Going Without

Richard Quinn

I RECENTLY READ about a trendy way to lose weight: intermittent fasting. Supposedly there are also health benefits. That got me thinking.

I’ve been roundly criticized for bashing the financial independence/retire early movement, otherwise known as FIRE, and for arguing that average Americans spend unnecessarily on all kinds of stuff, thus hampering their long-term financial security. My point of view hasn’t changed. But I’ve found room for compromise: Think of it as periodic financial fasting.

I maintain that this strategy can work at virtually all income levels. Alas, it’ll still be an uphill battle to make converts. Surveys show most people would rather cut back spending in retirement than spend less today. No doubt that sounds easy—until you’re retired. At the same time, however, 87% of Americans appear willing to make tradeoffs to catch up on retirement savings.

What’s my strategy? Start by tracking every penny you spend over a 30- to 60-day period. Once you have your list, check off each item that isn’t essential spending—and be honest. This exercise will also help you figure out if living paycheck to paycheck is more about your spending than how much you earn.

Here’s an idea of what counts as essential spending: food, housing, clothing, transportation, utilities and health care, including those insurance premiums. Everything else is discretionary. That said, there’s also a great deal of wiggle-room within the essential category. A case of soda at the grocery store or leasing a luxury car are questionable for the essential category. Streaming services and premium cable channels are not utilities.

Next, decide which of the items on your list you can do without—not forever necessarily, but for a period of time. You may decide to alternate your fasting. For example, give up designer coffee for two months and then give up eating out for the next two months. For many people, that could easily yield a few hundred dollars over a couple of months. When it comes to a big item like vacations, tone it down for a year. Whatever works for you. After you’ve accumulated a pool of savings, it’s time to invest.

Building an emergency fund comes first. After that, you need to settle on a retirement strategy. How about a traditional or Roth IRA? At some point, maybe you’ll also open a regular, taxable brokerage account.

You can buy a mutual fund from Fidelity Investments or Charles Schwab with as little as $1, but $250 would be a more meaningful start. What if your goal is to buy an individual stock? You might invest once you’ve accumulated $1,000. Using an online broker, you can elect to buy $1,000 worth of a stock and receive whole and fractional shares in your account. My point: You don’t need a fortune to get started.

Be sure to reinvest all distributions from your funds and all dividends from your individual stocks. True, when you start out, the sums available for reinvestment will be modest. Don’t be deterred. Growth will come as the process continues. The amount you can save will, of course, depend on your income and the discretionary spending you abstain from.

There may be another benefit to all this: You could become addicted to saving and investing. Like the super-rich, you may discover it’s the quest that’s exciting—and you’ll be inspired to keep going and save even more.

Don’t be concerned about the stock market’s ups and downs. Every dip in the value of a mutual fund or an individual stock means you can buy more shares through investing and reinvesting. You’re running a marathon, not a 100-yard dash.

Like the idea of financial fasting? You might supplement the money from spending cuts with income from a part-time job. Work at it for a few months and build up your initial investment. Even $500 or $1,000 helps.

The immediate goal is to get out from under the “I can’t afford to save” mindset. Yes, you can. As Shakespeare put it, “Things won are done, joy’s soul lies in the doing.”

Richard Quinn blogs at Before retiring in 2010, Dick was a compensation and benefits executive. His previous articles include Getting CattyGive Until It Hurts and Food for Thought. Follow Dick on Twitter @QuinnsComments.

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