“Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.” -Antione de Saint Exupéry

All 135 characters of this quote fits snugly into the 140 character limit of Twitter, but instead of just tweeting it (which I did), I blogged it.

I think it’s fairly obvious why, but at the risk of having excess I will explain. I had a whole blog post centered around the quote, but the rest wasn’t an improvement on what he wrote, it was excess.

All I can say is that throughout our lives we surround ourselves with excess, excess house, excess car, excess cable channels, excess words in a blog post. And all of this excess only leads to more excess; electricity bills, gas bills, cable bills… We live highly inflated lifestyles believing that these things make us happy, but the feeling of happiness is fleeting, takes us off track, and leaves us wanting more. Our car is no longer the latest and greatest, so we trade it in for another, a bigger/slimmer TV comes out so ours is already outdated, our wants turn into “needs” and we truly think of them that way. When this happens we lose focus of the little joys that make us happiest; things like watching the sunrise, reading a good book, meditating, and spending time with loved ones.

I won’t proclaim to have the answers to perfect happiness, but I would bet that it starts out by stripping away the excess in our lives.

Related posts:

1. The Case For Less
2. The Art of What Not to Post
3. Fun And Frugal

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When I first started receiving an allowance, I did what any kid in my shoes would have done…I stole my brothers old velcro neon yellow wallet, and from then on I would walk around with my wallet just like I had seen my dad and brothers do. A wallet was like magic, you open it up and money comes out. “I’m a big kid now,” I thought to myself.

I went everywhere with my wallet, but I soon came to realize that my wallet was always empty. A couple years later, in an effort to make extra money, I began helping with my brother’s lawn business; but my problem remained…I never had any money for what I wanted and I was always broke. This especially hurt because I was now doing hard work with my brothers instead of the little made up chores my parents would pay me for to rationalize my “allowance.”

“I’m broke” is a funny thing for a 10 year old to say, and even though I still had full access to the ATM (Bank of Mom and Dad), I cherished being able to say that I bought stuff with my own money, so I had to figure out the problem. I remember looking around at all the stuff in my room and figuring out where all of my hard earned money went. I saw tons of crappy toys that I never played with, a pair of really cool sunglasses that I could never wear because I wore regular glasses, and a bunch of baseball cards in drawers. I realized that I had spent money on a ton of stuff that I never used and/or didn’t even like, and to make matters more ironic, I had bought most of it on impulse because I had my wallet with me and thought “Why not?”

After I came to this childish epiphany I began saving by hiding money around my room. Before I knew it, I had enough money to buy the new baseball glove I wanted, and when my parents realized I had started saving, they took me to the bank to open a savings account.

As children it’s easy to realize why we save. We set our savings goals for the short term in the form of the items we want. We save up, get our new toy, and set our eyes on the next savings goal, but as with everything in life, our perspective changes as we grow older.

I went a long time just making deposits to that savings account, in fact even at 16, when I finally did touch it, I managed to not waste all of it lifting my Jeep (OK, I did waste most of it). Soon after spending way too much money on my Jeep, I set my sights on homeownership. And for the next 6+ years I saved and invested with this end goal in mind; then when Mary and I got married, our combined savings allowed us to realize this goal.

As we grow older our financial goals change from being weeks away, to months away, to years away, to decades away. And now as I write this, financial goals are harder than ever to define. For us, goals are no longer defined by material things like a car or a house, but they are defined by ideals and the dreams of another generation that wanted to escape the workforce all together. Now these dreams that once seemed so defined are now obscure words that mean different things to different people. Words like entrepreneur, travel, and retirement.

To you retirement may mean leaving the workforce all together and escaping to some exotic beach. To me that sounds like an empty world of boredom because I don’t plan to retire in the traditional sense. I want to be just like my 89 year old grandfather who is still a highly sought after consultant; he doesn’t need to work but chooses to, and thus he remains the smartest and most quick witted person I know.

Saving without having an understanding of what you are saving for makes saving that much harder. You say you are saving for retirement but what does that mean to you? How much will it cost to live the lifestyle that you want for the number of years that you want? You want to start your own business? Awesome! How much does it cost to be an entrepreneur? You want to be able to drop everything and travel the world? How much will it cost, where will you go, what will you do? And most importantly, how long do you need to save to achieve your version of these goals?

Going through a series of questions like these either by yourself or with your spouse may be the most important time investment you make. Doing this allows you to define your goals and have a true understanding of why you save the way you do. Maybe you’ll find that in order to finance your goals you won’t need as much money as you thought so you can cut back on saving, or maybe you want to keep the same pace to achieve those goals earlier. Regardless, having a name to every dollar you save makes saving that much easier because it gives you a defined end goal.

Why do you save?

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3. Murphy’s Law

Over a year ago I wrote a post asking the question: “Is it possible to be young and frugal and still have a vibrant social life?” To which I came to the answer of “it’s hard.” But in the 18 months since I wrote that post, I have learned a great deal about money and my own psyche and therefore would like to change my answer.

At the time of the previous post Mary and I had set our priorities on purchasing a nice new house, and accordingly were saving every penny in anticipation of the closing. As a result, we weren’t doing anything besides working and working out, which was starting to get old. In a nutshell, I was letting money control me and it was kind of depressing. 

Since then a great deal has changed, and I have learned that really knowing who you are as a person and as a couple is the most important aspect of setting priorities. Going without certain aspects in our lives to which we had become accustomed made us realize where our priorities were individually and as a couple.  Sure we accumulated a good amount of money for our house, but it wasn’t any fun because we were saving too much. With this in mind we reworked our budget after the close to allow for more social activities, entertainment, and wants.

Now we no longer feel bad about wanting to go to Starbucks or going out to lunch with co-workers because we know that having that social aspect in our lives is important to who we are. Instead of shunning social spending we accept it as something that is needed for us to stay sane…and believe me, sanity is a priority.

Making priorities is part of being frugal and living a balanced lifestyle, so if you ask me now if it’s possible to be young and frugal and still have a vibrant social life, the answer is absolutely yes… if you choose to make it a priority.

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3. The Art of What Not to Post

In other cultures around the world, you are considered stupid or odd if you don’t talk money. In most parts of the world if you buy something without haggling the salesman will probably make fun of you for being a sucker as soon as you walk away. In America haggling is only considered acceptable in 3 scenarios. The first scenario is if you are buying something from a street vendor (like in New York), the second when you are buying something off of craigslist, and finally, haggling is OK when you are buying a big ticket item like a car or a house.

For some reason society has deemed it alright to negotiate and talk money in these scenarios, but if haggling is acceptable in these scenarios, why isn’t it acceptable in your daily spending? If just by asking for a discount you could get one would you go against this social norm?

I frequently go against this norm, it doesn’t always work, but when it does it feels great. Think about it from the salesman’s perspective, if 5% or 10% off will close the deal and allow them get on to helping the next customer why not? And if 10% off saves you $5 will it be worth the awkward moment? The worst thing that could happen is that they will say no.

Talking money does not only mean haggling, it means sharing your salary, something strictly forbidden in America.

In other cultures sharing your salary is not about bragging, it’s just normal everyday conversation. Xin Lu over at Wise Bread wrote a great post about how her Chinese culture influences her money habits. In the post she talks about how her father once helped a friend get a 20% raise, something that would not have been possible had they not been talking about salaries.

If by sharing your salary a friend could tell you that you are undervalued and try to help you get a higher salary is it OK? If you got a 20% raise I’m pretty sure you’d think so.

Recently I started a new job, and by talking about the offered salary and benefits of the job with someone else, that person helped me to effectively negotiate the offer . Does it feel odd for me to know that someone else knows my salary? Yes a little, but the person who helped was glad to do it and I am extremely grateful to him for it. Sure, at the end of the day I was the one doing the negotiations, and yes, it was a bit awkward, but it was well worth it.

The point here is that Money shouldn’t be taboo. Not everyone is rich, and there is nothing wrong with that, but our culture has ingrained in us that money separates us and defines us. Nothing could be more wrong. Money is something that needs to be talked about by more people, finances cause people more stress than anything, and they are the number one cause for divorce; but if we would all be more open about money we might be able to help each other and it could all change.

Do you talk openly about money? Why or why not?

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After I hung up the phone I kept asking myself, “Am I truly happy?” and “What could I do to make myself happier?”

…and thus a personal journey of self discovery began.

I could bore you with an endless array of what I found about myself, or I could answer it for you in a simple sentence that might contradict the American dream: the opportunity cost of owning a house at 23 sucks.

No, we aren’t hurting financially like many Americans. We bought a house that we could afford, we got a low interest, fixed rate loan, and we put down a good sized down payment (10%). We have an almost fully funded emergency fund, we are both employed, and we live a frugal lifestyle. The issue comes when I look at the opportunity cost of home ownership, or what we could be doing if we didn’t own a house.

The thing about owning a house is that no matter how much financial knowledge you have you can never really account for the opportunity costs of this often emotional purchase that is deemed a “necessity.”

I think about how much money we spend each month on our mortgage, taxes, insurance, utilities, and HOA dues and I cringe when I think about what else we could be doing with half of that money if we had bought a less expensive house, or even if we were renting. One of us could work while the other focused on entrepreneurial ventures or attended grad school. We could work for a year, save up, then quit our jobs and travel the world for a year. Even if we waited another year we could have saved up enough money to put an even larger down payment on a house, thus lowering the future monthly burden.

I look at our house as the reason why we have to work. I feel like I work a job not because I want to (even though I do), but because I have to, and this feeling of burden makes work seem like a chore instead of a learning experience.

So I challenge you, as you are tempted by a free $8,000 first time home buyer credit, to truly think about how much money you want to spend on a house, and the opportunities that you will give up as a result.

For the record, my wife disagrees with me. Her rational (and mine at the time of purchase) was that we bought a house in which we could grow into and start a family, while this is true, I believe that the only thing that would make me a happier person right now would be owning a less expensive house that wouldn’t feel like a burden.

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The following information is adapted from research by Stephanie Komon at Kent State University, and is based on the book The Millionaire Next Door.  Stephanie’s research was derived for the ability of fundraisers to be able to spot wealthy people, but it is very relevant for us.  Her presentation can be seen at the end of the post.

You may be surprised to know that only 5% of millionaires make a taxable amount over $1 Million a year, 8% make a taxable amount between $500,000 and $999,999 a year, and the other 87% work hard and live well below their means.  In fact, the average taxable yearly income for a millionaire is about $250,000.  Taxable income is mentioned because millionaires are most likely to greatly reduce their tax bill by investing in municipal bonds, real estate, an unrealized gain in stocks, and various other forms of (legally) reducing their tax burden.

80% of millionaires are self made, meaning that they are first generation holders of wealth, and 66% are self-employed.  Of the self-employed, 75% are considered to be entrepreneurs, the other 25% are professionals (Doctors, Lawyers, Accountants…).

Most of the entrepreneurs are not in glamorous industries, in fact they are in the opposite…think construction contractors, pest exterminators, plumbers, farmers, and even owners of mobile home parks.

The most common degree these millionaires have is an undergraduate degree.  The second most common?… no degree.  In fact the least common degrees for millionaires are the Ph.D., J.D., and M.D.

97% of millionaires are home owners, and 50% of those have occupied the same home for more than 20 years.

What does the most common millionaire look like? He is 57 years-old, married to his first and only wife, and has three children.

What does the millionaire spouse look like?  The spouses are typically “meticulous budgeters and planners and are more conservative that the millionaires are.”  The spouses are also most likely to be housewives.  If they are employed they are most likely to be an elementary or high school teacher.

Most entrepreneurs live well below their means, and in fact, live so conservatively that if they make $200,000 in a year, they will most likely live off of $80,000 and invest the rest in an effort to accumulate more wealth.

By what means do they live frugally?  They just don’t live extravagantly.  Half won’t spend more than $400 on a suit, they also won’t spend more than $140 on a pair of shoes.  They most likely haven’t bought a car in the last couple of years (if they did it’s probably used), and they are most likely driving an inexpensive domestic car.

What does all of this mean for you?  It means that there is light at the end of the tunnel.  Living frugally is not easy, in fact it’s hard, but as you can see from these that statistically the way to wealth is becoming an entrepreneur and living frugally.  Most small businesses owners make less than $250,000 per year, but they live frugally enough that they live well and save a ton.

Hopefully this has served as a pat on the back for conservative living because it helps us see that there is long term gain from making your own meals, carpooling, owning a home, and consuming less.

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While stuff may be the most vague word in the English language, I think everyone knows what I’m talking about.  Stuff is usually accumulated over time, we get stuff in the form of event t-shirts, “stocking stuffer” gifts, good deals we can’t say no to, hand-me-downs, or my favorite “stuff we hold onto in case we might need it again someday.”  In many instances this “stuff” triggers a memory which makes us feel attached to it.

I tell you this because I accumulated a lot of stuff in my life.  In fact my mother encourages it, she calls them “memories,” and she refuses to throw anything of my “Memories” away.  Regardless, I never really thought I had a problem until I got rid of it all.  This magical day came when I packed up my stuff after College graduation.  There was no way I could get it all in my truck so after much debate (and the fact that I was broke) I sold all my furniture, donated all of my “stuff” to charity, and packed everything else into my truck.  At that point in time I had never felt more free in my life.  I didn’t feel like anything was tying me down, I could drive anywhere I wanted to and start anew.  I got a rush from that feeling, and so I’ve chased that feeling.

Now that Mary and I own a house, this is a much harder feeling to chase, because, as a matter of fact, I am tied down.  But as a result of my moving experience, I’ve made a conscious decision not to accumulate stuff we don’t need.  I don’t want to become one of those guys who can’t even park his car in his garage because the garage is used for storage of stuff.

Here are some basic steps that I’ve found helpful in getting rid of stuff, making a few bucks in the process, and avoiding the accumulation of stuff:

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Did you know that there are companies whose whole foundation is based on taking your money while giving you nothing in return?  These companies exist, they are very real, and most people continue on paying them for nothing, you probably are right now.

The primary example of this that comes to mind is your Gym membership.  Some people are very good at going to their local gym daily to workout, but the fact of the matter is that big chain or “Globo” gyms earn their money on upfront fees and the premise that most of the people who pay are not going to go.  I know way too many people who pay for a gym membership that they don’t use.  What many people are paying for is the delusion that having a gym membership means that they do workout.

Think about how much you pay for your gym membership.  Now how much do you go to the gym?  Is it really worth it when there are literally HUNDREDS of things you can do for free to stay in shape?  Go run, do sit-ups, push-ups, jumping jacks, run the local stadium steps, join an intramural sports league, all these things are more fun than staring at some meat head stare at himself in the mirror!

You could save hundreds or even thousands of dollars a year by going outside and using the world as your gym!  I’m not telling you to not workout, and some people use the “globo” gym everyday (good for you!), but most don’t.  If you are a “most” person, or even if you aren’t, breaking the gym rut would be good for your workout routine anyway!

Mary and I do Crossfit workouts on our own, and the money we don’t spend on a gym membership we are using to buy different pieces to build our own gym of homemade (medicine ball, parallettes, pull up bar) or used equipment found on craigslist.  Crossfit is a high intensity combination of Gymnastics, Aerobics, and Olympic Weight Lifting where all the workouts can be scaled to your own level of fitness.  Doing this we are in the best shapes of our lives, and we aren’t paying a dime for it in membership dues!

As a side note I have a recommendation to gym big wigs.  Why don’t you offer a punch card for workouts? Say $20 for 12 workouts.  Like a buy 10 get 2 free visits or something.  That provides more value to many of your customers, I can guarantee that it would be a huge hit (I’d probably buy one for a rainy day), however I do understand that it undermines your whole profit base.

Related posts:

1. The Opportunity Cost of Home Ownership
2. Why Do You Save?
3. The Party Always Ends

Now that we have moved into our house, I’ve found myself at a loss of ideas and motivation to post.  As I’ve been trying to analyze why I feel this way, I’ve come to the conclusion that it’s because I’m beginning to feel like a hypocrite.  We live in a very nice new house, that we have worked very hard for, however we have had a great deal of help getting here.

First, we got a huge leg up from my wife’s brother and his wife.  They currently own two houses in the Dallas area and offered to let us live in one of them, rent free, as long as we maintained it and paid the utilities.  So far we have not been able to thank them enough for the head start they gave us on saving for a house.  We lived there for about a year, and by living frugally we were able to live on my wife’s salary while saving all of mine.  This enabled us to have a good sized down payment on our house and to fully fund an emergency fund.

Next, my in-laws gave my wife her mom’s old car for her graduation.  Which is a very generous gift by any standards, but when her mom’s old car was a mint condition Lexus SC 430 with low miles, it’s above and beyond.  We were able to sell the car for a large sum, which enabled us to put a very large down payment on our Volvo, and put the rest into the down payment on our house.

Finally, something that I have written about previously, but a check that my grandmother gave me when I was young.  I was able to invest and exponentially grow it.  This money paid for Mary’s engagement ring and our wedding rings.  It also paid off all of our debt after college, and for some of our furniture.

Living in our nice new house I have to say it is hard to feel like we are living frugally, in the truest since of the word we definitely are not.  We have a new 2500 sqft house (for 2 people), and we drive a new car that we make payments on (when we could have paid cash), but what I have really come to realize in the last few months writing this is that being frugal isn’t about being stingy, cheap, or not wanting to spend money.  What being frugal is really about is choices.

Mary and I choose to live in a nice new house, we choose to drive a nice new car, and we choose to make sacrifices to afford both of them.  We take our lunch to work.  We don’t eat out much.  We carpool.  We don’t have cable.  We use coupons. We don’t belong to a gym, instead we workout on our own…which will hopefully be a future post.  Mary made the drapes in our bedroom from nice fabric she found deeply discounted.

As you can see, although we may not be the true poster couple for being “young and frugal,” we like to think that we are wise with our money, and we are able to enjoy the choices that we make, while still saving for retirement.

Related posts:

1. The Opportunity Cost of Home Ownership
2. Fun And Frugal
3. Why Do You Save?