I was gathering items for a pasta dish for supper the other night when my son made an interesting observation: “Does everything you buy say ‘Fareway’ on it?”
I mostly shop at Fareway, which is a small local chain of discount grocery stores with one of the stores fairly close to my house (the closest grocery store by far). When I do shop there, I buy a lot of their store brand items. So, when my son saw me putting together a pasta dish, he saw a can of Fareway store brand diced tomatoes, a box of Fareway store brand pasta, and a bag of Fareway store brand frozen vegetables, along with some fresh items (I think I may have also had a gallon jug of Fareway store brand milk, but I’m not sure).
I told him that I liked to shop at Fareway because all of the prices were low and that I bought Fareway store brand stuff because those items were particularly low in price and most of them worked just as well as buying name brand stuff at an expensive grocery store like Whole Foods. I actually went to a few other places in our house and pointed out a bunch of store brand household products and food items, both Fareway store brand and store brands from other stores.
He was really interested in how much this saved, so after supper, I pulled out a recent grocery store receipt and we used the online prices at another grocery store as a comparison point. I found that the store brand items I had bought at Fareway for groceries for that week saved me about $26 all told compared to the name brand items at that other store.
Then things got interesting. “Imagine if I did that every week for the entire time you lived at home,” I told him.
Assuming he lives here for 18 years, and also assuming that I buy groceries once a week, and that store brands are saving me $26 each week, I multiplied 18 years by 52 weeks in a year by $26 per week to get a total savings of $24,336.
And then I pulled up a spreadsheet that I use to calculate compound interest, set it to compound weekly at a 7% annual rate, and it spit out the results of all of that store brand savings: $53,546.96.
Yes. If I buy as many store-brand items at the discount grocery store instead of buying name brands at the main grocery store, and I do that every week while my youngest child is at home, I will save more than $50,000.
Needless to say, that realization had a pretty big impact on my son.
Simple moves can a big difference with your money.
That’s just one calculation. If I were to repeat calculations like this for a lot of the ordinary, frugal things I do or have done over the years, the savings add up into the hundreds of thousands of dollars, easily, over the years while our children live at home with us.
If I take that money and do something even halfway smart with it, like putting it aside for retirement, using it to pay off debt quickly, building an emergency fund, saving up so that I can pay cash for a car or saving up so that I have a down payment for a house, those savings compound dramatically. I pay less in interest and finance charges on my debts, and I avoid getting into more debt. I earn interest and investment returns on the money I invest.
If I pair that with consistent hard work and an effort to further my career and earn more money, the potential is even greater.
As long as I don’t spend that saved money and additional income on wasteful things, it’s going to add up to an enormous financial difference over the course of a few decades.
It makes sense on paper, but why make those choices? If you’ve got your finances in at least decent shape and you’re making more than you’re spending, why not live a little?
For a long time, I argued that “living a little” now wasn’t really worthwhile compared to living a better life, but I realized that didn’t really capture the full point.
Instead, for me, “living a little” means having more time for the things I want to do, and the most effective way to do that is to spend less money on stuff that doesn’t matter to me so that I can use it instead to maximize my control over my time. I would much rather have an hour of uninterrupted time to just do whatever I felt like than have a $10 treat. I’ll choose the hour every single time.
Let’s dig into that.
Frugality (and other smart financial moves) make a big difference with your time, too.
As I stated above, I’m willing to forego a $10 treat to have an hour of uninterrupted free time. That’s an automatic choice for me.
So, let’s twist that question a little bit. Would I forego a $10 treat to have an hour of uninterrupted free time a year from now? How about 10 years from now? If I knew that giving up that $10 treat would guarantee me an extra hour of free time in a year, would I still give it up?
It’s a harder choice, but I’ve come to realize that, yes, I’d still do that. I’d give up most of the $10 “treats” in my life to gain an hour of uninterrupted free time later in life for each of those treats I’d give up.
OK, but how is that practical? How does it fit into that story of frugality over time that I shared earlier?
Here’s how: every extra $25,000 or so that I save for retirement gives me a year of free time without working. Right now, I already have enough money to retire at age 65 in my retirement account, even if I don’t contribute another dime. Whenever Sarah and I put enough into retirement savings to cover our living expenses for a year, we are able to retire a year earlier.
Let’s figure that a year is 50 weeks, with 50 hours of each week suddenly freed up because we’re free from work responsibilities. That’s 2,500 hours of fresh free time. If that can be bought for $25,000, that means that for every $10 I put into retirement, I’m directly buying an hour of free time where I don’t have to be working to earn an income.
In other words, when I forego that $10 treat and instead put $10 into my retirement savings, I am directly buying an hour of free time down the road.
It works with frugality. If I choose not to eat out at a mediocre restaurant and instead make a pot of chili at home, I’m spending $20 less. If I save that $20, that’s two hours of uninterrupted free time.
If I install some weatherstripping that cuts $10 off of my energy bill each month during the winter for the next ten years and I bump up my Roth contributions by $40 a year to match those savings, that’s $400, which turns into almost a week of free time in retirement.
If I cancel the cable bill and put that $100 a month into retirement savings for the next ten years, that’s $10,000, which turns into about four months of my weekdays spent freely without work devouring half (or more) of my waking hours.
It works with earning more money, too. If I use my working time a little more efficiently and come up with a freelance article a week without adding more work hours for which I can make $50, that’s five hours of uninterrupted work time. (It’s stuff like this that gets me to focus on time management and working efficiently.)
If there’s an efficient way to earn more money or spend less money, I’m going to do it, not to have money in my pockets, but to have more free time.
This isn’t about having nothing today so you can have “everything” tomorrow.
When this kind of argument is made, people will often take it to an extreme position. They visualize themselves giving up every single pleasure in their life so that they can have a few more years without work, and that’s not an exchange most people want to make (myself included).
Here’s a better way of thinking about it: you should spend money on things that have a strong, clear and positive impact on your life; this is about cutting the stuff that has little or no impact, and there’s a whole lot of that. It’s also about earning more money without ramping up your spending, so you can take that extra earning and use it to buy free time to enjoy life rather than low-value stuff.
To me, spending money on something that gives me little value or only a little brief burst of pleasure is a bad choice.
If I buy something that I completely forget about in a week (and it isn’t serving a vital purpose in my life), then I made a mistake. If I buy something I need and spend more on it than I could have to fulfill that need, then I made a mistake.
On the other hand, if I spent money on something deeply fulfilling, then I did not make a mistake at all.
(The trick, of course, is to learn how to avoid fooling yourself into thinking that purchases are going to be deeply fulfilling and wonderful when they will really be forgotten quite quickly.)
To me, getting a raise and just channeling it into buying more less-than-meaningful stuff and low-value pleasures rather than buying more time to live is a bad choice. It’s much better to channel the extra income into something that produces more free time for me.
What if I love my work?
Many people truly love their work. They love what they do and love being productive and have no interest in a life that doesn’t involve doing the work they cherish. Much of the time, I’m in that group.
If you’re in that group and you want to always be doing the work you love for the rest of your life, then what’s the incentive to follow this free time path?
Remember, the goal is to spend your money better so that you can spend your time better. If you have enough money in the bank such that you can make tough career decisions without finances handcuffing you and forcing you to compromise, you can do even more.
You can speak up at the meeting without any fear of losing income. You can choose to go work at a nonprofit instead of at a corporation. You can start your own freelancing gig or business without worrying about whether you’ll eat.
In short, choosing to spend your money better so you can spend your time better means that you have even more power to do the things you love in the way you want.
I love to write. I would truly love to have a year with 30 hours a week to write the book I really want to write and create a bunch of other media in relation to it, and so I’m buying the time to do it. I want to write the book I want to write, the book I really believe can help people, without editors and marketers tweaking it into something else, and if it financially fails, that’s OK, because I can survive it. That’s one of the things I want to do when I’m completely free of the need to use my time to make money.
Even if you absolutely love your work, you’d probably do quite a few things differently if the need for an income disappeared. Who would you work for? Where would you work? What would you have the courage to say? What direction would you take things?
Implementing all of this isn’t hard.
It comes down to a fundamental choice, one that you make every time you spend money. Would you rather have this thing or would you rather have more time to live the life you want to live?
Would you rather have name brand cereal instead of store-brand cereal, or would you rather have a little more free time? Each choice is little, but if you repeat it hundreds of times, that little bit of free time adds up to a lot.
Would you rather have a gym membership you never use, or would you rather have quite a bit more free time? You can choose to change things around to use that gym membership, of course, but then you might choose to drop your cable instead.
I can list choice after choice like this. The key is to recognize those choices as they come up and get into the habit of choosing which option really gives you the most value. Our instinct is often to grab the thing that gives the most pleasure in the moment, but that pleasure often evaporates really quickly, so give those choices some thought outside of the heat of the moment. Personally, I find a lot of value in reviewing receipts, bank statements and credit card statements, because the expenses on there that I find foolish from the perspective of a later day are the ones where I’m making a bad choice.
Just sit down and read through them carefully; with receipts, put them aside and look at them several days later. If something feels foolish in retrospect, that’s OK; just remember that it felt foolish. I often ask myself whether this thing brought me any lasting value and, if it didn’t, I gradually become more wary of that kind of expense.
You can do the same thing with your income. Look at the time you’re spending at work and ask yourself whether you’re spending it effectively. You have to spend that time there, so if you make it more effective, it’s going to eventually translate into more money for your time. Spend your spare time at work (if you have it) doing everything you can to prepare for a raise or for the next step in your career or the next gig. If nothing else, sharpen your skills a little and learn something new for your career.
Hand in hand with those things are lifestyle changes and small projects that both save money and make life better. I love finding these and seek them out all the time in my own life.
What you’re trying to do here is cut out spending that doesn’t bring any lasting value to you, leaving in place the spending that does matter. Everyone has some things in their lives that can be cut.
The magic happens when you take that money you’re not spending and put it aside for the future. I prefer to do it automatically through automatic transfers into Roth IRAs and 403(b) plans and 529 college savings plans. These happen automatically once a month or so and I just keep enough buffer in my checking account that I’m never worried about an overdraft. If I’ve found a few smart ways to cut my spending, I’ll notice that my checking account balance keeps going up over time and, if that’s true, I’ll bump up my automatic contributions.
Finally, always keep in mind that those automatic contributions are transforming into free time. This is a huge motivator for me. Whenever I feel frustrated, I look at my savings and I don’t think about dollars and I don’t think about material items. I think about freedom. I think about how it already gives me a lot of freedom over my time choices (after all, I was able to become a freelance writer because of it, which was a very fulfilling career shift), but soon I’ll be able to spend all of my time pretty much however I’d like.
Spend your money better so that you can spend your time better. Stop working for the weekend, and start working for every single day.