Cutting expenses or Earning more - which works for financial Independence_

The FIRE community is split between 2 groups : one that advocates frugality by cutting down on expenses and the other that promotes earning more. The idea behind both is to save up your target corpus sooner and most importantly “sustain” the spending after FIRE as well. Both groups love to make fun of each other’s extreme habits with labels like “misers who will never enjoy life” or “big-spenders who will never retire” etc. You don’t have to pick sides. You only need to assess your lifestyle and choose a balance between frugality and earning more.

If you are a long-time reader of this blog , you will notice that we barely talk about frugality even though our inspiration was Mr.MoneyMustache and his eco-friendly frugality. The reason we don’t talk much about frugality is because we started writing this blog well after we had experimented with frugal & eco-friendly living in a Goan village and not being too happy with the results mostly because we were not ready to give up life’s luxuries.

Frugal South Indian marries Hearty North Indian

I remember feeling smug when I first encountered the frugal approach via MoneyMustache. As a South Indian I can eat curd rice and pickle 3 meals a day every day (never mind the diabetes it inevitably leads to). As a working professional I used to repeat ramen noodles mixed with frozen veggies for dinner every night. Weekday lunches were Subway sandwiches and Weekday breakfast was Quaker Oats. Weekends were 3 litres of chicken kozhambu (stew) cooked in a pressure cooker with exactly one onion and one tomato – bachelor-style to be eaten with you-guessed-it: rice(!) for lunch and dinner. Of-course I was also a foodie who loved trying out different cuisines and restaurants. Being frugal in home cooking allowed me to enjoy high-end restaurants without breaking the bank. That is also how I saved up money to buy the flat in Chennai.

Then I married Sugandha, the North Indian with a healthy & optimistic joie de vivre (a cheerful enjoyment of life) approach to life. My frugal approach really grated on her “classy lifestyle” approach which included food cooked at home by a cook who never repeated dishes at-least in the same week, high-quality clothes and accessories wardrobe , high-end beauty cosmetics, yoga instructor who would come home for daily classes etc But she was impressed that I had already bought a loan-free apartment by being frugal. So she was willing to give frugal living a shot. I quickly realised that I had to rise above my bachelor-level frugality with Sugandha and she also figured out ways to get high-end quality mostly by DIY. Sugandha used to cook all our Instagram-worthy meals when we moved to Aldona village in Goa, found Yoga videos on youtube, experimented with creating natural cosmetics and soap by hand and we even tried growing our own vegetable patch in the backyard etc.

Our Experience of Frugal Living

We both are from Middle-class families, where a certain level of frugality is ingrained in both of us. Though Sugandha likes comfort, she almost always looks for a bargain, and has never ever taken a debt in her life – credit card always paid on time and her car was also bought without loan too.

However, inspired by US-centric blogs – where because of high manpower costs people do all their household chores and DIY projects themselves, we gave it a shot. What we realised is that F.I.R.E brand frugal living and DIY is a lot of hard work for very little monetary reward in the Indian environment. In fact frugal living & DIY did not give us the one thing we had both hoped from moving to Goa : more time for ourselves. Watering the plants, working on our veggie patch, cooking meals 3 times a day, cleaning dishes, composting the kitchen waste, washing the car, mopping the floor, turning water tank motor on/off, buying groceries & veggies from the mandi, washing clothes, drying clothes, remembering to bring down the dried clothes, ironing the clothes etc literally consumed our day-to-day life. All this on top of working-from-home on a new business.

Now for some people all this physical hard work throughout that day maybe rewarding – MMM is a great example of that. In fact, Sugandha’s dad loves it too. But for us, it was not so rewarding. We did not mind doing it for a certain period when we had to live on an extreme budget, but it was not an ideal lifestyle for us.

So, after a 1.5 year long experiment we decided to “buy” ourselves more time and shifted from a Goan village to a Goan city to focus on earning more money by doing what we were both good at : “computer work” and outsourced all the household chores to cook, maid, gardener, car cleaner, grocery delivery service, restaurants etc. This decision doubled our monthly expenses from ~Rs.50K/month to ~Rs.1 lakh/month. But we have more time for ourselves now and we are both happier. In fact, the free time we got after moving to Goa enabled both of us to put our personal finances in order. This is the bare minimum FIRE lifestyle that we want to secure for ourselves. We are no longer ideological about frugality or DIY etc but more practical about securing a lifestyle that makes us happy in life.

But we are not discounting frugality as an Idea. We may not be very frugal but we are minimal (check out our minimal wardrobe) and that does save us money and energy. However, here are a few very good reasons to be frugal, if you are contemplating it:

Advantages of Frugal approach

  • Easier to cut expenses than increasing income. No special skills needed. Anyone can do it starting today.
  • Since 25X or 40X corpus is a function of your current expenses, frugality helps bring down the monthly SIP needed to achievable levels.
  • You get to exercise your creative & DIY muscles. It is a lot of fun & bonding to do things with your own hands together with family instead of reaching out for a ready-made expensive solution. Best example is home-made cooking.

Downsides of Frugal approach

  • There is a lower limit to cutting expenses after which you will feel like a poor person especially in India with its inadequate public amenities. I’ve traveled during peak hours in an ironed shirt in overcrowded Chennai public buses only to be squeezed like sardines with no standing room and reaching my destination all sweaty & crumpled.
  • The biggest risk with Frugal approach is that you might have scrimped and saved with the FIRE goal in mind but you might not be able to sustain the same low spending levels post-retirement either because things got expensive or you got tired of scrimping.
  • No one talks about this in the FIRE community – frugality works best only when everyone in the family is onboard otherwise you seriously risk ruining your marriage. My theory is that most FIRE enthusiasts are single males early in their career with artificially low expenses like I was once.

Advantages of Earn More approach

  • You have substantially more surplus to save. Think DINKs in high-paying jobs
  • There is no friction in the family due to money matters as you buy all that you can afford
  • You get to exercise your entrepreneurial skills to make more money and you get to meet all sorts of interesting people who make money through talent and hard work.

Downsides of Earn More approach

  • There is no upper limit to expenses and you might not be able to say “enough is enough” to define your ideal lifestyle and the corpus you need for that. There is always another house to buy and a new travel destination to explore.
  • Even if you save a lot you might find it hard to give up the tons of money you are making and try something different a.k.a golden handcuffs. So you may end up making more money just because there is more money to be made.
  • Not many highlight this but making more money equals working harder & longer as a norm spending time away from family & other personal pursuits. So if you are raking in a ton of money each month you are also probably working 18 hours a day and flying around on work each month.

Frugality vs Earning more – a false comparison

To me the best part about the Early Retirement/FIRE journey is that it has forced us to think hard about what makes us happy in life and how much it will cost to stay that way for the rest of our life. Sugandha and I both love freedom to learn & grow, access to nature, free time, solitude, modern amenities, good home-cooked food cooked by someone else 😉 etc and we are targeting a corpus that guarantees this lifestyle for the rest of our life regardless of our income or life stage expenses.

Don’t be misled by internet wordsmiths into believing that frugality is always the best OR earning more is the solution to everything. More than money you need to understand what is the ideal lifestyle you are seeking and how you can afford it with a combination of frugality & earning more.

Do you need to own a yacht to feel happy?

FIRE/Early Retirement answers the age-old question of “How much money is enough to be happy?” The answer is “Enough for YOUR needs if you can control your expenses and your ego”. Because deciding what life-long expenses make up your corpus forces you to decide your priorities in life. That is why the FIRE movement has energised our entire generation into saving a lot of money very early in life. Turns out many of us don’t have endless wants in life. We are able to put a cap on our expenses & egos.

When I was working at a startup surrounded by peers from other startups, the potential of becoming filthy rich was a very real possibility. That did not happen so I was adrift for a while until I had a major “aha!” moment when I realised that I don’t need a yacht to make me happy. All I ever wanted was free time to read my books. So my pursuit of “enough money to never work again” was actually a pursuit for “free time for myself” that was not consumed by work all the time. That gave me the clarity to define my FIRE lifestyle as one with enough free time for myself.

I did not need to be filthy rich to be able to finally get free time. I can get free time if I can simply ensure food, shelter & modern amenities like the Internet for the rest of my life.

Early Retirement is a gradual lifestyle change not a switch to be flipped once corpus is saved

In our current lifestyle, food ingredients are cheap, renting away from prime locations is relatively cheap, modern amenities like Internet, Phones & Streaming Entertainment are also cheap, driving 6-year-old hatchback is inexpensive. We live in Goa which has refreshing greenery, beaches, cleaner air and world-class music, film & art festivals.

Our main indulgence is an expensive cook since good help is hard to find. We’ve not been able to indulge in foreign travel or luxury domestic travel yet. I’ve never been big on travel and Sugandha is also busy that she does not miss travelling at the moment. So that is an indulgence we want to factor into our FIRE lifestyle.

To summarise: our ideal FIRE lifestyle is an independent house surrounded by greenery with a cook & maid, access to high-speed internet for learning, working & entertainment, lots of free time in between work to focus on ourselves and family with Travel once in a while. We kind of have that lifestyle already at this point 🙂 Since we are renting we ideally want to own the kind of house we have in mind and secure this lifestyle for the rest of our life using the FIRE corpus. At this point we are focused on increasing income to afford this dream lifestyle we have in mind since we’ve already maxed out on frugality.

Conclusion:

  • Identify the needs and wants that will make you content in Life.
  • Put a target number needed to achieve those needs & wants
  • Cut expenses in categories that are not high priority. If travel is important for you then perhaps cut down on eating out.
  • If you have nothing left to cut, then focus on increasing income to meet your goal -> This is really the point of the article. If Frugality is not enough then your only option is to earn more.
  • Most importantly start living this “dream” lifestyle in the Present so you get a clear idea of how much it costs and what sacrifices need to be made and whether your spouse or even you yourself are comfortable with this lifestyle.

Please share the F.I.R.E lifestyle you are saving towards in the comments below and what tradeoffs you are making to achieve that dream!

4 COMMENTS

  1. I agree that the MMM frugal retirement approach is not for everyone. I remember him saying in one of his early blogs that if you’re able to save 70% of your income, you should be able to retire in 10-11 years. I tried to do the calculations and it would involve some adjustments that I’d think as serious sacrifices. I admire the concept but have never felt that it’s practical for me. Unlike you guys, I haven’t even tried,

    To be fair though, even MMM doesn’t recommend his extreme approach is everyone. He offers it up as an example and says that if you’re able to save a good percentage of what you make, you’re well on the track to an early retirement. 50% always been my personal benchmark. Haven’t hit it every year but I think I can say that on the whole, over my career, I have been at or very close to it.

  2. Do you guys ever worry about letting the rest of world know that you have so much cash at hand? I meant safety-wise. I am a little on paranoid side, so I would be concerned if somehow my net-worth alongwith where I live etc. becomes public. For one, there are criminal elements looking for that kind of information, another is your friends, family and acquaintances may start looking at you for bailouts.

  3. Excellent view from both sides. You cant have apple to apple comparison but balanced view surely helps. I read this book few years back “The Life-Changing Magic of Tidying Up: The Japanese Art of Decluttering and Organizing” by Marie Kondo. This book really changed my life, not only from clothes,household perspective but from finance as well (Reducing number of bank account etc.)

    • I have not read the book- but I do follow her idea of keeping things that “spark joy in your life”. You are right- once you start de-cluttering it touches upon physical, emotional, mental and even financial aspects of life!!! It is a simple, powerful tool!

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