The Frugality Pyramid

The 80/20 principle says that 80% of effects can come from 20% of causes. This principle, commonly referred to as the Pareto Principle, shows up in economics, science, finance, and a host of other areas. A good example is the fact that about 20% of drivers cause 80% of accidents. The big idea isn’t that the ratio is always 80% to 20%, but rather that results can be predictably unbalanced. For example, say you are trying to lose weight. You decide to eat healthy foods, but you still overeat. You will not lose weight because there is a bigger cause at play, your caloric intake.

Now, obviously this is a guiding principle and not a law. In my experience, and I am sure in the experience of countless others, when we look to save money and be frugal, the VAST majority of our results will come from reducing our spending in two major areas. Housing and transportation. These two expenses are 80% of frugality results. We would be wise to not major in minor things. Eating at home is nice and advisable, but address the elephants in the room first.

Don’t Buy More House than you Need

What is the single most expensive purchase you are likely to make in your life? A home. When we purchase a home, we are looking for safe neighborhoods and good schools, and perhaps even status. This is where many people go wrong. Instead of buying a home that fits our needs (safe neighborhoods and schools), we buy one that satisfies our wants (status etc.). For example, a pool would be nice, but a community pool is just as good (probably better). We may also want two guest bedrooms, but realistically, who has guests over more than a few times a year? Little desires like these can push us to buy a home at the upper limit of our means. I wrote an article about wise practices in home and car purchasing.

If that isn’t proof enough that we should be frugal in our purchase of a home, consider the major level of inflation in the size of homes over time.

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People and families haven’t gotten bigger (well…maybe we’ve gotten heavier haha), but the size of new homes is steadily climbing. What major elements do you remember lacking from your childhood home? Chances are our appetites have just gotten bigger. When choosing a home, if we are frugal, the savings are astronomical. Couple this with modest investment knowledge, and the path to financial independence is much closer than one might think. Not to mention that bigger houses have bigger utility bills and larger maintenance costs. And, this is just my opinion, but when the second housing bubble pops and future generations look toward efficiency rather than excess, many of these gargantuan homes will suffer losses.

Buy a Modest Car

The next big purchase is a car. If you are lucky and live in an area with good public transportation, you may be able to get by without even having a car. But chances are it is a necessary expense. One of the most ill-advised financial decisions we can make is to buy a new car. Mr. Money Mustache provides great wisdom on frugal approaches to buying a new car. Although extreme, the mental image of setting $20,000 on fire is effective. A new car is just one of the stupidest things to buy unless you are very wealthy and can afford it off of interest income.

The reason buying a new car is stupid is (at least) two-fold. One, the value of your car immediately decreases after you drive it off the lot. But two, you have just weakened your frugality muscle by giving in to consumer culture. This is likely to increase your desire for more luxuries along the way. This is a surefire way to derail you efforts at becoming financially independent.

Hopefully you gained some useful insights into why homes and cars are the two biggest areas in our lives in which we need to be frugal. Thanks for reading!

How to Keep your Life in Balance

One of the big lessons I have learned as I get older is that life is many shades of grey (maybe not 50 haha). There are very few hard and fast rules, but rather principles that should guide us a we flexibly navigate life. Not surprisingly, these principles hold true in most areas of life. It reminds me of the oft-quoted Bible verses about there being a time for everything. People who live one dimensionally and by very strict rules will inevitably have trouble in life. Someone who is always agreeable will miss opportunities to stand up for themselves. Likewise, people who are aggressive will miss out on benefits nature only rewards to the gentle. It’s not that being agreeable is “good” and being aggressive is “bad”, it is that there is a time to be each one, and more likely a good response is somewhere on a spectrum rather than an extreme.

These principles show up in most areas of our lives. A good teacher is a warm demander. A seeming paradox! They are emotionally warm, but have high expectations. Likewise a good parent loves their child unconditionally but also disciplines them. Any balanced approach to our lives requires that we navigate seeming opposites. Let’s take a look at a few areas this applies to in our lives.

Health and Fitness

A healthy person with a good relationship with food knows there is a time to be very disciplined in eating, and a time to enjoy eating. If we can keep our ratio balanced (say 80% healthy food, 20% fun food) our fitness and health will benefit. If we skew too much toward healthy food, we can become orthorexic, and if we skew too much toward fun food we become fat. So we see again, fun foods aren’t “bad”, they just need to be balanced by healthy eating. Many dieters also know that eating tasty high calorie food when dieting can help reset your metabolism and set the stage for more fat loss.

Similarly, any sensible exercise program has the majority (maybe 80%) of training as base training. For lifting, this would be multiple sets of 5-12 reps. For cardio, this would be talking pace, or long slow distance cardio. If we dabble too much in intense exercise (HIIT, very heavy lifting >85% 1RM, sprinting, etc.) we can quickly become overtrained. Interestingly, we can’t have one without the other. They are two sides of the same coin.

Money

A few years ago I stumbled upon Mr. Money Mustache. After reading about the FIRE movement, I became very interested in ways to become more frugal. When dealing with money, our default stance should be toward frugality. But we have to remember that the whole point of becoming financially independent is freedom. And sometimes that freedom comes with a literal price tag. We are frugal so we can enjoy our vacations with family and the occasional nice dinner. If we err on the side of spending frivolously, we go broke. If we skew too intensely toward frugality, we miss opportunities to have interesting experiences and enrich our lives. My wife and I cook most of our meals at home to save money, but we also enjoy (every couple weeks or so) delicious fancy dinners. Once again, if we keep this in balance (daily frugal habits with the occasional splurge) we get the best of both worlds.

Work and Play

Lastly, we see that work and play must also be balanced. Hopefully, we are on the path to financial independence. But in the meantime, we must balance our work as a necessity, with play as leisure. Most people don’t love their jobs. And that’s okay. We don’t go because we love it, we go because they send us a check every two weeks. If you do like your job, consider yourself lucky.

Because of advances in technology, most people are always on the clock. Emails flood our inbox at any and every hour of the day. Unless we make a conscious decision to set boundaries between work and play, we can easily get out of balance. My wife and I were recently taking a walk on a beautiful Saturday afternoon. When I looked at my phone, I had over 10 emails and messages (none of them urgent) that I had received during that one hour walk. Apparently no one else was outside enjoying the weather! I try to make a habit of “unplugging” as often as possible. Think about it, there were emergencies before cell phones, so if something is urgent, people will find you.

Hopefully you have gotten some useful insights into ways to keep your life in balance. Thanks for reading!

Listening to the Seasons

I started seriously working out in the spring of 2012. I remember the exact event that motivated me. I went to the gym with a colleague and we went to the bench press. I did my customary 5-8 reps of 135 lbs and when it was his turn, I watched with amazement as he easily repped 225 lbs. I was amazed. I made a decision that one day I would be able to do the same.

I started my fitness journey doing Stronglifts 5×5 (an excellent start). Within just a couple months, all my lifts had gone up significantly. Then something happened. Progress slowed. Alot. I tried to push past it, but workout after workout I grew more tired and burnt out.

Any fitness professional worth their salt would know the obvious answer is periodization. Basically meaning altering the volume and intensity of your workouts over time to allow for full recovery.

I say all that to discuss an important idea when it comes to fitness and to life. The seasons.

There is a Time for Everything

Ancient wisdom going back to King Solomon talks about the importance of seasons (“There is a time for everything…”). It took me a while to see the true wisdom in understanding and going with the seasons.

When I began to periodize my training, I started to make progress again. Albeit more slowly, but progress nonetheless.

I then began to notice the same patterns in other areas of my life. At times, things would thrive, and then at other times, despite my most valiant efforts, things would change or “get worse”.

In my mid-twenties, I happened upon a book by Jim Rohn entitled “The Seasons of Life”. Reading this book gave me a philosophy that I refer to often (especially in difficult times). I want to share a few of these experiences so that hopefully you can notice and go with the seasons of your life.

Seasons of Fitness

Our bodies cannot work at 100% all of the time. There is basic information we have to know about how our bodies work in order for us to get the most out of them. For beginners, you should follow a linear program. Meaning you should add more weight to the bar, or walk/run longer, until you stop making progress. When you become an intermediate athlete (which will take 3-6 months), then you begin to periodize.

Now with this bit of wisdom, I know that I can’t always lift heavy. I need light days and deload days. I also need to work on other aspects of my fitness to improve. I highly recommend working with a good fitness professional if you are having any trouble at all reaching your goals.

Financial Seasons

Money is an interesting thing. Sometimes you feel like you have more than enough, and then other times, scarcity overtakes you. I am reminded of a story in the bible where David is asked to interpret the Pharaoh’s dream where he sees seven skinny cows and then seven lean cows, and the lean cows eat up the fat cows. David interpreted this dream to mean that there would be seven years of plenty, and then seven years of famine. David’s solution was to save 1/5 or 20% of all the grain during the good years. As a result, Egypt had food all throughout the lean years.

I believe this will be true of pretty much everyone’s financial situation. Sometimes money will come in from unexpected sources, and other times unexpected bills will pile up. So what do we do? We learn to live frugally and save for those times when opportunity and money is hard to come by. Coincidentally, a 20% savings rate would be a great place to start (hopefully ramping up to 50% or more over time).

Just a few weeks ago I got an unwelcome bill. To the tune of $4,000! Of course I was bothered, but my wife and I have carefully planned and saved to the point where a bill of this size is actually no big deal. The comfort of knowing you can handle a financial setback is much better than the comfort of riding in a new car…to me at least…

Professional Seasons

Seasons become very apparent in our work. Sometimes things come to us and thrive. The promotion comes, we learn a new skill or a new way to earn money, and everything is great! And then there are other times where we are looked over for a promotion, a colleague says a harsh word to us, or our work begins to overwhelm us and throw us out of balance.

Here too, we are admonished to submit to the seasons. We should always be learning and growing, but we should be patient (and expect) that we will meet the inevitable plateau and/or backslide. During these times we have to remember that our next season of opportunity is coming. What are we doing to prepare for it? Are we reading? Are we speaking with wise older people? Are we trying new things?

In conclusion, just as the seasons of weather dictate when we will sow and when we will reap a crop, the seasons of our lives dictate when we will sow and reap in our relationships, finance, health/fitness, and work. Let’s be sensitive and listen to the wisdom of the seasons.

Until next time…

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