Achieving Financial Security While Saddling Frugality And Extravagance
“Don’t spend beyond your means” is an age-old, wise advice. If you spend more than you earn then you will go into debt and if you spend without saving then you won’t end up with much. You’ll be the squirrel that didn’t hide any nuts for the winter.
I have lived both extremes of a spending lifestyle. On the spendy side, I have bought everything I wanted and traveled without worrying even about the extra debt I was taking on.
On the frugal side, I lived in a 140 sqft studio without a car while saving 80% of my earnings.
Either of these extremes might feel uncomfortable to imagine yourself in. Though, thinking back on it, it’s an important skill to obtain, to be able to live either extreme.
For me, I never felt like I was suffering. I think it’s because when I was spending a lot, I was paying for things we brought me genuine pleasure. When I was saving a ton, I was doing so to pay for my freedom.
The Flexibility To Downsize Or Upsize
Being able to spend on the things you like is important. Some go through life denying themselves experiences or objects which they might otherwise enjoy. This can lead to resentment or feeling like a martyr who is missing out on something.
The cheap person is focusing on the dollar signs and the frugal person is focusing on the value of the expenditure.
The financially flagrant will buy and spend in order to impress others or control others around them. Money controls them, not the other way around.
Striking A Spending Balance
There will be a time in your life when you need to save aggressively, without being cheap. And there will be a time when you need/want to spend freely without worrying about creating a financial disaster.
In my saving days, I would rarely go out multiple times a week to expensive dinners and shoot pool all night at a fancy bar. During my wealth accumulation days, the money spent there wouldn’t have had the same value of saving and investing it.
Allowing more serendipity into our lives is a magical experience. You never know what opportunities will come your way, whether windfalls or a pricey experience.
When you are young and you can work, when you have a lot of energy to balance family and friends, fitness and fun then you can earn high and save high.
As we get older, we may want to spend more time learning and developing certain hobbies. Suddenly, we want to spend less time working and spend more time with family, more time with friends and maybe even more time traveling.
If I remained spendy my entire life, I would still be a slave to my job, heavily reliant on the income and always at the mercy of my checking balance and my tax bill.
If I was cheap then I would have never signed up for my expensive rock climbing membership and met the great people who I’ve met, developed the calluses on my hands which I love and gotten into a wall-crushing shape.
If I was cheap I would enter my “retirement” being as stingy with spending as I was when I was hypersaving. I would not take a trip to go see family in NorCal, I would not spend to hang out with my buddy Tim and I wouldn’t help out family/friends financially.
Financial Security Leads To Flexibility
There are many ways of reaching financial security. The one that’s most obvious to me is to always have a steady income stream. Whether from a job, a business, or investments.
If we feel financially secure then we will be more likely to spend when it’s the right time to spend and we will save when saving is in order.
Financial security is a consequence of having control over our spending and knowing when and how much to save. A bit of financial literacy is required or you can just hire the right person to do that for you until you develop it.
What’s wonderful about flexibility is that it allows us to experience life exactly the way we want to, when we want to. Imagine suddenly having a week off of work while your kids, too, are on break. You want to take a cruise that will cost $3k.
If you are cheap then you would never consider spending this kind of money. If you are frugal then you likely have spent conservatively throughout the rest of the year and can capitalize on this opportunity.
If you are irresponsible with money then not only will you jump on this opportunity but will also spend lavishly once on the ship and will then live paycheck to paycheck for a few months until the next big expenditure.
How Much Wiggle Room Do You Have?
Are you spending so little every month that an unexpected expense shoots your cortisol through the roof for days?
Do you have so many financial obligations that you keep having to delay saving and investing?
Wiggle room is created by mastering your finances.
Build a sound financial plan for the short-term and long-term.
Budget, in order to meet your financial goals.
Not only will you create financial security but you will dissolve any stress that might result from spending too much or spending too little.