At this point I’ve come about half way through the first frugal month of my happiness project. I’ve spent lots of time reading about and listening to information about frugal living through books, blogs and podcasts. What I noticed is that frugality is closely related to the term financial independence (FI). This is because usually the answer to why people are frugal is connected to the long term goal of financial independence. I find the idea very interesting.
So what is financial independence?
To sum it up financial independence is about having enough income from your assets to cover your expenses so that you never have to work again. The having part is very important because it doesn’t equal that you never will work again it just says that you can choose to do whatever you want without needing the income to support you.
You don’t need to have or earn outrageous amounts of money to be able to reach financial independence. It’s rather figuring out what your yearly expenses are and then working out how much you need to become financially independent. This is usually based on the 4% rule. Mr Money Mustache has great posts on the math of early retirement here and the 4 % rule here. After figuring out how much you need – start paying off any loans and saving (usually in index funds).
What is your goal?
Why do you want to reach FI? Having a clear goal to guide you through the process of getting to FI is essential otherwise it will just feel like a sacrifice and misery. The people from the blogs below have goals like buying a homestead in the woods (they retired at the age of 32), being able to retire when their son was born (at 30) and moving to a cabin at a ski resort (age of retirement 37). You need to figure out what your dream is. What would you do if you didn’t have to work? Travel the world, move to the woods/the beach/the mountains, volunteer, be stay at home parents, start your own company or just work with something that you want without being dependent on the pay?
This is where frugality comes in
To be able to save a large percent of your income (we’re talking more than 60% usually) what naturally follows is figuring out what expenses you can eliminate/reduce and still feel like you have enough. Frugality is about finding the balance of not too much and not to little, the “just right” line.
Is buying coffee on your way to work really worth setting back your goal? (30kr x 5 days = 150 kr per week. Which is 600kr per month. 7200kr per year). Start thinking of money as life energy, because that is what it is, and figure out what is worth spending your life energy on. Focus on what you actually need not on what our materialistic society says that you need.
Here are some resources to learn more and get inspired to start thinking what do you want to do with your limited time in earth (in order of discovery):
- Mr Money Mustache (blog)
- Frugalwoods (blog)
- the Mad Fientist (Podcast)
- Your Money or Your Life (book)
- Our Next Life (blog)