[Editor’s Note: This is a republished post from Physician on FIRE, a member of The White Coat Investor Network. The original post ran here, but if you missed it the first time, it’s new to you! How you see the word frugal depends on your attitude toward money. Enjoy!]
Frugal. Frugality. Frugaling?
These words, which rarely appear anywhere near the word “physician”, are interpreted different ways by different people. I think we all have the same understanding of the definition, although we may use different synonyms to describe what frugal means to us.
Do you see frugality as a good thing? If so, similar words that may come to mind are thrifty, prudent, penny-wise, or smart with money.
Do you see frugality as a bad thing? Your synonyms might be stingy, cheap, penny-pinching, or tight with money.
Frugality as a Good Thing
When I first started my current job a couple years ago, our ophthalmologist noticed a “new” car in the physicians’ lot at the surgery center. When he learned that the ’06 Chevy belonged to me, he asked if I was one of those frugal guys. I suppose I am. I see that as a good thing; I’m not sure he does, although he seemed to be more curious than judgmental.
There seem to be two types of people in this world: those who feel good when they spend money, and those that feel good when they save money.
I see the dichotomy all the time. The former camp will boast about the $300 massage they enjoyed, the $200 bottle of wine they shared, or the $100 shirt they’re wearing. You can see that it makes them feel good to spend that money, or at least to be able to tell others how much they spent.
Those of us in the latter camp are more likely to boast about how little we pay for cell phone service (mine runs $13 to $15 most months), the good buy we found at the liquor store (Sierra Nevada Snowpack mixed 12-pk for $8.98), or how we are flying our family of 4 to Orlando with credit card introductory bonus miles (happening in 2 days!).
The Opportunity Cost of Being a Spendthrift
When I was a resident, one of our attending physicians shared a story about buying a pair of khakis in a department store after he got his first real gig as an anesthesiologist in the 1980’s. They were $110. The point of his story was how good it felt to be able to spend that money and not care about the price tag. Some residents nodded their head in acknowledgment and admiration. My brain started calculating how much that $110 could be worth after 20 years of compounding, and how dozens or hundreds of decisions like that could be so costly over the long haul.
About five years later, my friend with the penchant for expensive pantaloons called me to inquire about locum tenens work, which I had a fair amount of experience with. He was probably in his early sixties, but still needed the income. That fact probably had more to do with his failed marriages than clothing choices, but still I felt a bit sorry for his situation and I was reminded of his story of the overpriced pants.
I can’t tell you the psychology behind it, but I think some brains’ reward systems are wired very differently when it comes to spending. I get a dopamine release when I find a good buy or avoid what I deem to be wasteful spending. You might get a rush from buying the Coach purse or Tag Heuer watch you’ve had your eye on. I cringe when the cost of four flights goes up $600 because I waited a day too long. You don’t sweat it; you’re a doctor after all.
Frugality: Nature or Nurture?
Which camp you fall into probably has a “nature” or genetic component. Cavemen who could ration mammoth meat over several months were more likely to survive a harsh winter compared to those who devoured a fresh kill every two weeks, living bison-to-bison when the bison hunting was good.
I think the “nurture” component is probably a more significant contributor. Our parents instill their money habits in us. Depending on our relationship with our parents, we may someday emulate their spending patterns or rebel against them. Some who grew up without a pot to piss in may overspend to make up for their meager upbringing. Others from a similar background may have been happy without means, and continue to live a modest lifestyle despite a high income.
Growing up in a household of spendthrifts may likewise lead one to continue those indulgent ways despite not being able to afford the lifestyle. They don’t know any other way to live. Siblings from the same household may see that their previous lifestyle was a house of cards, and as it comes crumbling down, change their ways to live more frugally.
There are some tangible benefits to frugality, particularly in the pursuit of Financial Independence. I’m not going to tell you that you must be frugal, or that it’s a purely positive trait to possess. When taken too far, frugality can cause you to miss out on worthwhile experiences. Frugality can be a hindrance to fun and can lead to hours wasted in search of a slightly better deal. Like so many endeavors in life, there is a point of diminishing returns when applying principles of frugality.
The Law of Diminishing Returns
The truth is, when your income is in the range of a typical physician’s, frugal choices in your day-to-day life don’t make a huge difference. Early bird discounts, discount groceries, and thrift store clothing are all fine and dandy. You might cut $500 a month from your budget by shopping wisely, and that adds up to $6,000 in a year.
$6,000 is a lot of money. This is the part where most articles will tell you that after 25 years earning 8%*, you would have nearly half a million dollars ($478,683 to be exact). Nothing to sneeze at, for sure. Now consider, that at a physician’s salary, that $500 a month should be the difference between putting $60,000 or $66,000 a year towards your debt or retirement, or if you’re a super saver, it’s the difference between $160,000 and $166,000 a year.
If your savings rate on a $200,000 to $400,000 salary is a lot less than $60,000, you’re doing it wrong.
Now, if you’re doing it right, and putting away $60,000 a year, you’ll have $4.78 million after 25 years of steady 8% gains. If you make little sacrifices every week to put away an extra $6000 a year, you’ll end up with $5.27 million. If your gains are 7.4% instead of 8%, you’re right back to $4.78 million. All big, big numbers. Way more than you should need to retire, and more than I aspire to have.
The lifestyle of someone with $4.8 million is probably indistinguishable from that of someone with $5.3 million. Also, notice that a difference of just 0.6% in return will cancel all of the “scrimping” you did on a regular basis for 25 years.
*8% is higher than I use for most projections, and volatility will lower your compound annual growth rate, even if your average return is 8%. Additionally, I don’t plan on a 25-year career, but I had to go out a ways to get a reasonable effect of compounding. This example wasn’t meant as an affront to frugality. I make frugal choices all the time, but these numbers illustrate that a latte-a-day isn’t actually going to break the bank at the salary a physician enjoys. It’s a lesson I understand, but haven’t really learned.
How can frugality make a difference for a physician?
Think big. Your home. Your cars. Private schools. Second homes. Second wives.
These are the things that can bust your budget. An expensive home costs more to heat, cool, maintain, and improve. Property taxes are higher. You might get your money back when it’s time to sell, but as many of us learned in the last decade, that is not always the case. Cars depreciate the moment they leave the lot. Public school tuition is 100% less than private school tuition. Owning two of anything rarely makes you twice as happy as having one.
Relative frugality when it comes to the big stuff can make a huge impact on your ability to reach your financial goals, a fact well illustrated by the 4 Physicians. Lifelong coupon clipping and reusing dryer sheets (or is it dryer lint?) will have a minuscule effect compared to living in a reasonable home and driving non-luxury vehicles. As long as you “pay yourself first” and save somewhere between 20% and 50% of your salary, you will be in excellent shape in good time.
Again, I’m not trying to make an argument against frugal living here. Frugality has its merits and I am largely frugal by choice and habit. Sometimes I need to remind myself that I won’t get ahead in life by buying a Baconator at Wendy’s because the coupon gives me a free soda and fries if I do. Or not to beat myself up over paying $10 to park and avoid making my family walk a half-mile through the slush. We’re doing the big things right. Sometimes it’s OK not to sweat the small stuff.
What are your thoughts on frugal living? Does it feel better to save or spend? Are your habits learned or were you born this way
I always enjoy rereading well-written blog posts. I sometimes wonder how I ended up being frugal. I too love saving money and get the dopamine from the savings. I do encourage it since I think frugality is also a virtue. Often it is better for the environment. Squandering money or resources just feels bad to me. Also those with a frugal spouse are more likely to succeed financially, per The Millionaire Next Door.
It is hard to remember to focus on the big stuff; you are right. About 3/4 of spending is typically in 4 categories:
http://wealthydoc.com/blog/how-to-save-money-big-time
I also take more pleasure from saving than spending. Sometimes when I do splurge, it takes away from my enjoyment of the purchase with constant evaluation of the value received. When I find a good buy, I enjoy the purchase more due to the satisfaction of getting extra value. I’d expect that free flight is going to be more fun than if you paid top dollar for it.
While that mindset WILL help you build wealth faster, I’m not convinced it will maximize your happiness. I’m perfectly fine not getting the very best price on something if it will bring me happiness. One benefit of having “enough” is that you don’t have to worry about getting the very best deal on everything, and that can bring satisfaction as well.
I too enjoy being frugal. I think much of it comes from being happy and thankful for what I have. I don’t want for a lot. And I am turned off by money inefficient items.
Unfortunately I find I am the opposite with my time and effort. I probably spend too much time at work looking for near perfection. Of course that is why I am a doctor and making good money.
Gratitude can help you realize just how good life is and leave you wanting less. That’s an excellent point.
Cheers!
-PoF
I like to believe that frugality is purely a learned behavior (nuture, not nature). I’m now very frugal, but started out the exact opposite way. It wasn’t until I learned the power of savings/compounding and how it can rescue you from the need to work until you are an old man, that I adopted frugal behaviors. My parents did not raise me to be frugal. They lived paycheck to paycheck and bought things above their means (new cars on credit, etc). They taught us to work hard in school because nothing comes free, etc. which I’m thankful for because it got me through college and med school. But, when it came to saving and living well below my means, I had to learn that lesson the hard way.
It’s a tough lesson to learn, but it sounds like you figured out the benefits of relative frugality on your own. Living paycheck to paycheck is a reality for Americans across a surprisingly wide range of salaries. Breaking free from that habit can lead to greater freedom, as you now know.
Cheers!
-PoF
It is fun to see who is driving the jalopy in the doctor’s parking lot. My car is worth about $7K currently. I am pretty sure there are some cars in the parking lot with tires worth $7k.
As for clothes, while I have never been fancy, I did shop at Banana Republic for years. Recently I downgraded to Old Navy. I realized that my Khakis often were damaged/stained after a year, so why spend two to three times as much on them if they look similar and still only last one year before needing replacement.
I split the difference and buy the khakis at The Gap. 😉
…and I thought that shopping at Banana was being frugal 🙁
Banana Republic suits are my favorite! However, I never buy them unless they’re at the outlet or at a steep discount (eg closeouts, last years model). I am frugal, cheap, or stingy (whatever my family wants to call me) when it comes to most material things. However, I willingly spend on family travel and other experiential activities, since I believe they result in more sustained happiness and nice memories.
What really irritates me is taking bags of clothing to Goodwill, and finding occasional garments that still have tags on them. Most of the time, it’s because one of the kids outgrew the piece of clothing that was buried in the back of the closet. Fortunately, it doesn’t happen too often, especially now that 2/3 are out of the house.
Khakis are only supposed to last one year? I think I’m doing this wrong.
I’m partial to the Aeropostale khakis / chinos. Sometimes, I’ll even find them in the clearance rack. Frugal win!
-PoF
Buying second hand is best! 😉
Frugal as charged at least relative to my colleagues but never felt restricted in any way. For the last 10 years of my career was in a high income practice and was able to save in the range of 70% of income. Married to a frugal spouse who has made a huge difference. Largest non-frugal items were the four children and private school for K-8 for three of them and K-12 for one. Retired from clinical at 53 and having fun ever since.
Great thanks to my parents and my Nan.
Wow. Saved 70% for ten years! That is a fast trip to FI. I don’t recall if you have written about that journey, but if not it would be a great guest post or longer blog comment. Congrats!
Glad you’re having fun now, but a little bummed you weren’t having fun before too. I’m a little younger than you and trying to balance life such that I have just as much fun during my career as I possibly could afterward.
70% of gross or net?
While there are people who save 70% of gross, most of them aren’t physicians simply due to the tax cost. I mean, let’s say you pay 20% in taxes, which is pretty good. If you’re saving 70% of your gross, you’re really only living on 10% of your gross. That’s pretty darn low on the average physician income. So I’d guess net, but who knows. The problem with net is that it’s always “net of what?”
Exactly. I always worry when people say meaningless, unqualified stats like that it will discourage someone who thinks, “wow, guess I’m not saving enough.” You know, the FIRE keeping up with the Jonses.
To be absolutely honest I was just ballparking it and had never really calculated the real percentage. I just knew that it was a heck of alot that I was saving and that it was in excess of 50% of gross income (it was in fact in excess of 50% of total income). Again, what does net and gross mean? I take it to mean total income – practice expenses = gross income. Gross income – taxes = net income. Others can correct me if I am mistaken. So in doing the actual calculation, when I use gross income, in my best years I was better than 70%. It is all complicated by the the fact that in Canada, incorporation allows the first 500k of income to remain in the corporation at a tax rate of 15%. The tax paid on 150k of personal income taken out of the corporation is 25%. There will still be some tax to be paid on the money in the corporation as it is drawn out as income or dividends but it will be much (much) less than what would have been owed if it could not have been left in the corporation. As well, I had the benefit of DW in a lower paying specialty who was working part-time. If we went with ‘family income’ we probably would be more like 60% range.
I would not have said that we were ridiculously frugal but rather that I was lucky (or perhaps as WCI points out – unlucky) to find myself in a very busy and efficient practice. And the family did have alot of fun but perhaps I worked harder than I should have or would have liked. Though one of the reasons that I chose to work so hard was knowledge that I would soon be free to do what I wanted.
I find this post so interesting I feel like I have a foot in both worlds. My parents were very frugal and I was raised that way and continued to be so through college and then my dad passed away and came to realization that he scarficed so much and never got to really enjoy the fruits of his labor. I think it was then I started to let the purse strings loose more and have found enjoyment in buying things without evaluating if I saved this amount it will be worth this much later. That being said I still save 25-30% of my high physican income as I also know how important it is to sustain the lifestyle I enjoy later in life. For me the answer is trying to be frugal but not stressing if I am not, which I think the post encapsulated perfectly. I think the real answer is do what makes you happy as long as you know what that is and you are not robbing the future you to do it.
Great comment Samip! My husband and I started loosening the purse strings after his Dad died unexpectedly. A parents early death makes one re- evaluate things.
Great post. Enjoyed reading it. As a frugal person myself, I’d like to share my perspective:
My wife and I are a two physician household. We have three kids. She works part time. I work full time in a high-paying specialty. We can afford anything we want. But we remain frugal. (Thankfully my wife isn’t interested in expensive bags or jewelry). Our kids get hand-me-downs like most kids in their school. There are no expensive khakis or shoes that we go after. Occasionally we do splurge on a toy or a gift for a birthday but that is around 3-4 times a year. We go out and eat about once every couple of weeks. We do spend our money on vacations (in some years upto 5% of our annual income) and focus on experiences than material luxury.
Occasionally I feel like loosening our purse strings a bit. But then we remember the big picture. Our kids are heavily influenced by our spending patterns and lifestyle and we feel it is our duty to teach them the value of money and how relationships and experiences are more important to us as a family than material things. We only hope that the kids pick up the right habits.
I guess what matters most to you is something you can splurge on. If khakis are your only vice then go for the best khakis you can afford. For us it’s vacations, and so we are thrifty in other places and spend the money saved on family vacations. Instead on spending on every luxury, if you spend on the most meaningful thing (to you) you can have your money last longer (freeing up your time that you might otherwise need to make more money). In the end that’s what’s most important of all – time, the most valuable resource of all.
Bikes…don’t spend a lot on most things, but I might spend 10k/yr on my bike habit. But I’m two years out of residency, have good savings, no debt besides a mortgage, and get a lot of enjoyment out of my hobby. I like my work, but what’s the point of earning a huge salary of you don’t use it for things you enjoy and to help others. Society isn’t really set up so that you can work 10 years and then live off the labor of others. Sure a few people can do it and it’s fine, but if it ever caught on with the masses, you could kiss your market returns goodbye.
You can have the finest in bikes for what it costs to sustain a boat or airplane habit.
And I wouldn’t worry about FIRE catching on with the masses. It won’t even catch on with the masses of physicians. It won’t even catch on with the masses of physicians who read WCI. It won’t even catch on with the masses of physicians who read WCI whose financial situations would allow early retirement.
True that…
Very True!! Health insurance is expensive. HAHA
I came to the bike shop for the packet pickup for triathlon, and the clerk pointed out a TT/tri bike “on sale” that costs more that Toyota Yaris which was parked outside.
I also want (not that one) but a carbon frame bike, which is at least $3k… But my aluminum one is not that much slower!
I put $600 worth of gas in boat/car last week and this week will buy another $800 in repairs and accessories.
Trust me, you can buy whatever you want for your bike and you’re still coming out ahead of boating. BOAT = Bring Out Another Thousand = A hole in the water you throw money into.
Wow, this is expensive hole in the water 🙂
I wonder, if you enjoy “motorized” speed on the water, you should try non-motorized- such as kitesurfing or windsurfing- there are lakes by you which get lots of wind.
Although by no means cheap sports, they would still be much cheaper than the boat.
The exhilaration I get from windsurfing is a legal “high” that for some reason I cannot get even on a fast powerboat.
I’ve taken kitesurfing lessons. It’s a lot of fun. Hard though. You have to wakeboard and drive the boat at the same time.
I’m not too worried about the boat. I knew what I was getting into and I can certainly afford it. If I didn’t use it as much as I do now I’d sell it. I’ve been putting over 100 hours a year on it, which considering we barely have a 4-5 month season, is pretty darn good. That’s like 20 5 hour days.
I get it… Wake boarding behind a good boat with music blasting from the rear speakers is the whole other thing!
I didn’t realize Khakis could be a luxury.
Excellent comment. The fact that it may be best for your kids not to grow up in a spend, spend, spend environment is one that I wholeheartedly agree with, and didn’t really address in the article.
Teaching our boys the value of money and the relationship between work and the ability to afford things is an important job.
Best,
-PoF
Frugal is one of those words that straddles the line of connotation, but generally it veers more negative for me. Smart with money, sensible, prudent would be the other end of the spectrum. But some are truly miserly. If you enjoy saving each penny more than you would buying X, Y, Z, then by all means. Some people love looking at their account statements, even though they will never spend any of the money in the account, ever. There’s real value to that, a sense of peace and satisfaction, accomplishment.
I consider myself a cheapskate most of the time but I spent plenty of money on our first house, drive luxury brand vehicles, don’t think twice about spending a couple hundred on occasional dinner, buy my wife nice gifts from time to time and go on nice vacations. On our anniversary I always buy a bottle of Cristal. Some stuff is still sensible (the cars are bought used) but other stuff is completely superfluous.
At the same time, I personally will put off buying things as long as possible, or avoid it altogether. We still don’t have a dresser in our bedroom. I haven’t bought myself shoes in years. I am still using the same cheap dumpy laptop that I had in lawschool. I rarely ever buy myself lunch during the workweek (easily $1,500-$3,000 a year) or buy things like coffee. I put regular gas in my car even though it calls for premium (~$500/yr). We don’t have cable TV ($2k++/yr). I don’t buy disability insurance (thousands and thousands per year).
Frugality isn’t a bad thing unless you’re making others suffer for it. I get groceries for the baby at whole foods since it makes my wife happy, even though I’d rather go to a discount store. I fear making my wife or future self suffer from scrimping on the disability insurance, but to me, the fear isn’t big enough to justify what I could otherwise put to use saving for the future. Who knows.
Certain things I regret spending on, others I never give a second thought. That seems to be the best barometer, but it’s only in hindsight.
I find that this statement
“I consider myself a cheapskate most of the time”
Is 100% the opposite of that which followed.
“but I spent plenty of money on our first house, drive luxury brand vehicles, don’t think twice about spending a couple hundred on occasional dinner, buy my wife nice gifts from time to time and go on nice vacations. On our anniversary I always buy a bottle of Cristal. Some stuff is still sensible (the cars are bought used) but other stuff is completely superfluous.”
I mean, is the big ticket items that can make the biggest difference and you just explained how you spend money willy nilly in the biggest things that can truly make the biggest difference. You sweat the small stuff (shoes) but don’t think twice about the big ones.
This is not too criticize how you spend your money, do what you want with it. Only finding amusement in the way you called yourself a cheapskate, but appear to be the opposite.
I prefer “broadly frugal and selectively extravagant.” We all get to spend our money how we like, but it’s best to spend it in the manner that will do the most good and increase your happiness the most.
+1, broadly frugal and selectively extravagant sounds about right.
I’m not sweating the small stuff, I’m simply not buying some of the small stuff. Well actually I do sweat a lot when I cut my own grass with my shitty electric mower 🙂 but saving money on this and that doesn’t usually stress me out.
And the small stuff adds up. Just look at all the grandmas with home shopping addictions and going bankrupt at age 65, it’s all spent $39.95 at a time.
Oh man, no way could I ever go back to a reel or an electric mower. That would be far worse than driving a beater. 🙂
Never heard anyone mention a negative connotation to frugal or thrifty. That’s usually reserved for “cheap” or “miserly.”
That’s something I’ve always had in my head. Thinking back on it, it probably has to do with hearing all those ads for that place “mac frugals” which was a pretty depressing place to shop. 😀 Or it could be just the way the word sounds, harshness of the G that follows the awkward sounding “fru.” 😉
Whatever the reason, for some reason, “he’s very frugal” typically meant to me that someone is a real tightwad, stingy, has a rewards card at big lots…
It is both sad and telling that there is no word in the English language for living
at the peak of the Fulfillment Curve, always having plenty but never being
burdened with excess. The word would need to evoke the careful stewarding
of tangible resources (time, money, material possessions) coupled with the
joyful expansion of spiritual resources (creativity, intelligence, love).
Unfortunately, you can’t say, “I’m enoughing” or “I’m choosing a life of
enoughness,” to explain the mixture of affluence and thrift that comes from
following the steps of this program. The word “frugality” used to serve that
function, but by the middle of the twentieth century frugality had gotten a bad
reputation.
To be frugal means to have a high joy-to-stuff ratio. If you get one unit of joy
for each material possession, that’s frugal. But if you need ten possessions to
even begin registering on the joy meter, you’re missing the point of being alive.
There’s a word in Spanish that encompasses all this: aprovechar. It means to
use something wisely—be it a sunny day at the beach or leftovers made into a
delicious new meal. It’s getting full value from life, enjoying all the good that
each moment and each thing has to offer. You can “aprovecha” a simple meal,
a bowl of ripe strawberries or a cruise in the Bahamas. There’s nothing
miserly about aprovechar; it’s a succulent word, full of sunlight and flavor. If
only “frugal” were so sweet.
-Your Money or Your Life
I’ve had people use cheap with me before, they don’t seem to realize it’s rude… they usually use it in the context of justifying why I’m in such a better financial situation than them when they’re further along in their careers and have made millions more than me. It’s called spending on what gives you the most enjoyment vs spending on impressing others. I guess my CRV is unimpressive, but it’s great for hauling around an 8k road bike.
if you come from money and was raised spoiled you probably will not be frugal
me who started from being in the red appreciated the money I was making and valued it dearly
I would change toner in copier cartridges for $8 bucks in 5 minutes, buy dental supplies from non dental businesses, shop all supplies, the list is endless
not wanting to lose $$$ in stocks, all my personal assets went into individual munis which served me well
stocks in my ret plan
Just listened to Larry Kudlow on the radio and they felt small and mid cap will do well when corporate taxes are lowered next yr
“not wanting to lose $$$ in stocks, all my personal assets went into individual munis which served me well”
Wonder how much that flight to safety has cost you missed out on returns over the course of your career? Probably far more than you ever made changing copier toner.
I missed this blog first time around, but I had not yet invented (or discovered) the term, “selective extravagance”, 18 months ago, to describe my personal philosophy. We have earned enough money and amassed a respectable nest egg over the years. We save money where we can and it makes sense (who doesn’t ?), but I would not drive out of my way to save a few cents per gallon to gas up the Prius, for example. I don’t buy expensive stuff to impress others, but only to make my life (or my family’s life) better.
If I can save money on vacation, great, but when I travel, I usually have limited time and try to maximize the enjoyment of the experience. If that means buying expensive, line-cutting personalized VIP tours of the Louvre, the Vatican Museum or the Uffizi, or staying on property at Yellowstone (versus the Best Western outside the park gates), I am all in. We buy high quality food (often organic) and do our best to load up on favored foods when they are on sale. If it is a choice between buying a hormone-infused, grain fed steak (or fish–yes, they are feeding farm-raised salmon with corn, erasing the health benefit of consuming it) or paying twice as much for grass-fed (or wild caught), we do the latter and would rather eat these expensive items half as often than eating the low quality substitutes.
I took exception to the “$100 shirt” in the opening section. I mostly dress, much to my family’s chagrin, like I am about to go on a camping trip. The clothes are super comfortable, fit me just right, and I usually get the Patagonia and Kuhl stuff from their 50% off sales after the season. The clothes last long (I have several shirts that are 20 years old and still look great), and I have occasionally resold items I no longer want on eBay, where there is an active reseller market for used items.
Where I have learned to make no compromise is socks and underwear. In the not-too-distant past, I bought the cheapest socks/underwear I could find in bulk packs at Target or WalMart. (Not surprisingly, they were not very durable, and I was replacing them frequently). The cheap running socks, in particular, fit terrible, trapped sweat, and you felt your foot sliding around in your shoe. Several years ago, as a gift, someone gave me high quality synthetic running socks, and I felt like Edison inventing the light bulb. It made a huge difference. Not surprisingly, it also makes a big difference in casual/dress socks, too, where I primarily wear wool or wool/blend. I try to get them on sale and only buy what I need, but it still costs quite a bit more than the cheap stuff.
I will spare the internet world the details on the underwear, but the lesson is the same. I can afford to be “selectively extravagant” with my undergarments in order to maximize my comfort, and I will make no excuses for being so!
I completely agree with spending on something as seemingly insignificant as socks. If you haven’t tried Darn tough socks they’re great. Only socks I’m aware of with a lifetime warranty, they’re super comfortable and are seemingly invincible. NFI
The last package of socks that was bought for me is of markedly lower quality than previous packages. I really noticed the difference. I agree it’s a great place to spend some extra money to increase your happiness.
I should try those darn tough socks canyoneering. Nothing stands up to canyoneering. I consider everything I take down slot canyons to be disposable/consumable. It’s just a matter of time. I destroyed a pair of boots designed for canyoneering in just 6 canyons.
Agreed with the darn tough socks. One of the best pairs I’ve ever had, though one is wearing a hole in it and I may have to have them replace it… after 5 years of very frequent use.
wow, I got some darn tough socks and they really are nice and comfortable. I got some smart wool socks a few years for a similar price point and while they are comfortable, the durability is poor. Only 2 of 8 pairs haven’t worn out yet and those last two are close to having holes in the heel. Since the Darn Tough have a life-time warranty I hope they will last longer and if not I’ll just ask for a new pair.
Relative frugality is a concept I can definitely get behind, especially with the big ticket items like PoF mentioned. It’s something that I’ve gotten better at, but I still do struggle with it from time to time.
If given the choice to save time or money though, I will usually choose time, especially for the small stuff. For example, I won’t drive 10-15 min out of my way to save $.10 a gallon. I believe your time is worth quite a bit more in the end. Great post!
Very interested on how you got a great deal on your cell phone plan!
I use Republic Wireless. Unlimited calls and texts, and I’m refunded for data I don’t use. Linked on my Recommendations page: http://www.physicianonfire.com/recommended/#cell
Hmmm… bought a $200 IPhone on Walmart.com and service through StraightTalk. The monthly unlimited rate has now gone up to $40-$45/ mo. (It was $30 -$35/ mo). Much better than the $150-$200 / mo AT&T was charging me, but still kind of high. I wonder if I could port my number over to Republic and use the Iphone?
Unfortunately, they only support certain phones, and iPhone is not one of them. Android only as far as I know.
Best deal I’ve found recently is cricket (unless you’re like PoF and don’t mind not having data). They have a 4gb data (until throttle) and unlimited call and text for $40. As long as your phone has a sim port, you can usually use it (I used my owned iPhone). The reason its such a good deal, is each additional line is $10 cheaper (so 2nd is $30, 3rd $20, 4th $10, and 5th free, max per plan is 5 lines). So for $100/month you get 5 lines with unlimited talk, text, and 4gb data/line. I added poor family members to my account (no kids yet), because it cost me practically nothing, and saved them a lot of money.
Also, cricket is AT&T’s low cost provider, so it uses their towers and so has much better coverage than republic (and many of the others) which uses mainly Sprint towers.
I read up a little on Cricket. Their data speed is capped at 8 Mbps. Is this noticeable to you?
I haven’t noticed…I think streaming a video in 1080p HD requires about 5 MBps if I remember corrently. It’s not like my home broadband where I’m downloading stuff, sharing with others in the house, Netflix, etc. Mostly use for emails, Spotify, and YouTube, where you can’t really tell speed above a certain point.
That does sound pretty good, and might be a good plan to transition to at some point. Sprint’s service seems to have gotten worse in the areas we vacation, although I have no issues when close to home.
As far as data, I’m on wifi 95% of the time, so I only use data when out and about. If I had 4 gb, I wouldn’t have to worry about data, though, I suppose. When I switch to a part-time schedule, I do plan to be away from home more.
In a recent forum thread someone used term “selective extravagance” which I liked. I don’t consider myself that frugal by nature – it’s definitely a muscle that always needs training personally. But I have enjoyed watching my accounts grow in just a few years because of it.
It really is a great term. Overspend on the stuff that’s important to you, scrimp on the stuff that’s not. When you’re not blowing money on just anything and everything, you’re not only saving money, but you can better appreciate the stuff you do choose to spend on.
It is all about values and perspective. I wouldn’t call myself very frugal but before I buy almost anything I compare prices, brands, quality…A LOT. But whether we like it or not nice things cost money. It is up to us to decide if it is worth it to spend the extra. There is a huge difference in comfort and even safety if you drive an E class MB or Hyundai sonata especially if you drive 35-40 min to work one way. That OLED 65 inch TV has a great picture compared to a lower quality plasma TV. But I wouldn’t change TVs every 2 year.
I agree with the post. It is really not worth it for me to sweat on small ticket items. If the cheapest gas station in my area is on my way, I will buy from there but I wouldn’t make a drive in search of cheapest gas. I value time, convenince and comfort.
Being frugal doesn’t have to mean buying the cheapest thing — it’s about getting good value for your money, which it appears you certainly do with the research you do prior to allocating your hard earned money to nice things.
Going the cheapest route can end up costing more money. It’s not frugal if you have to buy the same thing over and over because it breaks / wears out quickly / doesn’t serve the purpose it was intended for, etc…
Cheers!
-PoF
The first finance book I ever read was The Automatic Millionaire, which gave birth to the famous “Latte factor”. While I now don’t think the latte factor will make or break your finances, it started me on the path of frugality and I’m glad it did. People are giving their kidneys for the latest iPhone, but 3 years later it looks like a toy. We rarely lament buying the cheaper and just as useful thing over the expensive one.
The author is right on about the big things. Be reasonable about your auto. home and spouse decisions, invest 20% of your income, and you will be just fine.
Thanks, Sved!
The “latte factor” seems to be a point of contention in the world of personal finance. With income like ours, it’s fair to say $5 a day isn’t going to make or break you. At the same time, recognizing that the latte can be a corollary for darned near anything, the lesson can be useful for people from all walks of life.
Cheers!
-PoF
My 8YO daughter still has Easter candy stuffed in the cabinet. I don’t really think it’s a conscious choice, but she clearly enjoys having it around more than actually consuming it. Her only response is “I like knowing it’s there if I want it.”
Personally, I think most people are innately frugal by nature. Did anyone have spendthrift grandparents until after the Depression/WWII when consumer marketing campaigns started going national? Our family’s lack of “want” leads to buying less stuff. It’s not any particularly strong interest in spending less money than the neighbors or competing with Mr. Money Mustache to live on $1,000 monthly. Buying stuff just doesn’t make us feel happier, better or special most of the time.
Although I suspect that trait will be fixed in the future with gene therapy.
I learned my lesson about saving holiday candy as a kid. It definitely has a shelf life.
Come on, MMM and family live on over $2,000 per month! =)
I missed this blog first time around, but I had not yet invented (or discovered) the term, “selective extravagance”, 18 months ago, to describe my personal philosophy. We have earned enough money and amassed a respectable nest egg over the years. We save money where we can and it makes sense (who doesn’t ?), but I would not drive out of my way to save a few cents per gallon to gas up the Prius, for example. I don’t buy expensive stuff to impress others, but only to make my life (or my family’s life) better.
If I can save money on vacation, great, but when I travel, I usually have limited time and try to maximize the enjoyment of the experience. If that means buying expensive, line-cutting personalized VIP tours of the Louvre, the Vatican Museum or the Uffizi, or staying on property at Yellowstone (versus the Best Western outside the park gates), I am all in. We buy high quality food (often organic) and do our best to load up on favored foods when they are on sale. If it is a choice between buying a hormone-infused, grain fed steak (or fish–yes, they are feeding farm-raised salmon with corn, erasing the health benefit of consuming it) or paying twice as much for grass-fed (or wild caught), we do the latter and would rather eat these expensive items half as often than eating the low quality substitutes.
I took exception to the “$100 shirt” in the opening section. I mostly dress, much to my family’s chagrin, like I am about to go on a camping trip. The clothes are super comfortable, fit me just right, and I usually get the Patagonia and Kuhl stuff from their 50% off sales after the season. The clothes last long (I have several shirts that are 20 years old and still look great), and I have occasionally resold items I no longer want on eBay, where there is an active reseller market for used items.
Where I have learned to make no compromise is socks and underwear. In the not-too-distant past, I bought the cheapest socks/underwear I could find in bulk packs at Target or WalMart. (Not surprisingly, they were not very durable, and I was replacing them frequently). The cheap running socks, in particular, fit terrible, trapped sweat, and you felt your foot sliding around in your shoe. Several years ago, as a gift, someone gave me high quality synthetic running socks, and I felt like Edison inventing the light bulb. It made a huge difference. Not surprisingly, it also makes a big difference in casual/dress socks, too, where I primarily wear wool or wool/blend. I try to get them on sale and only buy what I need, but it still costs quite a bit more than the cheap stuff.
I will spare the internet world the details on the underwear, but the lesson is the same. I can afford to be “selectively extravagant” with my undergarments in order to maximize my comfort, and I will make no excuses for being so!
I too loved the private tour at the Vatican. I stood in line 3 hours for the
Last uffizi tour because I did not plan ahead. I love Patagonia products but I love them more on sale. I am more frugal at 60 than 40. I think this is because I have more time
The point that frugality takes time is an interesting one. I know I’ve spent many hours in the past researching potential purchases like TVs, computers, cameras, and lenses. Does it make sense to spend two hours looking for the best deal to save $20? Of course not. Sometimes, it’s easier (and perhaps a little more expensive) to just take the best price Amazon gives you.
Best,
-PoF
Being frugal with autos will save you tens of thousands over your lifetime
I think a lot of being frugal depends on whether it is important to you to keep up with the Joneses. If you don’t care what others think, you are more likely to be frugal. If your image is important, you will spend more on material things. Therefore, you will likely save more if you have the I don’t care mentality. Whether you actively invest those savings or not then adds to your overall net worth. I used to care what people thought and didn’t have a lot of self-confidence. Material things meant more to me. As I have aged, I have a much larger net worth and can afford more. However, I really don’t care what others think now, and I actually spend less on the material things than I used to either though I can much more easily afford them.
“I used to care what people thought and didn’t have a lot of self-confidence.”
Before I got to that line, the word confidence popped into my head. It’s quite useful to have the confidence to be comfortable driving an ordinary car, wearing ordinary clothes, while not feeling the least bit inferior to someone who appears to have more than you.
Cheers!
-PoF
I definitely agree with this frugality post!
At my house it feels much better to find the best deal and see how little we can spend to get the same product (my wife once bought a brand new large box of diapers for $0.68 shipped to my house). I also believe that the reason why I am frugal is because of the circumstances in which I was raised and the habits that distilled down from my parents to me.
That’s quite a deal! I used to be a slickdeals.net junkie, but I found myself buying things I didn’t need for the sake of getting a fantastic bargain.
We’re trying to practice more minimalist principles, and find that frugality is often at odds with them, like in the case of the great deal on the thing you don’t need. More on frugality and minimalism here: http://www.physicianonfire.com/minimalismversus/
Cheers!
-PoF
I love the article I am not a doctor and my salary nowhere near that of a physician. I am frugal it allowed me to start a second career and live reasonable well. I love that opportunity cost is addressed we tend not to factor that in decisions.
Great article. I think frugality is definitely a learned behavior fostered by our environment; thus I’m with the “nurture” camp. However there is a “nature” component because I think “willingness to learn” is inherent in our personality.
Btw, make sure to NOT make eating Baconators at Wendy’s a habit; it would absolutely hurt your bottom line in terms of long term health costs and it would likely lead to decreased years of your life (longevity) and decreased life to you years (vitality). As a frugal frugivore, I definitely wouldn’t touch it 😉
I think I used that Baconator coupon once. Definitely not a habit.
A similar one that did become a habit last year, though, was a free McDonald’s breakfast sandwich every time a Golden Gophers athletics team won the prior day. Between football, volleyball, mens and womens hockey and basketball, they did a lot of winning, and I threw down on far too many free muffin and biscuit sandwiches. Not good for the waistline or coronaries!
Best,
-PoF
The challenge I face as a new attending physician with excellent income and more of “feels good to spend” attitude is how to overcome the mindset of spending on things I know don’t make me happy. Just like I know eating an extra piece of chocolate or having another beer makes me feel better right then, long term it is detrimental just like going from one luxury car to another. I have to convince myself daily to save and not spend on stupid things. When I receive a bonus, I immediately send it to DRB to payoff my loans less it sit in my bank account begging to be wasted. I don’t like doing that at the time but later when I see my balance I do. I feel like I got a defective gene from my parents because it is so hard to save, but like someone said in one of the replies, I try to think about my kids and setting a good example do they will find it easier to save. That makes it easier for me to save when I feel like my 9yo is holding me accountable even if she doesn’t realize it.
I don’t know, if I still owed money that I actually spent 7+ years ago, I wouldn’t have much trouble saving. Maybe this post will help:
https://www.whitecoatinvestor.com/your-debt-emergency/
It’s one thing to loosen the purse strings when you’re already rich. It’s entirely different to do it just because your paycheck went up. Focus on net worth, not income.