Does Frugality Necessarily Lead to a Lifetime of Regret?
I’ll bet you already guessed the answer to this question, but let’s explore it. Just for fun.
In a recent podcast episode of Radical Personal Finance, Joshua Sheets advanced the idea that many FI/ER seekers were unwittingly locking themselves into a “lifetime of regret” resulting from forced frugality. Before detailing my thoughts in opposition to this wrong-headed conclusion, let me say this: I’m a big fan of Joshua Sheets. He’s a clear thinker that provides a great public financial resource through his podcast, and I have found that we agree on many personal finance topics and probably on most things moral, ethical, and spiritual. So this is NOT an anti-Sheets rant. (And I’ll note that based on recent RPF activity, Joshua appears to be in something of a rut. Hang in there Joshua. Keep going. You’re doing good work.)
In the podcast Joshua did a good job of voicing a general concern that many people have when superficially considering the idea of frugality as a means to reach the objective of Financial Independence: the idea that the whole exercise is premised upon living like a pauper in order to avoid work. Joshua referenced Jacob Fisker as the prototype: leaving work and living on an extremely frugal budget of something like $7k/year. So as a starting point, let’s agree on this: as Jacob’s blog title indicates, his approach is in fact early retirement in the extreme. And while Jacob’s thoughts and his example serve as the starting point for many in their FI/ER journey (including MMM and others), it’s not an approach that is suitable for the masses. I totally dig it, but it is extreme. I couldn’t do it—at least not with my family of five—and it would induce feelings of deprivation. At one point Joshua talks about the prospect of having to eat your dog in order to allow your family to survive. To my knowledge, there aren’t any legitimate FI/ERs that are advocating eating your household pets as a means to leave work early. (But who knows; there are a whole bunch of FI/ER blogs out there, and I certainly have not read them all.) I don’t think that’s what achieving Financial Independence is about—literally, figuratively, or in any other sense.
My Own Version of Financial Independence
Here at the Joe Freedom household I worked really hard at my corporate-attorney gig for 16 years. We saved like hell for most of that time, but we also made mistakes and spent crap-tons of money on comforts along the way ($1.3 million in superfluous comforts, to put a price on it). We now spend … well, let’s just say many multiples of $7k/year. We’ve certainly reined in and optimized spending since our income-fire-hose years, but that’s translated into maybe (at most) a 30% reduction from our paycheck days just over a year ago. We’re not roughing it by any stretch (although our spending level is only a fraction of what many of my former BSD-law firm colleagues spend each year), and we’re not eating our dogs here in Freedomville (wait … there aren’t any dogs around here … did we eat them?)
The Logic and Rationale of Financial Independence
If done correctly, the mindset employed in reaching Financial Independence is not about deprivation. It’s about making very thoughtful and deliberate decisions regarding the cost/benefit of various consumption, lifestyle, and career options. Do you really want to spend the majority of your “life energy” funding luxuries like a country club membership? If so—cool. Accept the reality of that cost/benefit calculus and work longer. If not—cool. You decline the cost/benefit calculus as presented and you get to leave work earlier and do whatever you want … although maybe not join an expensive country club (but if you wanted that lifestyle you would have stayed at work to fund it, right?) You recognize, scrutinize, and accept these lifestyle trade-offs and make decisions that are comfortable and right for you in light of your values, preferences, career congruity, etc. Some will decide to spend $70k/year on lifestyle and (in theory) tailor their earning years accordingly (and probably work longer, unless they can really ratchet up income). Others will call BS on all that consumption as a motivation to devote the better part of their lives to TPS reports, and lead a more modest consumption lifestyle. But if you’re analyzing this calculus the right way, you don’t decide upon a lifestyle that won’t be comfortable and consistent with your values and proclivities over the long-term. In fact, not only should you NOT decide upon a lifestyle that you think you may be able to tolerate— don’t decide upon a lifestyle that you don’t get excited about. The truly successful FI/ERs don’t view a more simple lifestyle as a “cost” of the benefit of leaving entrapment early—they view it as an added benefit that they enjoy and are comfortable and consistent with.
“High-Point” Experiences Are Subjective
Joshua’s argument focused on the notion of what he referred to as “high-point” experiences—memorable activities in life that you will always remember, and therefore wouldn’t want to miss. His example was a helicopter ride over the Grand Canyon. His view is that a visit to the Grand Canyon is fun; a flight over it in a helicopter while there is extraordinary. To be forced to forego this type of experience because of money constraints, he argues, would constitute deprivation, and potentially lead to a lifetime of regret.
But this is where the logic goes off the rails. Joshua is viewing this “high-point” experience through the lens of his own subjective cost/benefit analysis and value set. He places a high value on this experience, and has made the determination that the time and life-energy that he will consume to fund that experience is worth it. A net gain. Not an irrational conclusion—but a subjective one. To someone else—maybe even yours truly—that cost/benefit analysis doesn’t fly. Not only might some refuse that bargain on the basis of a cost/benefit analysis, but some might not even enjoy the so-called “high-point” experience because they know what it is costing them.
While I can appreciate this example because I probably would consider a helicopter ride over the Grand Canyon to be an experience of some value (even if I wouldn’t pay for it because it wouldn’t create net value under my cost/benefit analysis), the problem with the logical framework (aside from the subjectivity) is that it could apply to inflate any other area of consumption and lifestyle. Driving a Toyota is fine, but to really appreciate the driving experience you have to have a Maserati! Eating a custom-made meal at home is nice, but damn, in order to really enjoy the culinary experience you need to go to a five-star restaurant! So the issue becomes: in any experience or area of lifestyle, how much luxury do you need in order to be content and not harbor feelings of deprivation?
Is Lifestyle Preference (and Frugality) Innate or Learned?
This discussion leads to the question of whether lifestyle preference and frugality are innate qualities (and therefore difficult if not impossible to substantively change) or learned attitudes (and therefore susceptible to willful change). Or maybe something in between—like a hard-wired trait that can be substantially modified, but only through significant (and maybe severe or damaging) life experiences. I don’t know the answer to this question—even though I suppose there are enough examples of changed mindsets/behaviors in our little personal-finance blogosphere here alone to readily support the conclusion that it is learned and can be substantively changed. I still puzzle over whether these examples weren’t really frugal in their DNA to begin with, and were simply going along with the tide of consumerism before embracing their true nature.
And let’s clarify a definitional point here: I’m using “frugal” in this discussion to refer to someone that is both (a) very thoughtful, respectful, and economical with respect to money, and also (b) has an ability to truly appreciate and be content with simple pleasures in life. Those two characteristics don’t always go hand-in-hand, but for purposes of our discussion here I’m treating them both as being present in a “frugal” person. Most people that I know or read about that are happy frugal either (a) have always been that way or (b) grew up in a frugal-mindset environment and while they may have gone through a hyper-consumptive period in their lives, it was just an exploratory phase, and they were always destined to return to their default mindset eventually. (You know, kind of like that period in sixth grade when you gave acid-washed jeans a shot.) True conversions from a hyper-consumption lifestyle to a happy frugal seem harder to come by, but they certainly are out there. But if you ultimately choose a frugal lifestyle strictly as a means to quickly accrue money—rather than adopting the concomitant mindset of seeking pleasure and contentment in simple experiences as true luxuries—it seems to me that you’re likely to fail in the long run. This approach likely leads to a perception that frugality equals deprivation.
To get either choice “right” in the long-term—either frugality or a consumption-orientation—you need a deep and accurate understanding of your own psychology. I would have felt deprived if I had spent another 10, 15, or 20 years working as an attorney—making huge bales of money but always missing out on the details of life because I was either at the office or checking emails to see what I was missing at the office. Sure, we would have splurged on some helicopter rides over the Grand Canyon during those years, but that’s not what I would have remembered. And I don’t think it’s what my kids would have remembered. More likely they would most vividly recall the missed birthdays and vacations cut short, and the dad that was always anxious and looking at his watch and/or iPhone.
Clearly there are some personality types that will feel deprived if they visit the Grand Canyon and don’t get to experience it in 360-degree splendor from a helicopter high above. That’s a different mindset. I’m not judging, it’s just not for me. If you are someone that will always see what someone else is doing and reflexively wish that you could do it too (or even worse, maybe, view it as a baseline for what you should be doing), then you will likely suffer from strong feelings of deprivation upon adoption of a frugal lifestyle. I don’t recommend the FI/ER path for this personality type.
For me, giving up certain “high-point” experiences and thereby releasing myself from the obligation of spending huge chunks of my life-energy paying for them is not regret-inducing but regret-avoiding. In my years at the big-shot law firm I frequented all of the swanky restaurants in town—and on the firm’s dime no less. I don’t do that anymore. And I don’t miss it. Not for a second. Many of my cohorts would not be able to give that up, but it’s just not in my DNA to value that type of experience (at least in relation to the cost that it brings). I’ll take a burger and a home-brew any day of the week. But I may be a bit odd in this way (it wouldn’t be the only way). Know yourself.
So my answer is “no.” Frugality and early Financial Independence does not necessarily equal a lifetime of regret. Or choosing to eat your family’s domesticated animals for calories. But this conclusion applies specifically to those that have accurately assessed their own tastes and preferences, and engineered an appropriate financial plan to achieve that desired lifestyle. If you opt for a FI/ER lifestyle level that is below what you truly believe to be optimal, then yes. You’ll get a lifetime of regret. Be honest with yourself and don’t make these types of decisions in a time of distress or depression. For example, don’t decide that you could live on $12k/year at a time when you’ve been living on $60k/year for as long as you remember, but you’ve had a really bad month at work. That will fail. But if you’ve taken the target lifestyle for a good, long test-drive and it agrees with you, then you should be fine (no regret). If you flee your entrapment to live a lifestyle that is below your optimum, your reward will ultimately be a lifetime of regret. But beware: if you continue to work a job that doesn’t agree with you in order to fund a lifestyle that is well above your optimum, you’ll get the same result.
Epilogue: It occurred to me only after writing the entirety of this post and preparing to click “Publish” that on our recent trip to Acadia National Park on Mount Desert Island in Maine (documented here), I had seen advertisements for helicopter/airplane tours over the park. We didn’t do one. Instead we spent three full days pounding the trails, cliffs, and beaches in the park at ground level, and I’m convinced that we could spend years scouring this area and never run out of surprises and delights. The grand total that we spent directly related to facilitating our enjoyment of this natural beauty was zero dollars. Wait. We did buy a hard-copy trail map for $4.95. (Our park pass was free. See here.) Point is: clearly I’m not harboring lasting feelings of regret and deprivation from foregoing the helicopter tour.