knew that I was spending a lot of money, but got out of the habit of checking my spending/saving balance regularly. I literally have a deep pit in my stomach writing this. But I’m learning from it and hope that radical transparency will help me improve next year.

How I spent over $210,000 in one year

 

So what happened? It’s actually a pretty simple story. I spent way too much money. My balance between spending in saving was seriously out of whack. Looking at my Personal Capital account, it’s easy to see where the money went. Just look below. I spent an insane amount on takeout restaurants, traveling, new furniture, gifts, clothing, business services, groceries, and a wedding.

Return.To.Frugality

As my income has continued to increase so has my spending, so much so that I stopped paying attention to the day to day transactions and making smart purchasing decisions. Yes my investments, including my Millennial Money portfolio are growing and generating a strong return, but I’m not building on my principle balances like I did for the past 5+ years that are essential to building my financial future.

I am left not only thinking about the $210,000 but also about the future value of the money that I spent. Realistically when I look back at my itemized spending I see how I could have pretty easily saved $100,000 if I was following the habits I used previously in building my net-worth. Hypothetically let’s just take a look at the future value of saving $100,000 of what I spent.

The Return on My Lost $100,000 over next 20 years

A simple future value calculation (with an expected rate of return of 6%) shows that I would have $302,713.55 in 20 years just investing that $100,000 principle and not adding a single dollar more. That’s a ton of future earnings that I’ve lost and won’t ever get back.

Future Value

 

A Return to Frugality

But I can only move forward. So how can I can return to frugality? It starts with changing my habits again. And changing my habits starts with each decision I choose to make. So yesterday I made the choice, and each day need to make the choice to recommit to frugality. It comes down to every purchase decision.

I was recently inspired by my Millennial Money Minutes podcast co-host Matt who shared in his 5 Frugality Lessons that he used to think that frugality was about saving, but frugality is really about spending wisely. I couldn’t agree more.

I was also inspired by Coach Carson’s quote about frugality in his How Frugality Buys Freedom post: “Every dollar you spend is really a choice between the object you purchase and increased life options. Frugality, or deliberately spending less, is actually a conscious choice to purchase more freedom.” This reminded my of my first Millennial Money post Money is Freedom and is an important reminder.

Finally, I returned to a Mr Money Mustache post on frugality that inspired me a few years ago, where he shares “Learning to separate “happiness” from  “spending money” is the quickest and most reliable way to a better life. The side-effect of this is that your life will become much less expensive and you will therefore become much wealthier very quickly.”

My Breakthrough Moment

Last week I had a small breakthrough moment. I’ve needed a new computer bag for awhile. One to take my computer to my office and to take on the road. I travel a ton for my business – often taking a trip every few weeks. Since I spend an unhealthy amount of time in airports, anything I can do to make my trip more efficient or more comfortable adds up to a better travel experience.Tumi Bag

I’ve wanted a Tumi computer bag that could easily slide onto my roller bag for a long time, but my current computer bag hadn’t worn out until this year. So I started looking at new bags a few months ago.

Earlier in the year I would have bought a new bag without thinking, but this past week I just couldn’t push myself to pay $350+ for a computer bag. I just couldn’t do it. I could feel a return to frugality.

So I set up an eBay alert and started hunting for a deal. Then I got an alert for the exact model I was looking for (one that retails for $429) on sale for $39 on eBay. I put in a bid and won the bag (with no other bidders). The bag arrived just like new. It’s a simple purchase, but it felt great to get a deal. It’s a small decision I hope to repeat daily when faced with the choice to spend or save.

Since that purchase I haven’t ordered take out food. I bought an $8 bottle of wine last night. And I booked a $49/night Airbnb for an upcoming trip (the best deal I could find).

I’ve returned to frugality. I feel like myself again.

What do you do to stay frugal?

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Grant Sabatier
grant@millennialmoney.com

Founder of Millennial Money. Dubbed "The Millennial Millionaire" by CNBC, Grant went from $2.26 to over $1 million in 5 years, reaching financial independence at age 30. He's passionate about helping others build wealth and is addicted to Personal Capital.

24 Comments
  • Chad Carson
    Posted at 18:26h, 17 December Reply

    Thank you for including me in your post, Grant. It is an honor. It sounds like you really did have a fun year. But good for you noticing when you have gone too far out if balance. I think at best we see saw back and forth continually finding our ideal balance point.

    I like MMM approach of separating spending and happiness. It makes decision making much different . You might still spend $500 on something, but your evaluation would have been much different.

    • Grant @MillennialMoney
      Posted at 18:51h, 17 December Reply

      Thanks Chad. I really enjoyed your post. Getting back on track!

  • Fritz @ TheRetirementManifesto
    Posted at 02:22h, 19 December Reply

    You’ve experienced first hand one of the major downfalls folks have as their incomes increase: Lifestyle Inflation. It’s very easy to slip. A week passes without paying too much attention. Then, a month. Then, a year.

    The good news is you caught yourself.

    Keep yourself caught. Great post.

    • Grant @MillennialMoney
      Posted at 03:37h, 20 December Reply

      Thanks Fritz. Very easy to slip. Onwards!

  • T@TheTirelessWorker.com
    Posted at 11:07h, 19 December Reply

    I personally feel that most people who save a lot will go through a period of time where they are seemingly spending out of their limits.(I’m not here yet) However I think that we need these moments so we can remind ourselves what got us here in the first place. Being frugal and choosing to “suffer” now so we can enjoy our later years.

    I like how you got your breakthrough moment again!

    • Grant @MillennialMoney
      Posted at 03:40h, 20 December Reply

      Thanks. Live for today and save for tomorrow!

  • Biglaw Investor
    Posted at 12:46h, 19 December Reply

    You got that Tumi bag for $39? That’s genius. I am in the market for a new briefcase. My current one has broken. I never thought about looking on eBay. Thanks for the great idea!

    • Grant @MillennialMoney
      Posted at 03:41h, 20 December Reply

      Yeah eBay’s legit.

  • Miss Mazuma
    Posted at 01:02h, 23 December Reply

    Hell of a year!! Particularly your trip to Napa…one of my fav places in the states (though I prefer Sonoma ?). Welcome back on the frugal train. The ride is a little slower but it promises to get you to FI on time. ?

    • Grant @MillennialMoney
      Posted at 18:09h, 23 December Reply

      Thanks Miss Mazuma!

  • Erith
    Posted at 23:34h, 23 December Reply

    For me, it’s about choosing to spend for specifics, and staying ‘frugal/simple’ for the rest. I am off to NZ next week. I have chosen to go business class because it is a long tiring journey (36 hours door to door), with a 12 hour time zone change and anything I can do to make it easier is good. However, I searched hard for a good deal and got an offer at half the normal price. I have also sourced the cheapest car deals I could find.
    My internal flight within NZ is economy, and I refuse to pay for a specific seat, and I only have a carry-on bag….
    And my wine is the $10 variety….

    • Grant @MillennialMoney
      Posted at 14:43h, 24 December Reply

      I agree. Choosing business class for your NZ trip makes a lot of sense! That is a worthwhile upgrade. A similar situation is what got me addicted to business class – I was exhausted from a business trip so decided to upgrade. The experience was a lot more relaxation so I started doing it on every flight. A couple hundred dollars here or there no problem, but looking back at my spending on it for the year – ouch. Thanks for stopping by Erith.

  • Misha @ MoneySheWrote
    Posted at 21:16h, 08 January Reply

    This is a great post. It’s very humbling to read your story because you were honest, open, and true about it. It’s so easy to read this and think of ourself and so many others we know who have struggled with lifestyle inflation. I have experienced it throughout my 20s and have had to “reel” myself back to frugality/reality multiple times. By making small choices, like increasing our 401k contribution to match an annual salary increase, is just one way to set ourselves up for financial success.

    • Grant @MillennialMoney
      Posted at 21:19h, 09 January Reply

      Thanks for reading Misha. Yeah 2016 was an eye opener! However 2017 is off to a great start – I’ve significantly reduced by spending for at least the first 7 days of the New Year! Thanks for stopping by.

  • Smart Money MD
    Posted at 05:57h, 29 January Reply

    Nice job getting back to reigning in your expenses! It’s amazing how quickly one can get carried away. I ended up getting an overpriced refrigerator for $12k! Works well though. 😉

    • Grant @MillennialMoney
      Posted at 14:05h, 29 January Reply

      Thanks Smart Money MD. I’m happy to report that 2017 is off to a solid started. My spending is down 78% year over year so far for the month of January. That must be one hell of a fridge!

  • Solitary Diner
    Posted at 10:02h, 29 January Reply

    This is something I have struggled with since going from being a resident to a fully licensed physician (complete with a large increase in my income). I kept to a reasonably strict budget as a resident, and I was very careful about every purchase, but since becoming an attending I’ve used my budget as much more of a “guideline” than a rule. I haven’t had any of the major lifestyle creep that often gets new physicians (new car, new big house), but my restaurant spending has skyrocketed, and we’re traveling a lot more this year than we have in previous years. The amount of excess is a bit ridiculous, especially given that I’m trying to catch up on a decade of saving nothing/very little, so I’ve recently recommitted to the budget and to being aware of where my money is going.

    Also, the $50+ bottles of wine are a great example of lifestyle creep. My partner and I have a number of ~$15 bottles of wine that we really enjoy, and people keep telling me that I should drink “the nice wine” now that I’m a physician. But I absolutely refuse to start drinking more expensive wine, because while it may taste better initially, I’m sure it wouldn’t take long before the $50+ bottles of wine would taste no better to me than the ~$15 bottles of wine. I’d rather save the extra for retirement/freedom, and if someday I have too much saved, I can put the excess towards doing some good in the world.

    • Grant @MillennialMoney
      Posted at 14:08h, 29 January Reply

      It sounds like you have a lot more balance than I had last year. I really need to come clean to myself (and readers) on my challenge last year. The transparency has already helped me significantly reduce my spending so far in 2017. Thanks for your comment Solitary Diner.

  • Dads, Dollars, and Debts
    Posted at 22:45h, 29 January Reply

    Lifestyle inflation is brutal…brutal! Right now I try to make wise decisions while making sure I am enjoying my life…I don’t need expensive things, but I do like to get things (a night out with my wife, Netflix, etc.). Nice post and look forward to reading more of your stuff.

    • Grant @MillennialMoney
      Posted at 14:13h, 30 January Reply

      Thanks!

  • Mike Levins
    Posted at 16:19h, 20 March Reply

    Great post, great reminder and site!! I think all of us have felt the lifestyle creep at one time or another but the key is noticing it and adjusting. Thinking and planning for the future is what is important now and always. Since I graduated from college I have always wanted a motorcycle, and I even got my license 15 years ago…but I have not been able to pull the trigger on purchasing even a used bike because it is too much of a frivolous purchase (beyond being really fun). I would much prefer to invest that money instead.

    I really appreciate the Ebay comment as well. I just found a pair of running shoes I need for almost half off!! The model is three years old and I couldn’t find them elsewhere!

    • Grant @MillennialMoney
      Posted at 12:03h, 21 March Reply

      Thanks Mike. Glad you liked the post. The question is how much is the enjoyment you would get from a motorcycle worth? It sounds like you’ve made the calculation it’s just not worth it!

  • RICK BERMAN
    Posted at 20:13h, 21 March Reply

    At the end of 2010 I was $36K in credit card debt and made the decision to leave the Life and Health Insurance business due to the ACA changes in how an agent would get paid. So, off to being an salaried employee again and now six years later I have ZERO credit card debt, own two used but dependable autos and refinanced my mortgage rate to 3.75% I made frugality a MAJOR part of my life by bringing my breakfast and lunch with me every day. I use two major credit cards that pay back up to 5% on purchases and use that CASH BACK to pay down what is owed the next month while ALWAYS paying off the balance when due. By eating healthy my weight stays the same and I am able to wear the same clothes without needing to constantly have to purchase new ones. I appreciate others that are frugal and thanks for the confession.

    • Grant @MillennialMoney
      Posted at 08:02h, 22 March Reply

      Congrats on getting out of debt and that awesome mortgage refinance rate! Being frugal feels good! Thanks Rick.

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