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.

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Comments (48)

Most Helpful
  • Intern in IB - Gen
Sep 29, 2021 - 2:44pm

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.

  • Analyst 2 in IB - Cov
Sep 29, 2021 - 2:56pm

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.  

Sep 30, 2021 - 10:35am

Life is about balance. You've succeeded thus far due to your focus. Put a little more focus on what brings you happiness. Money will come and go (looks like you're fine tbh) but you're only in your 20s once. Take it from the guy that just turned 30 lol. Life doesn't get easier but harder. You've done the hard part by getting to where you are. Now you have to do the introspection to see what you value. For me, it was living alone without roommates. I love my friends, but I am an introvert and needed that time to recoup. It's allowed me to push extra hard at work as I know I have alone time afterward.

I don't think I would be buying a 110k miles truck if for only 8k I could get a brand new one. Be wary of the used car market right now. I hear ya on the car though. I don't value them much and drive a 2003 Toyota (also has AC problems lol). If I did, I'd upgrade, but I just see it as a way to get from A to B. My house on the other hand is nice as I value my time at home. My backyard is a freaking oasis that I don't have to leave if I don't want. Again, just do some introspection and find what you value. Small upgrades are fine. Frugality isn't a bad thing but sometimes it can be hard to allow ourselves to treat ourselves, and you do only live once. Enjoy it!

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  • Analyst 2 in IB - Cov
Oct 1, 2021 - 9:31am

Thanks my man.  This is pretty helpful.  The order time on a new truck is about 3-6 months which I am okay with if I can come out ahead on price.  The used car market is just kind of crazy right now.  

Sep 29, 2021 - 2:53pm

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).

  • Analyst 2 in IB - Cov
Sep 29, 2021 - 3:25pm

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.  

  • Analyst 2 in IB - Cov
Sep 29, 2021 - 3:27pm

And not even so much missing out on thing, but rather living a more cushy life since I work so much.  

  • Associate 1 in RE - Comm
Sep 29, 2021 - 3:42pm

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).

  • Analyst 2 in IB - Cov
Sep 29, 2021 - 3:54pm

That post was actually pretty helpful. I think it is a very similar thing.  Where I would feel much better if I had a couple hundred in the bank. Which is another bonus season.  

  • Analyst 3+ in RE - Comm
Sep 29, 2021 - 4:15pm

I felt pretty comfortable once I had $100k in the bank. I'm OK spending a bit more on something, or saving a bit less for a month or two, to enjoy better life experiences now. The thing I realized is that there are certain experiences that you can have in your mid 20s that you can't in your mid 30s, 40s, etc. I read a book called "Die with Zero" and the author talks about this a lot. Obviously there is a balance, don't spend money for the sake of spending money. But if the trade off is save $1,000 cash per month, or save $500 per month but have 5 nights out with friends where you will build great relationships and look back fondly on your life...I think it's worth it to spend the money. The book talks about how you also retire with a "memory dividend" or something along those lines. Spending the $ on a trip, car, whatever, will (hopefully) continue to make you happy vs. a marginal extra few grand in the bank

I was pretty frugal when I graduated and I've started to spend a bit more because to be honest I think I will regret not doing so when I'm older. Just max your 401k / invest a bit each month and I think you'll be just fine in the long run, especially as career earnings should continue to increase as you progress. 

Sep 30, 2021 - 3:04pm

"By great toil they attain what they wish, and with anxiety hold what they have attained; meanwhile they take no account of time that will never more return" - Seneca

the way I think about it is this - save enough to meet your financial goals and then don't apologize for the rest. if your expenses are not detracting from these goals, then you have no logical reason to get upset.

also, an anecdote worth remembering, I've had a few clients that took big bucket list trips - $50k for a family cruise or safari, living in Italy for a month, stuff like that. they all fretted about the expense. not one of them fretted about it after the fact. memory dividends are REAL

Sep 30, 2021 - 11:01am

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 !

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  • 1
  • Analyst 2 in IB - Cov
Oct 1, 2021 - 9:25am

I dropped in an engine with 150k miles in the car last year.  So it probably be good for 40k.  The AC I have tried everything and nothing will work.  I have jsut come to the conclusion that it is dead.  I am just concerned that the next problem is going to be worse. 

Sep 30, 2021 - 3:19pm

Don't buy cars new. You can get a 5 yr old Corvette for cheaper than a new truck.

Buying RE and renting it out is a fantastic idea for MAKING money, not spending it. This is an investment at best and capex at worst, not an expense on the income statement.

Just be careful with this housing market, it is overpriced, cap rates are low, and the market have shown signs of slowing down.

Sep 30, 2021 - 8:06pm

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

Sep 30, 2021 - 8:23pm

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.

  • 4
  • Analyst 2 in IB - Cov
Oct 1, 2021 - 9:28am

Yeah completely agree.  I guess I am just trying to weigh my values and see what part of my life I am okay spending more money on.  Saving has become just part of my life and I get excited by putting money away.  

  • Analyst 1 in IB - Gen
Oct 1, 2021 - 5:22am

Spend your salary, save your bonus. 
 

If you want a new car just buy it man. What's the point of working hard if you don't enjoy

  • VP in RE - Comm
Oct 1, 2021 - 9:57am

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.

Oct 1, 2021 - 10:19am

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.

Oct 1, 2021 - 2:08pm

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.

  • Analyst 2 in IB - Cov
Oct 4, 2021 - 12:15pm

Yeah it would just come out of my savings /investments and I just really would not like to see that go to far down with rates being so low.  

  • Analyst 2 in IB - Cov
Oct 13, 2021 - 1:32pm

  I think the biggest thing is if I did have a payment that I feel like this would be limiting my spending.  But I guess that would hold true if you bought anything that is large purchase. 

  • Analyst 3+ in RE - Comm
Oct 3, 2021 - 6:59am

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  • Analyst 3+ in RE - Comm
Oct 6, 2021 - 12:52pm

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