From Frugality to Financial Freedom: A Path for All
A Growing Shift in the Way Americans Think About Money and Life
When Kristin Hanes decided to move into her boyfriend?s car to pay off her debt, she said she felt a lot of negative emotions. ?I often felt ashamed and scared, not wanting to tell people I lived in a car and camped in the mountains.? But she didn’t let that dissuade her.?And when she later lost her job at a radio station and was unable to find employment, she moved into her boyfriend?s sailboat and began writing about experiences. Today her blog, The Wayward Home, which chronicles her lifestyle change, is a huge success and allows her to live anywhere. Though her initial goal was debtless financial freedom, the continuation of her lifestyle change resulted in much more. Complete Financial Independence (aka FI).
Escaping the Hamster Wheel
It may be an uncomfortable truth, but Americans are becoming increasingly aware that the days of working for a company for 40 years and retiring with a fat pension, or 401K, and a gin and tonic on the porch of your paid-for house are long gone. Dreams of retiring in debtless financial freedom seem further away. Millennials in particular are woke to this and many are taking matters into their own hands. There’s a growing movement of people who are seeking to completely disrupt the status quo and do things differently. They gather online to share their ideas, successes, and failures. Their goal? Complete financial independence.
More and more people are seeking creative ways to escape the hamster wheel. They are learning that they can do with less and not notice. And they are discovering an unexpected freedom in living more authentically. Add to this the DIY spirit of the internet and the gig economy, and you have a complete disruption of the lifeplan?story taught by the Traditionalists – the generation on the way out. Put simply, the idea of settling down, working for 40+ years, buying a bunch of stuff that sits in storage, then dying, doesn?t sit well with today?s generation. And they are actively seeking a different way to live.
Okay, by a show of hands, who loves working a stressful, hateful job for 30-40 years, to pay off a massive mortgage, only to die of a heart-attack?at your desk or be laid off without a pension??Anyone? Anyone? – Millennial Revolution
FI/FIRE stands for Financially Independent/Financially Independent Retire Early and is a movement of people who are focused on spending as little as possible, and hence needing as little as possible, while investing wisely so that they can quit working as soon as possible.
The birth and spread of the online FIRE community is especially reflected in the Reddit thread ?r/financialindependence. But it is also seen in popular blogs such as Mr. Money Mustache – Financial Freedom Through Badassity which explores ways to live a frugal lifestyle in exchange for freedom. He retired at 30 after saving most of his engineering income.
Remember this ? money is not for showing off or spending on consumer shit, it is for making you more money to buy freedom and happiness. – The Escape Artist
Who are these Trailblazers?
FI/FIRE enthusiasts come in all colors. Some are working high paying jobs, investing carefully, and have set an actual timeline for retirement. Others are more interested in working less, living more, and learning how to live below the material expectations of our consumerist culture. Highly focused spreadsheet geeks share how they are maximizing their retirement accounts. Families share how they cut their cable bills by negotiating. FI groups and blogs have a wealth of information on ways to maximize dollars.? ?
In the winter we wore sweaters around the house instead of jacking up the thermostat. We used bikes to get around town whenever possible and tried to use public transportation for our commutes. All of these little things added up and we were well on our way to saving for our goal! – Freedom With Bruno
FIRE and ALICE: Why it Matters (and why it doesn’t)
Meanwhile, there is another acronym popping up in the news – ALICE. This United Way acronym stands for Asset Limited, Income Constrained, Employed. According to the United Way ALICE project, 43% of American households, though employed, can?t cover a basic monthly budget for housing, food, transportation, child care, health care and a monthly smartphone bill. When we truly break down all of the expenses required in our country simply to retain a job that pays less than $20 per hour, it?s not impossible to understand how this can happen.?
It really doesn?t matter that the unemployment rate is low if employment doesn?t cover basic life expenses.
For the ALICE group, the old system doesn?t fit anymore, either. College grads are shocked to find out that their degree isn?t worth the student loan they owe. Middle-aged, experienced professionals who find themselves priced out of the market are working 2-3 part time jobs to make ends meet and be able to cover their health insurance. The ?American lifestyle? has become too expensive, too confusing, and too demanding. People who are struggling to find financial balance and get out from under consumer debt are looking at creative changes they can make in their life to simplify everything, just as Kristen Hanes did when she moved into her car. This, too, is reflected in social media groups such as Living in a Van where people from all economic levels share ideas on how to live rent, mortgage, or location free.
Same Approach, Different Purpose
So we are seeing an interesting parallel across the board. Whether you are a 25 year old engineer, living in a box truck in the Google parking lot and trying to estimate when you can retire, or a 65 year old retiree, living in an RV and supplementing your Social Security with seasonal jobs across the country, your lifestyle adjustments have similarities, though your purpose is different. Lifestyle shifts are helping people realize they no longer need what they used to believe were necessities. And today, more than one type of person is looking for change for more than one reason.
This cross section between millennials focusing on financial independence and those merely trying to keep their head above water is unearthing a plethora of ideas that anyone can implement to help achieve personal financial goals. The?minimalism, sustainable living, and zero-waste movements are increasingly being interwoven into lifestyles in different ways by people from all walks of life who are searching for less stress, less waste, more time, and more freedom.
C?Mon, Isn?t Frugal Living a Wealthy Privilege?
But there is a difference in mindset between a person who chooses to elect a particular lifestyle choice (FIRE), and a person who feels forced to adopt a lifestyle change (ALICE). And that difference can make or break a person’s success. While there are plenty of reasons why clearing the clutter and materialistic focus out of your life can bring you both personal and financial freedom, adopting a more frugal lifestyle is best done out of choice than necessity. For many, it has become a fun game: ?how little can I get by on? ?But if you already feel deprived, the idea of having to go with even less isn?t inviting.
It doesn?t matter how much money you make if you spend it all. This is why we always hear about bankrupt NBA players and musicians. – Retire by 40
For example, if you’ve been struggling already and someone tells you that you now have to get down to $2 per meal, it may not sound like a fun game. Yet the $2 meal topic was so hot in one Facebook FIRE group that within one hour of the initial post, 138 responses popped up addressing this question: ??One of the hardest things to get on board with is $2 per person per meal. What is the community doing and how can we get better??
Of course, the realities of layoffs, healthcare emergencies and student loan bankruptcies are front and center for many.? But there are things that can be controlled and others that cannot be. So we might as well focus on what we can control. Spending is one of those things. People who are focused on the idea of financial independence experience excitement rather than deprivation when they discover ways to slice their overhead. And they are sharing their discoveries.?
Money Stories: How to Unlock Your Joy
Those who elect to adopt a more frugal lifestyle and make it fun have a better chance of making it work than those who do so grudgingly.?For those in ALICE, the $2 meal may feel more like a mandate than a choice, and this lays at the crux of the issue. The actual activity of shopping for, cooking, and eating the $2 per meal is generally the same.
Your mindset is one of the most powerful forces behind your decision-making process. – Think Save Retire
1. The Money Stories We Adopt Are Powerful
Part of this enigma lies in the stories we tell ourselves. Our ideas about money and possessions are integrated with our self-perceived value. It may feel pretty cool living in a van, eating a can of tuna, while socking away tens of thousands a year in 401(k)s, IRAs and other investment vehicles.
But in the van parked next to?you, you may find someone who’s lost his job and is in transition,?eating the same can of tuna, and feeling like a failure. While the former is finding joy in how much she’s saving, the latter is perhaps ruminating about how low he’s fallen. She feels free, he feels trapped. We empathize with him. They are both presently?eating, sleeping, and showering?in a similar fashion.
2. Our Cultural Money Stories Might Just Be… Marketing
If part of your story is that successful people drive expensive cars, you will equate older, cheaper cars with unsuccessful people. So, if you happen to be behind the wheel of an older, cheaper car, you’re going to feel like a loser. Meanwhile, another camp looks at expensive cars and wonders why anyone would spend tens of thousands on a machine that will depreciate as soon as they purchase it. According to their narrative, buying an expensive car, especially if you have to finance it, is the loser move.?
I?ve always been a bit disturbed by the American consumerist mentality. We live in a disposable society. Some people will trade in a perfectly good car just because they want a new one. – 1500 Days
3. Which Money Narrative Do You Choose?
Everyone?s got their own money narrative. Mr. Money Mustache?s narrative incorporates a bit of?stoicism when he says that overcoming one?s own insatiability will lead to a good life. He makes a clear distinction between happiness and pleasure. He says that by??focusing on happiness itself, you can lead a much better life than those who focus on convenience?(and) luxury.? But to do this, you can?t follow the ?lead of the financially illiterate herd that is the TV-ad-absorbing Middle Class of the United States (and other rich countries) today.?
Happiness comes from many sources, but none of these sources involve car or purse upgrades.?MMM
Whether you are trying to escape ALICE or going for FI/FIRE, the practical application of frugality and minimalism is the same. If people who are struggling can learn to look at frugality as a lifestyle choice rather than a necessity due to perceived lack, it could be a game changer.
The Even Bigger Benefits of a Simpler Life
The benefits of simpler living go way beyond financial freedom. People from all demographics and for all different reasons are learning to shed their super-consumer lifestyle for a simpler, easier road, regardless of where their particular road is going. And many are finding solace in realizing that, by needing less, they are rewarded with more than a sense of financial freedom.?
With frugality, there?s often a double or triple benefit. It?s not just saving the money. You?re going to reap an advantage in some other way. – Mr. Frugalwoods
1. How Not Giving a F**k Brings us More Joy
So, how do we get from always thinking we need more to learning to need less? For Mr. Money Mustache, the key to this transformation is a technique called Negative Visualization. By imagining that you have less than you already do, and that your life is more difficult than it actually is, you can train yourself to be grateful for what you already have. By practicing voluntary discomfort, such as experimenting with how long we can last on a hot day without the AC, we can work on “broadening our comfort zone while eliminating our fear of discomfort.”
The other tip: learn to stop worrying about things that are out of our control, and focus instead on those that we have a direct effect on.? For example, instead of stressing out about potential health problems you may run into in the future, throw that nervous energy into taking better care of the body you are in today.
2. The Other Weight Loss:? Having Less Stuff
Those who have given themselves permission to withdraw from the ?new shiny thing? addiction of the status quo are experiencing levity across the board.?Instead of “I can’t afford it,”? they say “what can I do differently?” For example, many save thousands because they no longer consider a high-end cell phone upgrade every year a given and have opted for a used model and a budget sim.?For FIRE, these thousands may go into their retirement fund. For ALICE, these thousands could free them from the slavery of consumer debt.?
When you stop caring about whether or not you appear to be in poverty, and cleanse your brain of the notion that your value is reflected in your possessions, you find more freedom, more time, more money, and more joy.?
3. Bonus:? Creating a World that Doesn’t Suck
Our motivation in buying as little stuff as possible this year has less to do with money than it does with wanting to be environmentally responsible …?and with recognizing that we already have everything we need. – Our Next Life
And, as it turns out, needing less also helps to create a world that we would actually want to leave to our children. For another uncomfortable truth is that our addiction to products and services is hurting our planet. And we really can’t afford to ignore this fact anymore when it comes to our daily habits. It’s not someone else’s backyard, it’s ours.
So think about the stories we tell ourselves. How can we do things differently? It’s not about depriving you of what you need, it’s about learning to need less. In the long game, our personal, financial, and planetary health all depend on us changing our stories from ?he who dies with the most toys wins? to something more like:
Can anything be so elegant as to have few wants, and to serve them one?s self? -?Ralph Waldo Emerson
Photo: Tommy LisbonTags: ALICE, Asset Limited Income Constrained Employed, consumer debt, credit card debt, FI, Financial Independence, Financial Independence Retire Early, FIRE, frugality, minimalism, negative visualization, saving for retirement, Stoicism, sustainable living, zero waste