Frugality vs Life

So I struggle with this mind set constantly of trying to be fairly frugal and just living life. I had a rough start from college and literally had to drain my bank account trying to support myself to get in to IB (literally I didn't know where rent was coming from some months). In 2020 I finished paying off all my student loans. I work at a solid shop in a regional office and making really good money now.


The thing I struggle with is that I am starting to get tried of living so frugally.  I have some concerns that I could always just squeeze one more year out of my car that has 200K+ miles and no AC or I can do one more year living in my apartment with 2 roommates. But I also fear that by not continuing to save money I will allow for to much lifestyle creep. 


My total spending is usually around 38K a year (including rent),  so I am saving about 50% of my post tax income (30% pre tax) and my entire bonus (which probably pushes my savings above 60% post tax).  


I have recently been looking at new cars and would really like one, and quite frankly with the used car market so hot, I think it actually makes sense to buy new. The car I have in mind is a  mid sized truck (I think it would be really good for all the activities I like to do, my current car is starting to run out of steam). I would also like to buy a house in the next two years (very doable with where I am and If I keep saving).  If I had a house I would probably rent out rooms until I had a significant other ( most likely to my brother who would just be graduating college around then). 


I guess all I am asking is am I thinking about the new car and saving for a house correctly?  Or is that allowing to much Lifestyle creep?  


********Update********

I am going to get the car and just start saving aggressively for a larger downpayment.  I figure even with a car payment I will be able to save about 40% of income and then also save my entire bonus which will put my in line with my goals for getting a house in 2-3 years.

 
Most Helpful

I get where you're coming from. When you grow up being frugal, it's something that's really hard to step out of. Honestly, I've become a believer of making sure you're on the right path to whatever goals you have in the future from a macro lens, but don't count your pennies month to month. For example- if you're investing 90%+ of your bonus and saving 50% of your post tax income, then it's pretty hard for you not be financially sound. Now maybe you have loftier goals, so you need to be more aggressive in investments, but otherwise I don't see how you'd get off track. 

Personally, I'm not a car guy so I would just buy something very average and reliable like a honda accord. If your AC wasn't broken, I'd just hold on to your current one. That being said- if you've always wanted a truck or your lifestyle makes sense to have one, then why not grab one. Analysts in nyc are getting watches and stuff, you could get a truck. Maybe you get a 2018 though instead of a 2020? Idk, I think if it makes you happy and you can make the purchase while still being on track with your financial goals from a macro view, then you should go for it.

On the house- house hacking is a great way to save money and start real estate investing. Maybe do some more research so that you're aware of different risks and opportunities when picking your property. I'm sure people on the RE forum on this site would be happy to help, or there's other forums online with people who have done this. I would write more but don't have experience personally.

 

I get where you're coming from. When you grow up being frugal, it's something that's really hard to step out of. Honestly, I've become a believer of making sure you're on the right path to whatever goals you have in the future from a macro lens, but don't count your pennies month to month. For example- if you're investing 90%+ of your bonus and saving 50% of your post tax income, then it's pretty hard for you not be financially sound. Now maybe you have loftier goals, so you need to be more aggressive in investments, but otherwise I don't see how you'd get off track. 

Yeah I am financially sound.  I just have these random goals in my head about how well off I should be and I am just not quite there yet.  I'm sure one more bonus season would probably be a big help.  

Personally, I'm not a car guy so I would just buy something very average and reliable like a honda accord. If your AC wasn't broken, I'd just hold on to your current one. That being said- if you've always wanted a truck or your lifestyle makes sense to have one, then why not grab one. Analysts in nyc are getting watches and stuff, you could get a truck. Maybe you get a 2018 though instead of a 2020? Idk, I think if it makes you happy and you can make the purchase while still being on track with your financial goals from a macro view, then you should go for it.

Yeah the only problem is this truck is more of an off road truck so like a 2014 with 110k miles is still like 30k - which is just crazy for 8k more you can get a completely new one 0 miles.

On the house- house hacking is a great way to save money and start real estate investing. Maybe do some more research so that you're aware of different risks and opportunities when picking your property. I'm sure people on the RE forum on this site would be happy to help, or there's other forums online with people who have done this. I would write more but don't have experience personally.

Yeah this is less of my concern but need to start saving for a downpayment.  

 

Hyper-frugal person coming in. It sounds like you weren't frugal because you wanted to; it's because you were hunkering down, paying your loans, and securing a place to live. That's frugality by necessity, not your temperament. My temperament is to be really frugal (that could change, of course, but I'm always going to have a miserly streak); yours may not be.

If you're worried about lifestyle creep, why not set a percentage of pay increases that will go to QOL rather than savings? 30% of pay raises, 50%, 70%? Who knows? But that way, you'll have your annual savings going up over time and QOL getting better. You just have to find that balance.

Trucks differ wildly in expense. You can buy a truck, and you can buy a truck. Maybe don't buy a truck, but what you're talking about is likely reasonable. You're also talking about BRRRR stuff, which is what the other poster was talking about. Become a master on FHA financing, 3.5% down, basic NOI and rent ratios, and you'll be golden. All of this stuff is on BiggerPockets, which is 100% the place you need to go first (no offense to RE forum-- it just comes down to specialization; our RE guys are much better at finding jobs. BP is for investors).

 
kellycriterion

Hyper-frugal person coming in. It sounds like you weren't frugal because you wanted to; it's because you were hunkering down, paying your loans, and securing a place to live. That's frugality by necessity, not your temperament. My temperament is to be really frugal (that could change, of course, but I'm always going to have a miserly streak); yours may not be.

Not so much,  that it was out of necessity,  I usually am pretty frugal as is. As my friends are starting to spend more,  I can't help but think that I am missing out on something.  

 

https://www.wallstreetoasis.com/forums/how-do-you-get-more-comfortable-spending-your-money

I posted a similar thread around two years ago.


My stinginess basically sorted itself out once I hit “x” in base and “x” in total savings. I have no idea what that number is for you, but for me it was a few hundred thousand in savings and a promotion ($80k raise from senior analyst).

 

I have thought about this and came to the following conclusion:

earn more, dont spend less 

use some common sense when interpreting the sentence and you'll be fine 

 

Try replacing the Freon canister (literally unscrew the spent one and replace with a new canister like changing a lightbulb) for $20 to “recharge” your AC. If that engine is still firing no reason to replace the car just yet !

Interested in code, market mechanics, and trading strategies!
 

I’m not really that frugal, I just hate waste.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 

ive been frugal for the past 5 years. told myself id use the cash for either MBA or business. saving cash just became a habit. but I ended up putting ~60% of my net worth in to a house in London recently and it has seriously improved my life. good feeling living in a nice house. and Im still on this frugal mindset because I will be renting out two of the rooms to people I know, so the house will become a self sustaining economy and a means of wealth creation anyway. so id definitely save and put off luxury items for a few years, and buy something big after that. every self improvement book I read strongly agrees with getting off the hedonic treadmill and avoiding negative lifestyle inflation.

 

I grew up being very frugal, partly because I am a first gen immigrant. Typical back story of parents that came here with nothing. They are now fairly well to do with no need to worry about money ever again, but for them they still act like every dollar is precious. I grew up clipping coupons with my mom at a very young age.

I currently drive a 2011 Toyota Corolla and both my wife and I do financially well. She comes from a similar background where her family also didnt have much and they are now wildly successful. We both have good jobs, she is a doctor. Regardless of this, money always comes to mind. When I started out in banking, I always told myself, the first bonus I get I am going to spend it on some luxury like a nice watch (Tag,Rolex, etc). Do you know what I did? I celebrated instead by ordering pizza and playing video games that weekend. When I see expensive luxuries like high end watches, they seem nice but when the time comes to give my credit card, I dont follow through. At the end of the day, what makes me happy is the simpler things in life.

Right now, my Corolla is hitting its lifetime, I've used it well. Looking to buy a new car and thinking of getting a used Porsche Macan. However, even used car prices are ridiculous. Its tough from justifying my toyota which did an excellent job of moving me around and now buying something 3x more expensive just to get me from Point A to Point B.

Here's my two cents. Outsiders think that frugal people don't live happy lives because they don't spend money. My response to that is frugal people are happy not spending money and instead focus on others aspects of their lives that are more meaningful.

 

I'd take a note from Warren Buffett on this, as in "price is what you pay, value is what you get". Meaning, you don't need to live super frugal, but whenever you spend money on in some way you should derive more utility than the price you paid for it. Meaning, don't feel you need to spend just to spend or because you have money, but also don't feel like you need to save all the time. It's okay to buy a nice Rolex, but a fossil watch also tells time. Or think of buying a lottery ticket, two ways to look at it, some say its a tax on being stupid because the % to win is so low, but others say its actually a good way to spend $1 because the happiness you get from thinking about what you would spend the winnings on is pretty good value for $1. 

I'd also add, don't go to extremes, but do things that make your life easier. For example, take lunch at work, you might save money bringing it yourself, but it might just be easier to go out and pick up something when you're at work. It doesn't have to be a choice of ether seafood tower at the steakhouse everyday or fighting a pigeon for a half a hotdog on street. There is a lot of in between, maybe a sandwich place.

Or say you had to travel two blocks in NYC. Lot of options from basically free, to mid-range (taxi/uber), to ultra-expensive (order a Blade). Depending on an individuals budgets, some would seem more expensive than others.

Point is, if something makes your life easier, its not a bad way to go, but realize there are options to making it easier.

 

Buy the car in cash. If you are covering the basics—maxing 401k and a fat (say 6 months expenses) emergency fund—then as long as you pay for other “luxuries” in cash you can be confident that you aren’t going to go off the rails financially. Obviously at today’s interest rates the math would tell you to finance, but the psychological effect of paying in cash is a good way to keep your spending in check and fee confident that you are not making a stupid decision.

 

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