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Saving money is the greatest of the financial virtues—and, for much of my adult life, I could hardly have been more virtuous.
This frugality didn’t come naturally. I wasn’t a “born saver.” Rather, I had no choice. Within a few years of graduating university, I found myself married to a PhD student and raising a family in one of the world’s most expensive urban areas. On my junior reporter’s salary, scrimping and saving were the only options.
But I found I enjoyed it. In fact, it felt like a game. I loved watching my financial accounts grow and the mortgage balance shrink. I got a thrill out of sending $100 to one of my Vanguard Group mutual funds and then receiving the confirmation in the mail. Saving money brought me more pleasure than anything I could imagine buying.
In those early adult years, we still took vacations, but they usually involved staying with family. I treated myself to foods I loved, though my tastes were hardly haute cuisine. We’re talking pizza, sub sandwiches and Chinese takeout.
I didn’t aim to save a target sum each month. Rather, I just saved as much as I possibly could. I’d max out my 401(k) and fully fund my IRA. If any extra money came my way—a health insurance reimbursement, payment for a freelance article, an advance on a book—it got salted away. For any money that came into my hands, saving was the default choice.
This was partly made possible by thriftiness. Every weekday morning, I’d bring my breakfast and a thermos of coffee to work, and sometimes lunch as well. I was slow to buy new furniture and new clothes. I rarely ate out. To improve TV reception, I eschewed cable and instead got a handyman to mount an antenna on the roof, and then supplemented that with occasional video rentals.
But the real key to my high savings rate was the modest home I lived in. The house that my wife and I bought in 1992 was less expensive than we could afford. I kept that house after we divorced and ended up living there for almost two decades. I never particularly liked the place, but the modest monthly payments meant I was able to save great gobs of money.
I didn’t track my expenditures and I never had a budget. There was no need; I knew I was spending far less than I was making. Was I socking away money at a pace that would impress FIRE (financial independence-retire early) adherents? Perhaps. But I never calculated my savings rate and didn’t hear about the FIRE movement until years later.
If all this sounds a little manic and obsessive, it likely was. I certainly wouldn’t recommend my “save every penny possible” approach to others. But even now, I have no regrets. I’ve come to believe the best thing money can buy is a sense of financial security. Those years of saving like crazy quickly brought me that sense, and I soon stopped worrying about money and I eventually stopped thinking about how I spent.
Thanks for sharing this, Jonathan. Pay ourselves first (i.e., saving) is THE most important step to financial independence, in my opinion. Thank you!
Thanks first Jonathan for another excellent article. I have to say, I always wanted to have money in my pocket, even at age 7. I learned from my parents and grandparents. I was willing to help anyone and was especially interested in earning a quarter. Worked as a delivery boy, using my bicycle in my early years 8 to 10. Dad & Mom always encouraged saving, and after I had my paper route, opened a Bank Savings Account and loved to see the bank, pay me interest, even though it was just a few pennies. After marriage my rule of thumb was, we cannot buy it, unless we had the money to pay for it. The only loans were for a car, and then a mortgage for the house. Charge cards were paid at months end, no high interest. We always took advantage of FREE money added to our 401K plans. Happy to say all good and accounts big enough to afford our retirement. Save all you can, especially when you are young. I like to teach our Grandchildren the power of compounding, and the negative of inflation. Overjoyed when I hear they have a 401K, and get some FREE money.
I certainly resonate with both the strategy and the result. In my case it was driven by a conviction that I would never be better off than I was in my 20s and 30s, formed in part by watching my parents’ journey and my own career choices. As with you, it turned out that these habits, shared wholeheartedly by my wife, reaped an unexpected harvest of financial security beyond my earlier imagination. Who knew?! I sure didn’t. When I realized, I wish I had adjusted some of my more severe habits sooner.
When were were looking for houses 30 years ago, we set a budget at $300k. We found a nice one for $232.5k and put $30k of work into it immediately. Not a big differential, but a meaningful one. No doubt staying below budget was important to being about to pay off the mortgage early. This could even be our frog house, but too early to make this call.
As for a house as an investment? If I kept my previous apartment, today it would probably be worth 9x what it was worth then. After all the work we put into this house, it’s worth about 2x, so it’s kept up with inflation. We love the neighborhood and are happy here, but as for dollar value?
I do regret that I didn’t go to the theatre more.
As you often point out, experiences matter, and these are experiences that could have been bought.
Automatic payroll deposits to a 401k are a painless and profitable way for folks to save over time. I recently retired from my salaried job and launched a new gig where I’m paid as a 1099 independent contractor. No more 401k, but I’m able to squirrel away a lot more via a SEP IRA.
The twist – it ain’t automatically handled by an employer. I have to manually transfer money to the retirement account every month (I suppose I could set up an autopay, but this could be a problem in a slow-earning month). The lifetime habit of auto-saving is now in my hands. It’s a good feeling
Saving money did not come naturally to me and never did give me any real pleasure. I ended up doing so well along in life and career after, shall we say, exhausting all other options. Those options, not surprisingly, included digging myself a nice hole of debt and a few times I didn’t stop digging. Apparently what does come naturally is learning the hard way. My mom used to tell me “money burns a hole in your pocket”. As a kid my dad gave me a slightly valuable penny and I promptly took it the local store and popped it into a gumball machine. My parents tried-I can remember the little savings passbook and having a savings account-which went nowhere. Eventually though I decided that, despite having a good bit of fun as a young guy, living paycheck to paycheck and piling up debt was self-defeating and developed some discipline to pay off the debt and carried those same habits into saving. Thankfully, my later career also allowed a good bit of catch-up and part-time consulting after retiring has padded the cushion. I can’t really put into words how it felt pay off both mortgages around the same time from our primary and rental home just before retiring but as someone who suffered with debt, it was very freeing. Now, as they say, we have “enough” and feel like we have won the game. Regrets? I have a few. But, when spending and doing things the hard way comes naturally, coming out on the black ink side of the ledger provides some satisfaction. And now in retirement I have the natural advantage of not having to struggle to spend. 🙂
It was elementary school, I think, when I read Robert Heinlein’s “Have Spacesuit, Will Travel”. I never convinced my own kids to read it with interest, but they might be better off if they had, at least the early chapters. Heinlein was an engineer’s sci fi writer, full of sensible ideas. And I’m pretty sure it’s an early chapter in this book where he says something like, “Everything a person ever desired ends up at the dump.” Context being the dump was the route between school and home for the book’s protagonist.
That’s when I first thought that maybe what I wanted to buy at any given moment possibly wasn’t worth what it would cost.
Another “Aha” came when I met a couple in the Peace Corps who lived off one stipend, saved the other. Now, it’s called “volunteering” for a reason. The tiny living stipend a volunteer gets is hardly the stuff sizable nest eggs require. Yet, these two were living on half that. I guessed it was probably true that I could cut some spending myself. The habit started then lasted the rest of my working years.
Choice of house (and car) is another area where I’ve been possibly overly frugal, both living below my means and also prioritizing paying loans off early. I hate owing money, even if the interest rate is lower than the inflation rate (as some current homeowners are experiencing). So I haven’t made money the leveraged way with homes or anything else.
I’ve been living large of late. I’ve learned from my kids, that there is value beyond monetary in being surrounded by natural or manmade beauty in abundance. (I totally get Mike in his “frog” house. Though my “ocean view” is the Sonoran Desert, and doesn’t carry much of a premium for the location.)
I absolutely understand the principle of buying modest, affordable homes, but I went in the other direction.
Wisely or unwisely, I always considered home value growth to be the best saving and investment plan for the long term, and I bought the most appealing houses I could maximally afford, always in high-growth areas with the ocean views I loved — because I figured that future buyers would love them too.
It worked out. A small condo with a massive Pacific view more than doubled in value in three years. The California house I bought for my first wife was a bit beyond my means, but when I sold it with wife #2 — after 15 years of watching the whales swim past — it too had doubled. Our Oregon beach house got off to a rough start due to expensive storm damage, but it became such a crazy hot property during the pandemic that realtors were knocking on the door, and again we made money.
And I’m convinced that my current home overlooking Puget Sound, the Seattle skyline and Mt. Rainier — my “frog” house, meaning I’m here until I croak — will richly reward my wife after I’m gone.
I’ve definitely been fortunate, but it wasn’t all luck. I have always researched real estate valuations like most investors analyzed stocks and funds. I went to open houses every weekend, made friends with realtors in my target areas (they called me the “ocean view guy”), and gathered all the information I could.
Not at all a strategy advocated by anyone else I’ve seen posting on HD, and again probably unwise and highly luck-dependent, but it has worked out superbly. My net worth is certainly modest compared to others here, but it is warm and comforting to me, and probably well beyond what my sparse paychecks could have produced no matter how wisely they were invested.
At the start of my career, I distinctly remember a very senior engineering manager recommending buying the most house possible in the best neighborhood. He had done that and made out quite well. We didn’t quite follow that, but did OK. I eventually realized that in recommending that strategy, he was subtly telling me he had faith in my career prospects.
Mike, I bought my first house at age 20 for $22k, it was well under my means. I bought another 4 houses in the following 20 years, moving on up with each house. Had I done it your way, I’d have had a nicer house, and it would have been paid for at age 40. Cash flow may have been a bit tight for a few years, but I may have been further ahead.
Dan, I’m sure that any wise advisor would have suggested you do it your way rather than mine!
Congrats on being able to buy a house so young. I was in my late 30s and still living paycheck to paycheck before I could start.
Also, my final home will still have something on the mortgage when I leave it feet first. At 3% I have no intention of paying it off.
Great post Jonathan. The best method for us was to automate savings. I’ve had a job of some sort since I was 11, ofter 2 jobs. So earning money was always a part of my life. It took a few years to get my career going, but once we were established we automated as much as we could. I liked having a skimpy paycheck, knowing that savings had already been taken out. There were some bumps in the road, but my career progressed, pretty well, and we had some good luck as well.
I need to credit ‘good luck’ as well. Planning got me pretty far, but good luck definitely played a role in my financial success.
I think back to being in a position to sell a house at the absolute peak of the pandemic housing market. More than three years later, that home still isn’t worth (according to Zillow) what I sold it for. The timing of that transaction was pure luck.
Kristine, I’ve had the opposite luck–and it’s just that, luck. As a military guy, we moved often. The first house I sold, in 1998, sat empty for 8 months until I got my money back on the sale. The second, in 2003, made me a few dollars, however the location, an up and coming town on the Oregon Coast, is now worth over 3 times what I paid for it. Up until that time, everyone I knew was lucky to sell their houses in that community, and then it all changed. The Fed dropped rates to near zero for 13 years and many homeowners got rich while the renters got killed.
My wife is naturally frugal and a good saver. I have worked to acquire those skills with modest success. One parallel is that we purchased our present home in 1988 for a price considerably below what we could have afforded. Today it would sell for about 30% above the median home price in our area, which is low nationally. And we adopted a correspondingly low cost lifestyle, enabling us to save a large percentage of income for retirement. The only issue now is the bedrooms are on the second floor. Ideally we would move into a one level home with “zero entry”, but I have a lot of inertia.
In a prior post I wrote that I used Morningstar Premium more as a hobby than a necessity. Jonathan uses the word game to describe watching the money grow, and I suspect other HDers may be similar. I submit that we are a bit like rabid sports fans who can recite the historical statistics of their favorite teams going all the way back to civil war days.
For as long as I can remember, I’ve been frugal.
It started at age 18 when I decided to go to a community college for a couple of years before transferring to a four-year college. I lived at home, worked part-time and got enough scholarships to cover all my tuition and book expenses. Back then, tuition was $18 a credit and any credits above 12 were free. I typically took between 18 and 20 credits a term.
When I transferred to a four-year school, I lived with my best friend from high school. Her parents had purchased a house for her to live in and they rented me a room for $75 a month. I had a bicycle (no car) and typically lived off a diet of frozen pizzas, ramen noodles and peanut butter sandwiches.
I worked part-time and earned more scholarships. Since I didn’t receive any financial support from my parents, I was eligible for Pell grants. Not only did I graduate from college debt-free, I also managed to accumulate almost $5000 for my savings account. It became my first emergency fund.
I too take way more pleasure in saving money rather than spending it. I cross more items off my ‘want’ list than I actually purchase.
Jonathan, I can identify with a lot of this. I likewise wasn’t a “born saver” but got hit with circumstances which dictated a new frugality: namely, going from carefree bachelor to married and father of four within a few short years.
My poor wife and kids undoubtedly suffered from my many economies, but they never lacked for the necessities (and more). Later, when all four kids graduated college debt free, and my wife and I retired comfortably, those early habits became (slightly) more appreciated.
My wife never complained about her forced frugality living with me, but there was occasional low-level tension. These days, she periodically thanks me for seeing our future more clearly than she did.
Jonathan, thanks for a thoughtful post. Spouse and I are also frugal. Your comments about the house you buy are spot on. We experienced being house poor in our early married life, but were able to recover. I think it is so important for young people to get that particular purchase right. Everything else flows from it. Chris
Jonathan – we are twins!
“Saving money brought me more pleasure than anything I could imagine buying.”
I think that about sums up how you achieved success. While the ultimate goal was financial security, it sure helped that your strategy to get to that goal, i.e., saving money, was so enjoyable.
“I loved watching my financial accounts grow and the mortgage balance shrink.”
Any other Humble Dollar financial nerds out there have an amortization schedule and annually cross off the previous year’s payments?
Of course that only occurred on the purchase of our third home (the one our children were raised in (and we owned for 20+ years). By the time of purchase I was 36 and starting to get a clue about personal finance.
Back in the day, I surely did.
yes, I’m definitely a nerd with the amortization schedule. Later, I had a schedule that showed how making additional payments would shorten the length of the loan term.
I always saved, but I can’t claim extreme frugality. When you start at the bottom there isn’t much to save. There was a Christmas Club, Savings Bonds and a few dollars a payday into the credit union.
Without college and in the lowest paying job in a company of 15,000 in 1961, my goal was to someday earn $200 a week. It took me until 1971 to achieve that.
Being married while in the army in 1968 and trying to send money to Connie to help pay her bills was a challenge. Our communication was letters and once a week call from a phone booth. I remember dropping $6.00 to $8.00 in coins in the box for one call. It was hard to hang up, but expensive.
We had four children by September 1975 while I worked and attended college at night. The 401k wasn’t available until 1982, but there wasn’t much to save in any case. I still bought payroll savings bonds and signed up for the company discount stock purchase plan at work for $10 a payday.
We didn’t have credit cards, so overspending wasn’t an issue which I guess is a form of frugality.
Out of necessity our first house in 1971 was a 1918 fixer upper by today’s standards. It cost $29,000 with 20% down payment at 9-3/4%.
Frugality was a given if we wanted to pay the mortgage. I do recall the first new car we bought was the least expensive we could find. A 1972 two door Duster that cost $2400, no power anything, no AC. We kept it until it was no longer safe to drive.
And so it went, baby steps, gaining a bit more in income and eventually investing over the next fifty years and always avoiding debt beyond a mortgage and never paying credit card interest. Whether it was a short vacation or a new car, we saved until we could pay for it.
I often wonder if today’s generation has the patience to take fifty years and more to achieve their goals or temporarily settle for less.
50 minutes is a lifetime to today’s youth
Especially without a smartphone. 🙂
I’ve always been a no-spender, but my wife came on board when I told her we really should shed our debt before she cut back to PRN at work. I couldn’t see the wisdom of keeping student loan debt that bought her the degree that would sit idle.
We bought nothing, as well. One expense I got rid of was one I developed in the first year of our marriage. We both kept our jobs in different cities, but rented a house for a year in between the two. My commute was 50 minutes one way. After work, I’d stop off and buy a diet Coke and bag of spicy chips for $2.11 with tax for the drive home. The habit stayed with me for a few years, until our effort to cut back. I put the two bucks toward the student loan, instead.
I once related that story to a man who was trying to get his finances in order as an example of how a change in behavior could help him. He looked at me like I was a freak and blew it off. He missed my point, which was that a strong desire to win the money game will change a person so that even seemingly insignificant expenses become unbearable.
In my thirties I worked for a physician owned orthopedic physical therapy practice. Each Christmas we received a bonus which was usually used to pay down our credit card balance (that was before we started paying off the balance each month).
One Christmas however I said to my wife that for once I was going to be irresponsible and blow the whole check on a Sony rack stereo system. I did and the first two albums I bought were Pink Floyd’s dark side of the Moon, and Carlos Santana’ Abraxas album. I had heard that this new music platform called compact discs really brought all the details out in the music. Boy were they right.
Soon after I heard Luciano Pavarotti and the three tenors concert at the World Cup and was hooked on his voice. I bought the CD. Good thing it wasn’t on vinyl because I would have worn a hole in the album playing Nessum Dorma over and over again listening to The Maestro, The King of the High C, hit that note and have the hairs on the back of my neck stick up.
“A good song is like a bank deposit for the heart: it grows interest every time you listen”. The first 10 years of my life in the US as a desperately poor and hungry refugee student, I was immune to poverty. When I got my first engineering job in 1985 earning $40K a year, I immediately bought a $10K stereo system (my only asset then was a $7K Datsun). The Datsun died, but the stereo system lives on to give me a music heaven for 40 years and still giving. If music were money, I’d be a billionaire in joy.
I asked Copilot AI what if I invested that $10K in Bitcoin when it came out. It played the “Titanic” soundtrack.
You were “hi-fidelity first class” with your new system.
And I think I need a Lear jet!
😉
Nice snacks anecdote. I fear this thread has potential to head into Four Yorkshiremen territory with oneupmanship tales of extreme frugality:
“Store brand cola – Luxury! I used to lick the damp off the air conditioner unit!”
“You had air conditioner, we took turns fanning each other with cardboard we’d taken from a tramp!”
Actually that might be quite fun.
😂😂😂😂
Have a look at this:
https://humbledollar.com/forum/humble-bragging/
I see parallels in my own life. What you miss from the backstory is that you I assume had a free statefunded education at one of the finest universities in the world (as did I – well parents generously topped up the balance of living expenses to maintenance grant level).
I think I probably always was a natural saver but beyond committing to work pension schemes I didn’t really have much clue about maximising growth through investment in equities. To me hot stock picking seemed intuitively a zero sum game and one in which I had no edge, plus there seemed great complexity in brokers creaming off money for not doing much. Such funds as there were seemed pretty opaque and triumphs of marketing and past times (I started work full time in the early 90s past the 80s boom).
So I guess frugality and scepticism possibly saved me from learning expensive lessons but importantly being not visibly into equities I also wasn’t put off for life by a serious burn.
Obviously you (JC) had the benefit of a professional life centred around personal finance so I shouldn’t be surprised you got into low cost index funds well ahead of me.
I always was a bit of an anti-consumerist rebel. Even now I sit on a armchair in the evening that a friend of my mother’s was upgrading. Cost of a transit van rental for the day and I had a 3 piece suite.
But the flipside of that was also that I didn’t max out on mortgage capacity and buy bigger homes than I strictly needed so missed out on highly leveraged property appreciation that more “profligate” peers have benefited from. Lots of things have a way of balancing out and I think this is possibly the biggest way frugality and/or prudence has been suboptimal for me. However I didn’t lose much sleep during house price downturns about negative equity etc and largely shrugged at interest rate rises and maybe peace of mind (plus the freedom to take multiple sabbaticals in my working life) has been a suitable payoff.
I think that’s why I’m pretty passionate about the FIRE movement and the power of planning and modelling the future. I’ve done ok, I made a plan in my 40s around maxing out 401K equivalent and Roth equivalent and modelled when I’d have “enough” for FI and subsequently discovered FIRE and all the associated tools that validated my thinking. I will be retiring well ahead of state retirement age to hopefully do lots of fun and fulfilling stuff before any health bullet heads my way. But it feels rather that I happened into it through basically never playing the consumer game in full then deliberate from the start.
I certainly wouldn’t hold myself out as an example of how to do it when with a bit more purpose (and the resources/investment options available now) I could have done much better. And that’s why I feel strongly that messaging from those who have “won” the game* about all the things they never needed to bother about is the opposite of humility. People who earn at a lower level than I did (or have some adverse life events which set them back) can still make it the same as me. And people who earn much more can still fail because of the bundle human failings.
*I don’t think I personally can ever declare the game totally won unless I annuitize (with a COLA) all my investments. And then I really do lack optionality for the future.