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I admire OP's financial project and appreciate his sharing it. I imagine quite a few people may benefit from it.

But make no mistake about it, the #1 reason for any "How I did <anything regarding money>" is really, "I am cheap."

We only get one chance at this life, and the thing that bothers me the most is, "What are you missing that you're too frugal to consider?"

Some of the greatest pleasures of my life came as a result of a discretionary purchase. Incredible people, experiences, even business opportunities came my way because I bought a product, went to an event, or took a trip that most frugal people I know wouldn't have.

Once you decide to be frugal, you'll probably be stuck that way for life because you'll rarely be in position to take advantage of those opportunities that would break the cycle.

If that works for you, fine. But not for me. I may not be extravagant, but I don't want to miss any wonderful opportunity because I was too worried about my bank balance. In the grand scheme of things, how sad that would be.

</sipsLatte>

[EDIT: Yes there is a difference between "cheap" and "frugal". Every time I mention "frugal" above, I really meant "cheap", but I was trying to be nice. I will leave it that way to make the thread below make sense. Also, I failed to mention that there's a big difference between being cheap because you have to and being cheap because you choose to.]




"the #1 reason for any "How I did <anything regarding money>" is really, "I am cheap.""

I read it as "what happens when you invest intelligently in a booming real estate and stock market" (especially the former). I don't think this path is open today.


Opportunity abounds at every point in time. Most of all, at times like this when markets are flailing after a severe and (somewhat) protracted period of chaos.

Even if we were at the peak of markets (arguably the worst time to invest), there are so many opportunities that oppose real estate and public equities. I'm not talking about selling stocks short, but potentially commodities, natural resources, agriculture, business, and so much more.

The thing is, we're not at market peaks. Not even close. If anything, I'd cite this pessimism and cynicism as a good indicator to start buying.


There absolutely are always opportunities, but those opportunities are not always available to those that won't or can't treat the investments as a full time job.

As long as there is inflation, all you need to do is buy assets to make money. When there is stagnation or deflation, making money becomes very hard work and luck plays a bigger role. That is because the number of wrong answers exceeds to number of right ones.


There absolutely are always opportunities, but those opportunities are not always available to those that won't or can't treat the investments as a full time job.

Perhaps, but more often than not I hear this excuse given by people who don't spend any time researching their investments. According to the BLS, the average American spends 2.7 hours per day watching TV. If that time were instead spent on investing people would be surprised at the difference in the financial situation.

As long as there is inflation, all you need to do is buy assets to make money.

If you're only keeping pace with inflation I hope you plan to consume a lot less in the future, otherwise you're just treading water. I don't consider that "making" money.


That's exactly what I read:

Step 1: Be born at the right time to take advantage of market conditions.

I see no reason to escape work. Rather my goal has always been to enjoy what I do. No matter the money pile, you'll never be able to repurchase your youth.


That is true of almost all success stories though ...


At this point, investing capital in real estate and stock markets is a fool's errand. They're done. Maybe they're okay as a savings vehicle (maybe!), but you should not realistically expect to make more than 2-3% returns after accounting for inflation, fees, taxes, and time spent on them. And, no, you're not going to be able to consistently outperform people who specialize full time in those kinds of investments and who have access to insider information.

The real trick is to invest in something you do have access to insider information about and that you do do full time: being yourself. Invest in human capital, aside from a financial baseline to diversify for when your human capital starts to rapidly depreciate.

In some ways this is cheap. Reject certifications besides the most basic (a degree). Focus on getting an education instead. Buying a top of the line computer, high speed internet access, and books to learn from, for developers, is an almost negligible expense that will go a long way. And the most valuable way to learn--creating useful projects--can more than pay for themselves.

In other ways this is expensive, though. Choosing to invest in a 401k* takes an hour or two of your life per year, while investing in yourself is at least one or two hours a day. This is very, very expensive if you're already spending 50 hours a week sitting at a computer pounding away at brain-deadening code. (On the other hand, if you can get paid while also increasing your human capital... you've hit gold. Stay there until you've stopped rapidly learning, and then jump to the next big thing.)

Key point, though: there are multiple areas you have to invest in. Yes, a professional skill like coding is useful. But who knows what it'll be like in 5 or 10 years? Make sure to put time into your relationships, your physical health, your non-coding hobbies (drawing, banjo, typography, whatever). This diversification exposes you to more long-term investments: they help you maximize your luck surface area and will come in handy surprisingly frequently down the line.

How do all these retire-at-30 articles fit in? They aim to maximize financial investments early on by under-investing in many categories of self-capital, hopefully catching a good bull market, and rapidly switching to building self capital at 30. The obvious flaw is the assumption of outsized returns--they're not going to be as big as hoped--but that can be dealt with by tinkering with the numbers a bit.

The more fundamental issue is that it's not diversifying. It's risky. If you've saved up 500k by 30 by working long hours and frugally cutting coupons on your time off, that's nice, and if things work out right you might be fine. But suppose the defaulting of some government thousands of miles away sets off a chain reaction of bank failures that ends up massively contracting the economy you live in. There goes most of your savings. Yes, you might have invested in bonds, but you wouldn't have been pulling in those massive returns you were banking on to retire so early. And your job, having been funded by massive amounts of loose capital, suddenly disappears. Oh, you're farked, and you'll have to start nearly from scratch again after the economy recovers. Back to giving up your weekends to the whims of an MBA. (If anyone's willing to hire an expensive 35-year-old developer when there are all these recent college grads willing to work like dogs so they can retire at 30.)

Or even simpler: you hand in your resignation on your 30th birthday, walk out the door, and are hit by a semi driven by some overworked and drugged up trucker. Wow, that sucks. At least all those hard-earned dollars will go to some charity or another.

The ideal, I think, is to semi-retire as soon as you can, and work 15 to 20 hours a week at jobs you find interesting or fun. You get the best of both worlds and have diluted the amount of risk you face at any one time.

*Controversial statement here: 401k's are the biggest scam alive today, you're not only freezing your capital but also betting on taxes being lower in the future than they are today.


At this point, investing capital in real estate and stock markets is a fool's errand. They're done.

Absolutely ridiculous. When I hear a lot of people spouting nonsense like this, I know it's time to buy. American corporations are making a killing right now; why exactly would I not want to buy a piece of that business? Especially when it's on sale? Similarly, real estate is dirt cheap right now. Have people decided they no longer need housing?

Think what you want, but I'm actually doing it, right now, as are many shrewd investors I know. And I'm doing quite well.


Exactly. Saying that most investing is done is just as bad as people saying real estate will never go down. Generally when everyone feels one way, it's time to act on the opposite.

I'm also actually doing it right now. I own stocks and close on my first house Friday.

Now for a crazy side anecdote. My cousin closed on her first house a few weeks ago. It took her 5 houses to finally get one. The reason? Her other 4 full price offers were rejected because someone else outbid her. Yep, outbid in the down market. It certainly doesn't mean that the market has turned, but it shows the interesting difference between what the news reports is happening, what people think is happening, and then what's really happening.


Doesn't the fact that my POV is apparently outnumbered 7:1 undermine the idea that everyone is a bear? =)

Instead of subjective measures like what everyone feels, I prefer to focus on things like P/E and Case-Schiller ratios. Though they obviously have their limitations, they tend to suggest that the market is still overvalued relative historical norms. And I see no reason for our economy to prosper in the near- and medium-term.


We can argue whether there are opportunities out there or not (I personally believe that there are), but in this link I see many instances of annual returns far greater than 10%. The writer seems to have an above average understanding of the market (or just got lucky), and presuming that the average Joe (who is the target audience of his blog) can replicate these returns in any given economy sounds rather absurd to me.

Retirement managers typically assumed 8% annual return for portfolios, but in recent years have adjusted this number to 5-6% per annum. The writer's returns are at times more than 3x this number. Generalizing his experience to the wider population is going to be dangerous.


I agree, though I'm currently saving some money because I expect the markets to go back down to 2008 lows. I'll buy then. Companies like Coca Cola and Shell are as good as ever, but will be much cheaper then.

  Have people decided they no longer need housing?
That may not be an entirely valid comparison, because it seems simply too many houses have been built.


Saying that real estate and stock markets are "done" is ridiculous. I don't know where you got the 2-3% return expectation from, but outperforming professional investors need not be the goal. Independent (retail) investors can generate sufficient market returns to live a very comfortable retirement without having to be disappointed that they're not the next Warren Buffett.

To your point, investing in human capital (yourself) is valuable -- but it's not enough. The problem is it doesn't scale. If your biggest asset is yourself, your biggest income is going to be from each additional hour you work. If you invest in other assets (real estate, companies, whatever) you can generate passive income without having to work.

I agree with your controversial statement about 401K's, not just from the future tax prediction standpoint, but also from the perspective of limiting your investment options.


If you look at reasonable returns back in the days when we weren't busy pulling forward demand with ever rising debt / GDP ratios, 2-3% over inflation is pretty much the best you can reasonably expect if you can't afford to lose your capital.

What's "done" is the days when real (post-inflation) returns of 7-8% were achievable from passive stock market investments. Any retirement plan based on those assumptions is probably underfunded.


IMO passive income can be dangerous in that it may negatively affect your motivation to invest time in yourself. The trick is actually using that income for self-investment in the first place. Self-investment is essential, while passive income isn't (I think that's among the points of grandparent).


401k is ok even if tax rates go UP, due to compounding gains.

However, IMO, it makes sense to Roth as much as you can. Especially if your're a startup founder in early stages, making <$200k/yr, it probably makes sense to do Roth IRA (up to 105k), Roth 401k, or Roth IRA backdoor contributions (via 401k to Rollover IRA to Roth IRA, or SEP IRA to Roth IRA). Pay the taxes now, be able to compound tax free, and distribute tax free.

I'm suspicious of the public markets in general, due to the baby boomers retiring, the sense that a lot of it is fraudulent, and the rigged nature of the markets, but it's probably the only way to do passive investing.


> what happens when you invest intelligently in a booming real estate and stock market

Or, more realistically... what happens when you just get lucky swimming on the rising tide.

I wonder what OP did after year 10 when the real estate crash and the current financial crisis kicked in? No matter how clever your investments, the whole market came down.


I've found it's not that hard to balance frugality with, well, spending money. They can actually work quite well together. So while most of my wardrobe is still acquired from thrift-shops, I also bought my most recent car without taking out a loan. I liked not having car payments, but needed a new car for a road trip we're taking next year, so I tuned my budget and saved cash to buy a car outright.

Just because you're frugal doesn't mean you can't have nice things. My wife just bought me a $600 leather jacket (that I've admittedly been too frugal to pull the trigger on) -- for $450, new, via eBay. My 10 year old set of Sennheisers were showing their age, so I bought HD595s. MRSP $329, Craigslist price? $100, new in the box. My other car's radiator was shot - and if I can develop loan disbursement software and ecommerce stuff, surely I can handle changing the radiator in my car, and did, saving myself hundreds of dollars. And these are just things I buy, not even going into the stuff I do.

On that last one though, there is definitely a balance you have to find between doing stuff yourself and better spending your time. My father would always wash his own car, but I can drive two blocks and spend $20 to have 8 guys and a giant machine wash it more quickly, and I'll pay someone else to change the oil.

In short, I think that your idea that "you'll probably be stuck that way for life" is absurd, and you're mistakenly mixing up the terms frugal and cheap.


"I can develop loan disbursement software and ecommerce stuff, surely I can handle changing the radiator in my car, and did, saving myself hundreds of dollars."

Only if your time is worthless.

I say this not to be snarky, but because I found myself having to re-think these same decisions as I moved on from graduate school (where my time really was almost worthless...on a monetary basis), to having a real job that consumes most of my week. Life is too short to spend part of a weekend day (or more) changing a radiator. Much better to pay someone skilled at radiator replacement to make the problem go away (or in my case, to outsource the problem of owning a vehicle to Zipcar).

More generally, the older I get, the more stuff I try to outsource in an effort to viciously guard my spare time. Sometimes it feels a bit bourgoise (e.g. am I really so important that I'd pay someone to clean my apartment?) but it definitely helps to be able to put a dollar value on each hour of your life, and answer the question "would I pay someone $X an hour to do this?" If the answer is no, it's probably better to outsource.


You unreasonably discount the possibility of someone deriving enjoyment from working on their car.

I personally find it to be rather cathartic.


Indeed. Working on a car can be pleasant. Admittedly I do not currently- partly because bikes are more fun to work on, partly because I don't have a good space in which to work- but I hope someday to resume doing some repairs.


A fair point. If you find something enjoyable, then I agree the economic calculation is obviously different.


On the other hand, if you don't enjoy working on your car, presumably a professional mechanic would enjoy it better. And he would certainly enjoy the money.


Zen and the Art of Car Maintenance.


Ah, I thought I addressed that when I mentioned that I don't wash my own car. I don't do my own oil changes either.

The last decade of my life has been incredibly busy. It's nice to take a half hour and mow the lawn, or walk to Pep Boys, chat with the folks behind the counter, walk home with a radiator, and spend an hour figuring how to replace the old one without spilling coolant all over the driveway.

With all the coding I do, there's a satisfaction I get out of physical assembly and creation in things like home renovation or working on my car that doesn't, for me, ever feel the same coming from an LCD screen. Wiring up a three-way switch on both ends of a light bulb, throwing the breaker back on and having it work the first time, or buying a "broken" drum machine, opening it up and soldering the power connector back on, or tuck-pointing the stone foundation in my house.

I agree that spare time seems more and more fleeting as the years pass by. And though I'm sure there are interesting things for which you're saving your time, your not having mentioned them reminds me of a poem by Ogden Nash, "The Strange Case of Mr. Artesian's Conscientiousness" which Google shows me is quoted in full at http://www.paceadvantage.com/forum/showthread.php?t=69657...


The trap here that I fell into during my youth is to ask this question at the wrong time....

Is going out on a date with my wife worth $X/hr ?

Is helping someone by giving them a lift worth $X/hr?

Is sitting down to read a book / watch a movie worth $X/hr?

Drove my wife crazy.


Is helping someone by giving them a lift worth $X/hr?

I've done that calculation from time to time, but I've always ended up concluding "yes, because I'll enjoy talking to this person for half an hour more than I would enjoy having an extra $50".

... which, depending on your perspective, either means that I understand that money really isn't worth a lot, or just that I'm desperately lonely.


And if you get 2 u-turn tickets and hit someones car by mistake before zip car, you can't use it or many of the other zipcar like services out there.


When you're working for yourself or in a situation where you can work more hours and make more money (freelance, sales, whatever) then you can lose money by being cheap. Anything that can be hired out at a lower hourly rate than your own should be hired out. The catch is that you actually have to spend that time you saved working and earning income!

If you have a fixed salary, though, you might as well do those things for yourself if you have the skill.


Well, if you have a fixed salary you probably work 40+ hours per week. This means your free time becomes scarce, and its value increases.


I understand that perspective, however I feel that there are experiences more valuable than money. Even when I was scraping by month to month during college, I blew time and money on experiences that no amount of work for hire would ever get me.


> "MRSP $329, Craigslist price? $100, new in the box."

Have you considered that those goods are probably hot? Perfectly good, brand new, item on CL for 70% off?!


I considered that they're now $200 NIB on Amazon, and that the dude I bought them from attends UPenn, so the chances are pretty good that unless he's financing his ivy league degree by selling stolen goods, it's more likely that he bought them, tried them on, decided he didn't like them, and listed them on CL to cut his losses.

We have really nice furniture in our house that we bought from a family on the main line. They still had the tags on them - if I were to guess, the family moved here from India, landed a job making more money than they needed, and overspent. Bought this couch and loveseat, decided they didn't like it, and moved them into the basement, buying another. Not sure how long they sat down there before we picked them up, but they sure look nice in our living room.

Even when back in college, I went to yard sales in (central PA) affluent neighborhoods. Sometimes people just want to get rid of otherwise good stuff. Now that I do alright, when I need get rid of a DVD player or a stereo I don't use anymore, I list it for free.


  > the #1 reason for any "How I did <...>" is really, "I am cheap."
I couldn't disagree with this more. In fact, I find the opposite true. Living lightly and investing well on average creates much greater opportunity and enjoyment than indiscriminate spending.

Sure, some wealth comes with being cheap/frugal. But real wealth comes from investing your time & money well and spending intelligently. Notice I said "time & money". Discretionary items are just as much a time sink as they are a money sink.

Forget the self-help articles that harp on about minimalism and the latest lifestyle design fads. Try to live lightly and gauge the results for yourself. You won't miss anything, you'll have more time, you'll think clearer, and of course you'll have more money.

Then you'll decide to launch a startup and lose your mind :)


To piggyback on your comment. Being frugal allows people to have capital when opportunities come along. Being cheap is generally undercutting someone else in order to save a nickel or a dime. Being frugal is delaying gratification in order to save up for some specific purpose or to have capital when an opportunity presents itself.

Regards, TDL


I am sorry, but I think I disagree with your viewpoint. My idol in being frugal (but not cheap) is Mr. Warren Buffett. I don't think he lost an opportunity by being frugal or has any regrets. Obviously it is a very personal choice. Some people do get pleasure by discretionary purchases, and some (like me) by knowing that there is money in the bank.


I live, by most comparisons to people within the same bracket, very cheaply. The thing is, I'm not watching every penny, I'm not buying the cheapest thing there is. I just refuse to pay more than what I value something at (and dollars, not intrinsic value of the time). There's some things that are significantly under what I would value them at dollar wise and have no trouble paying for, but there's a large number of things that are priced over what I would value them at and just don't buy them. Additionally, the immediate price isn't the only thing to consider in the cost, there's the lifetime value of the item as well. So, I would disagree that the sole response is being cheap, I'm completely confident the same things are capable of being accomplished by having an understanding of the total cost and total value of things you're spending money on and being smart about purchases and use of money rather than buying expensive things because they're "nice".


Story of my life, Ed. I am your poster boy who lives "cheap" and not "frugal" by choice. I clip coupons and browse slickdeals before committing to a purchase. I never buy anything at MSRP. I monitor airfare prices for weeks before booking a ticket.

This is a difficult problem to escape because it's one that I behaved myself into, and that it's self-reinforcing for a variety of reasons:

- When you're already on a fixed salary, the opportunity cost of spending time on being cheap is not obvious. You're not taking time away from that $500/hr side consulting gig that you don't have. Instead, you're at a situation where the marginal rate of return on clipping coupons (say, $10/hr) is significantly better than spending the next hour working on that iPhone app that is months from release and has no interested buyers (how long is it going to take to recoup the Apple developer fee?).

- Some people get a rush out of saving money, a feeling of "Ha! I beat the system." To them, saving money is a form of entertainment [1], and there's certainly far worse hobbies to have from a well-being perspective. Unfortunately, there are people who take this too far and end up as total misers or compulsive hoarders. I'm not a pathological case, but I've done things that would make some people cringe.

- Seeing people successfully live frugally can be a motivator to follow in their path. My parents are immigrants who worked hard and saved for 20 years before they were finally able to afford a house in an expensive neighborhood (and nearly paid for it all in cash). They drive Toyotas, shop at Costco, and cook at home. They are basically the epitome of the "millionaire next door" [2].

- There's also a moral justification for this. "Why do I have to keep up with my spendthrift neighbors? So what if I don't drive a Maserati or carry a Hermès bag? No thanks, I shall be comfortable in my own skin, since envy and greed are evil." This is now an identity statement [3], and while it's a good position to take from a financial perspective, it can be crippling in the way it makes some people closed-minded. Of course, this doesn't necessarily stop them from pontificating about retirement at 30.

I do still think that my years of being cheap are starting to pay off, mostly because I'm finally getting comfortable with the sort of "discretionary" expenses you mentioned in your post. The difference is that it probably took a much larger bank balance for me to consider them "affordable." I just flew across the continent purely on a whim to visit some friends that I hadn't seen in years, I no longer cringe at expensive bar tabs if they were time well spent with buddies, I can afford to make an impulse electronics purchase just to see what it's like, and I'm preparing for that self-funded sabbatical [4] to reboot my life.

Was it worth it? Well, it was really, really hard to re-orient myself this way, and it took much more sacrifice than necessary, but the good news is that aside from lost time, most of the rest hopefully can be recovered.

[1] http://www.budgetsaresexy.com/2009/08/saving-money-trumps-se...

[2] http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/d...

[3] http://www.paulgraham.com/identity.html

[4] http://www.joelonsoftware.com/articles/fog0000000076.html


Well I would say that savings driven life is far better than the spendthrift side of things. Now this is purely personal choice. No denying.

In my case I like to sit on piles of cash, without any debts and EMI's to pay. And loan interests to worry about. I like to live a tension free life at the same time get a realization that I'm getting rich. And if you do so, you actually see that a lot of luxuries come a little late, but they come at zero stress, worries and hassles to worry about. The lateness in affording things is often very differential and in my case at least has made very little difference. Over the years you are far better off having money, peace and tranquility in your life even if you drive the Mercedes two years late. Than having a Mercedes right now and all the while paying off debts endlessly in cycles(Home, Credit card etc).

Now the point is simple, I don't really understand the spend thrift part of the world. Just because I don't dine at a seven star hotel eating a sever course meal, I doesn't mean I'm not eating well. I eat whatever I like, drink whatever I like and wear whatever I like. I just don't fall for the brands and buy 1 get two free kinda stuff.

I can go with the same phone for some years provided that server the job for the moment. Which most of the times it does. I don't see any reason to have credit card(Yes I don't have a credit card at all). Its just if you don't succumb to peer pressure and blindly imitating others spending patterns. You sort of can end up saving really lots of money. With savings and investments you can really end up making a lot after a while.

And then you can buy everything your want, retire early. Buy your dream home and live well.

In fact this is more pleasurable than the other approach.


It's funny that a black 0 in your bank account can make you better off than so many others, these days.


Debt is a dangerous thing. I don't think the same about governments. But I consider debt to be disastrous for individuals.

The reason is simple a lot of your work, time and energy drains into paying the most scary thing invented by finance industry so far - 'Compound Interest'. This is especially dangerous in the case of credit card. The debt keeps mounting because of two reason, you being unable to pay and yet still continuing to borrow money. This sort of a spending patters brings a lot of pain to people every where.

And all of this for what? Upgrading from iPhone 4 to iPhone 4s. Is this really worth?

In this sort of set up people living with a savings driven life get a automatic lead ahead of spendings driven people.

Because while you are working to pay off the interest money. He works for the same time and saves that interest money.

I think it will be safe to say to say that if your paying X% money as interest to bank by working for hours Y(Remember you are loosing X% money, thereby in effect rendering your Y hours of work useless, as though it never happenned). The same X% is the money earned by the savings driven guy in the same Y hours(Additional to the money he is already earning. So this his extra income).

You work to loose money and he works to get rich. Although both work for the same time. One gets richer other gets poorer. This is how bad debt can inflict suffering on you.

These days you can be relatively rich by just saving money! And avoiding debt.


I think the lack of understand about borrowing to fund an asset, versus borrowing to fund lifestyle. If it is going to return higher than the interest rate you are borrowing at, then cool. If, in the case of a house, it is cheaper than renting (without a high risk of capital value falling putting you into liquidity diffulties), then also cool.

Borrowing for consumption is where people make the mistake.


Don't forget however that you still have to have a roof over your head. Assuming you have close to $0 net worth when you graduate, you still have to lose money, be it over a mortgage or over renting.

So, the question is, which is cheaper? Your mortgage, or your landlord?


Money let's you trade things you don't mind doing and stuff you don't need for things you want other people to do and stuff you want to have. Clipping coupons can pay 1000$ an hour or 1.5$ an hour but the important thing is not just ROI but how much you like or dislike doing things. But with stuff there is a third option. I don't listen to music so the cost of a CD or concert ticket is irrelevant to me. I don't like to travel so the cost of a plane ticket is irrelevant, I don't like posters, nick nacks, or buying clothes so most stores simply don't have anything I want to buy.

So, when you see someone that saves most of their money don't assume they are hording it, some people just don't find all that many things they want to trade it for at a price they are willing to pay. Now I like playing video games, but I have several of them unopened new in box so I don't feel the need to buy yet another one that may or may not get played etc. I have cable TV, but I spend far more time playing free flash games not because they are cheap but because I simply enjoy them more. http://www.kongregate.com/games/light_bringer777/learn-to-fl...


I think it was a post on HN awhile back that got me thinking like this. If I don't want to do it, and the opportunity cost for me is greater than the cost to hire someone else to do it, then I should just pay them. The key here is the opportunity cost is for me, not for anyone else. For example, I hate mowing the lawn and I estimate I'd have to be paid well over $100 to get me to "enjoy" doing it. Thus, I pay the $60 for lawn service. To me, I just earned $40 of my time back. Now, I'll admit, it isn't as cost effective as being cheap or "frugal", but I do think I enjoy life a bit more.


How much can you save per month by being frugal? Top several thousands dollars per month.

I prefer to focus my efforts on maximizing my income, which is theoretically unlimited, instead of minimizing my personal expenses, which are limited to $2K/month.


On the other hand, as todsul pointed out, cutting your expenses can give you more money to invest. Cutting costs that also eat up your time also gives you more time to increase your earnings potential. Owning many things brings to mind the definition of a boat as "a hole in the water into which you pour money" and your time.


There is only X amount of time and Y amount of energy you can use to 'maximize your income'.

Now come to think of this. If you choose to go this way More expense imply more work. How long can you can you continue doing this. Unless you have a business which you can milk like a cash cow, a salaried employee can only go so far with 'Work more earn more' attitude to match his increasing expenses.

The only approach is to know to how to save and invest appropriately.


It's worth noting that you are better off tax-wise saving one dollar than earning the same dollar. I didn't expect it to impact your argument that much, but given that the 2010 income tax rate in Israel is 44% for anyone making over ~90K/yr, 2K in savings is roughly equivalent to 3.5K in marginal income. From what I gathered last time I was in Israel, that was a pretty significant amount of income.


We only get one chance at this life, and the thing that bothers me the most is, "What are you missing that you're too frugal to consider?"

And I ask instead, "What are you missing because you have to spend so much time working?"


What you're saying is that you spend money and it increases your luck surface area; but there are plenty of free ways to do this. You don't need to go on vacation, make extravagant purchases or even go to the coffee shop to meet new people, make contacts, etc.

It sounds like you need money to get outside of your social comfort zone. If that works for you, fine. But it's not necessary.

Also, don't confuse using money to increase your luck surface area with blatant consumerism. Flying to a conference in Finland is much different than buying a new TV.


The thing that "cheap" and "frugal" characterizations miss is one that I think is significant (and is noted in other comments in this thread, e.g., ebay) is "resourceful".


This is not about being cheap. This guy won't cheap out on food and drinks on a night out, because he doesn't do it very often. He will buy better shoes and clothes than you, because they have to last longer. He will have a nicer house than you, because he has put time into it, and the end, can afford better stuff than you do. Spending wisely and being cheap are very, very different things.




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