Can You Ever Get Back From the Frugal Tipping Point?

NoTell Motel - Abandoned Trailer Park Pano

Millionaires’ Row?

“I went to the bank and reviewed my savings, I found out I have all the money I’ll ever need. If I die tomorrow.”
–Henry Youngman

“It’s a fine line between frugal and being a cheap *$#&$.”
–Anonymous

I loved Thomas J. Stanley’s book The Millionaire Next Door. I found the stories inspirational, and they aligned with my beliefs. Ostentatious showiness is often a cover-up for a poor life – both in the financial and in the mental/spiritual sense, and as I drive my paid-for hoopty down the road and get passed by much nicer, newer cars, I often wonder how much the payment is on those and if it’s worth it (the answer is that if there’s a payment on it, it’s not worth it). I smile when I pass the cars which have bumper stickers which say “Don’t laugh. It’s paid for!” I appreciate sales and deals and downsizing more than the average person.

The habits of frugality are great. They keep you from overextending yourself financially. They keep you from getting onto the hedonic treadmill. They ensure security through old age.


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They can, though, become an anchor as well, just as much as living a life of excess can. Take a look at the example of the millionaire grandmother in a trailer home cited by Stanley in his blog. This is a woman who is, according to her son, making a six figure passive income but refuses to turn the heat above 65 degrees in the winter.

It was the statement about still not turning the heat above 65 degrees in the winter which struck me. Yes, the woman in the anecdote had to scrimp and save and work hard all of her life to get to the point of wealth that she is at. I suspect that the behavior is so ingrained in her now that she wouldn’t consider loosening up, even a little, to enjoy the fruits of her labor and her sacrifice. She has lived a life of thrift for so long that she has reached a frugality tipping point from which she could never return, no matter how much money she had.

Money for many people represents, first and foremost, security. It represents the knowledge that they will never want and never be in abject poverty. Many people never even reach that level of security and continue to work until the day they drop. However, for those who do reach that level of security, money can then play a secondary role as an enabler – to enable comfort, experiences, giving, and assistance.

Some people, like the grandmother in Stanley’s anecdote, just keep moving the security bar farther and farther away and never allow themselves the opportunity to believe that they are secure and can move on to looking at the enabling powers of money. In denying themselves extravagances and comforts to ensure security, they abnegate their financial power to do so once they have reached security. Just like the people who continue to stock up years and years of supplies in the bomb shelter for the extremely remote possibility that they’ll need it, these habitually frugal people continue to build their financial bomb shelter long after they no longer need it.

I’d love to read more stories about the people who achieved financial security and then were able to truly enjoy the boon rather than continuing their path of miserly living. Do the people who loosen the reins achieve more happiness? Or do they, upon loosening up the reins, feel so uncomfortable after having lived for so long so tightly that they go back to their frugal ways?

What do you think? Is there a frugality point of no return? Do people pass their lives away picking up pennies and miss everything else? Tell us your thoughts in the comments below!

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About Jason Hull

Jason Hull is a Fort Worth financial advisor. Before becoming a Fort Worth financial planner, Jason co-founded, built, and sold a software development company. He is a CFP candidate, has a MBA from the University of Virginia, and a BS from the United States Military Academy at West Point. He is the owner of Fort Worth financial advisor Hull Financial Planning.

Comments

  1. Great post, Jason. It struck a nerve.

    I think military veterans & families deal with not just frugality but with downright deprivation. You learn to squeeze every nickel because you have to, not just because you want to.

    A few years later when you’re financially independent, frugality becomes a choice. Maybe it could be called “green”, or maybe it’s a gamification challenge. Now that our family has gone from “enough” to “giving to charity”, we’re still frugal about almost everything. Judging from the little jolts of serotonin I get from using our frugal tricks, it’s still a game worth winning– especially compared to the submariner lifestyle.

    There’s hope for recovering frugalistas. We’ve loosened the purse strings for the things we value. We pay for the airline seats with the extra five inches of legroom and we stay at nice AirBnB places. We drive Priuses instead of Corollas. I bought an “extra” longboard. We treated the family to 23andMe genome profiles. We’ve budgeted a blowout graduation week for our college daughter next year.

    But we still dredge pennies out of the gutter, and we still shop at Goodwill on Military Discount Tuesdays!

    • Nords–I really like how you frame this up as having the choice to be frugal or not, and choosing what you do with your money should you choose to loosen the purse strings a little. It doesn’t mean that you’re forced to scrimp and save, but if you choose to do so, then so be it. I think that people forget that they have a choice. In fact, they forget that, all throughout their lives, they have a choice in what they do. You’re choosing to spend on the things that are important to you, and you are spending. You’re following what’s important to you rather than being locked in a mindset that you have to continue to scrimp and save until you die. You’ve learned when “one of these days” has actually arrived and are doing something about it. A lot of people could learn from your lessons.

    • Yup. Sure have. He probably hasn’t heard of me, though. His choice of what I perceive to be über frugality works. It got him where he wanted to go. It’s not the choice we made, as we have chosen not to pare our spending back to that level. In fact, our spending has increased over time, but it’s focused, intentional, and, for us, meaningful spending. While he has, rightfully so, earned quite the band of loyal followers, his way is not for everyone.

      If you simplify the problem of how to get to retirement, you come to three options:

      1. The frugal path: cut spending to the bone so that the amount you need in assets declines. Maintain frugality through life. Quit when assets reach lower target. Isn’t this what they taught way back when in Home Economics 101? How to be more efficient in your household? Proponents of it include Mr. Money Mustache and Trent from The Simple Dollar.

        Pros: Retire much earlier, disconnection from happiness and money, simpler lifestyle
        Cons: Not much room for error, prone to negative black swan, not open to positive black swan, constantly making tradeoffs

      2. Earn more income: hold expenses somewhat constant and don’t hop on the hedonic treadmill while increasing your income. It’s what I did when I built and eventually sold a company. Proponents include me, Paula Pant from Afford Anything, and Pauline from Reach Financial Independence.

        Pros: You get to expand your definition of a reasonable living standard to include more luxuries, more wiggle room in case of mistakes – a big down year doesn’t necessarily kill you or force you to go back to work, still should be able to retire ahead of (if not well ahead of) the curve
        Cons: Not everyone has the ability to earn more income, may not be able to stop lifestyle expansion once removed from the self-imposed constraints of the frugal path

      3. Work until retirement age: this is the group who tells you that you have to work until age 65-67 and then you can retire. Proponents include Dave Ramsey and almost all of the media who harps that you can’t retire.

        Pros: Plenty of time to build your nest egg, max out Social Security, all of those fabulous work benefits
        Cons: You may die before then, range of activities most people of that age can engage in are limited, you may not have that job for 40 years

      So, in summary, I think Mr. Money Mustache is great. There’s definitely a niche of people for whom he is very applicable and a great wealth of knowledge. Most of my clients and people with whom I’ve worked make an intentional choice to trade a few more years of working for a looser set of spending and living guidelines. But, for the people who are looking on my website for tips on frugality and paring down lifestyle, they should go check him out!

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