This is part of an ongoing series where I dissect and discuss the reasoning behind various facets of my lifestyle. Through this, I’m attempting to separate the money aspect from the decision-making process, showing that I live a lifestyle that’s largely divorced from concerns about money whatsoever. Essentially, this is a lifestyle that I’d live regardless of my income/wealth. These facets thus aren’t about the money at all, but rather the result of thoughtful choices based around what I value and what drives my happiness.
Warren Buffett still lives in the same house he bought in 1958 for $31,500. (I took that picture of his house when I was in Omaha for the 2015 Berkshire Hathaway Annual Shareholders Meeting.)
Tony Hsieh lives in an Airstream trailer (inside an Airstream trailer park) and walks everywhere.
Mark Zuckerberg drives a Volkswagen GTI.
Whenever I used to read about millionaires or billionaires living rather frugally, I used to think it was kind of strange.
I mean, once you have enough money for multiple lifetimes, why bother to still live so substantially below your means? Isn’t the point of building the wealth and passive income in the first place so that you can do whatever you want?
The answer to that second question is a resounding yes.
But that answer doesn’t invalidate the idea of living substantially below your means proposed in the first question. One can live rather frugally and also live the exact lifestyle they want to live. The two are not mutually exclusive.
And that’s what took me a little while to understand.
I believe those who have really mastered how life, money, and happiness all intertwine understand this concept.
Happiness isn’t about how much money you spend once you have your basic needs covered. And money shouldn’t be spent just because it can. Being able to do something doesn’t mean you should do it. Just because you’re in a position to burn $100, $10,000 or $1,000,000, it doesn’t mean you should light that money on fire.
Living frugally is simply part of an overall belief system about what matters in life. Frugality is part of a holistic lifestyle designed to maximize happiness, purpose, and value.
Whereas society apparently has the notion that frugality is a detriment to one’s happiness, I believe the opposite. I think frugality is a great boon to clearing the clutter from one’s mind and life in order to discover what’s true and lasting.
My monthly core personal expenses hover around $1,000 these days. Could I spend much more? Absolutely. Although my passive income is designed to cover those core personal expenses, passive income is just one element of my overall income.
But why would I? Why would I spend much more money? What would that get me?
I used to spend a lot more money. And you know what? I wasn’t happy. In fact, it was this feeling of running on a treadmill faster and faster but not getting anywhere that led me to the idea of frugality in the first place.
See, I believe it all comes down to value.
When I first started to cut a lot of fat from my budget, I took a hard look at what I value and what I do not.
What I found is that what I value highly doesn’t cost much money. Conversely, that which I do not value that highly actually tends to cost a lot of money.
This is a thought process that takes over every time I’m about to spend money.
Do I value it? What do I value it at? Is it important to me? What’s it worth to me? Is this going to positively impact my lasting happiness?
The billionaires I used as earlier examples have found what they value in life and they concentrate their resources on those things.
Warren Buffett doesn’t value a stable of expensive toys (like yachts and luxury cars). He does, however, value the company he built. And so he spends a lot of time running Berkshire Hathaway. He also sees a lot of value in philanthropy, which is why he’s giving away 99% of his wealth (during his lifetime or at death). He’s actually a major force behind The Giving Pledge, which encourages the world’s wealthiest individuals to dedicate the majority of their wealth to philanthropy.
Tony Hsieh has an intense desire to make the city of Las Vegas (especially downtown Las Vegas) a better place to live, work, and play. So he’s spending his resources (time, money, creativity, energy) on projects related to that. He doesn’t care to own a giant mansion, so he doesn’t bother with buying one. Although he wishes he would have spent some of his money differently, there’s no doubt that he’s behind some major transformations in the city.
Mark Zuckerberg obviously has a passion for social media, entrepreneurship, and running his business empire. But just because those passions have endowed him with many billions of dollars doesn’t mean he should then just spend it recklessly, without the thought process of what he values and how much something might be worth to him. He instead lives in a modest (by Palo Alto standards) home and drives a modest car. And he, too, is part of The Giving Pledge – Zuckerberg is going to end up giving away 99% of his Facebook shares during the course of his lifetime.
These extremely wealthy individuals have taken the time to thoughtfully approach spending money on what they really value in life.
Not only is spending money on things that we don’t value a waste of money that could be used to do great good in society, it’s a distraction from what does provide value in our lives. Wasting money is a needless distraction.
Although I’ll never be wealthy enough to join The Giving Pledge, I also plan to give away the majority of my wealth during my lifetime or at death. I’m already as happy as a pig in mud, so I see no reason to hoard money for myself. Once what I value is regularly and easily attainable, the rest of the money is essentially being squandered.
For example, I like living in a small, modest apartment. I don’t like clutter. I don’t value large spaces. Having a yard and a garage means zilch to me. And I like renting. I’m not living the way I live specifically to live frugally or save money; rather, I’m living a lifestyle that is in alignment with my personal values. I’d live just like I do no matter how much money I had.
This simple choice allows me to spend far more resources on things I do highly value, like writing this very article.
Frugality is occasionally looked at as a bad word, as if it’s this necessary evil that one must have in their life in order to achieve certain financial goals. It’s a means to an end.
Well, I don’t believe that. The money is a means to an end, but frugality is not a necessary evil at all. Frugality is instead the natural byproduct of concentrating on value in all aspects of life. It’s the manifestation of living a holistic lifestyle that’s custom tuned to maximize happiness and purpose.
The importance of concentrating on value in relation to what I’m paying is an intuitive concept, but it became very obvious to me when I started buying stock.
I still remember when I first started investing. It didn’t take long for me to realize that I had to buy stocks for less than they’re worth. I should only buy high-quality stocks when they’re priced less than they’re intrinsically worth, as that maximizes my income and long-term total return potential while minimizing risk. Why pay $50 for something worth $40 when you could pay $20 for something worth $30?
And so this thought process then carries out to everything else in life. Is that steak really worth $45? Is a trip to some beach halfway across the world (that’s probably no better than what I have here in Sarasota) worth $3,000? So on and so forth.
Once you’re thoughtful about this in all aspects of your life, you naturally start to find that perhaps many objects and experiences are overvalued, relative to what they’re worth to you. While society seems to believe that nothing is too expensive once you have the money for it (i.e. you should spend all that you have), value has become my guiding light in all aspects of my life.
I believe value should be thought of at both the micro and macro level in one’s life.
There are the individual transactions where you’re determining value independent of price, attempting to pay a fair price or better. Otherwise, it’s just a waste of a precious resource that could be used for greater things.
And then there’s the overall value system that one has in their life, where they live a lifestyle congruent with what matters most to them, forgoing all that impedes them from achieving greater lasting happiness.
As I’ve written about before, the definition of happiness proposed by the ancient Greeks thousands of years ago seems most appropriate: happiness is the joy you feel striving toward your potential.
What I think these extremely wealthy people understand is that striving toward your potential as a human being has nothing to do with what kind of car you drive or how big your house is.
Once that’s understood, frugality is the natural byproduct. And once you’re not spending money on that which impedes your happiness, it’s freed up to be directed toward your overall value system in life, which gives you even more motivation to value individual transactions in life. That means more money eventually piling up throughout life that can be further directed toward that which you value the most, which is all part of striving toward your potential. It’s an incredible cycle that holistically and organically feeds into itself.
Because I also understand this, I spend very little. Although I could easily ramp up my spending, I’ve instead started to direct some of that cash flow toward philanthropic ventures. I wouldn’t live much differently than I do now, no matter how much money I had. It’s not about spending less just to spend less; it’s about living authentically. Frugality is no necessary evil. It’s instead a beautiful gift.
I’m having this dialogue with you readers in order to point out that the lifestyle one creates in order to become financially free at a young age doesn’t have to and shouldn’t lead to a decline in one’s happiness.
Not only does spending more money not automatically lead to more happiness, but spending less money can actually lead to more happiness.
It’s counterintuitive – which makes it that much more amazing. For some reason, people largely believe that money and happiness operate under a constant 1:1 ratio where the increase or decrease of the former always leads to the equivalent change in the latter. But it’s just not true.
And that’s not just due to the permanent shift in one’s internal “happiness thermostat” that one attains after becoming financially free, but it’s also due to the realization that the creation of a more robust lifestyle that concentrates on life and experiences more than stuff and money alleviates oneself of a silly and undue burden. This can actually improve the world around you, which simply compounds the benefits.
Finally, being in a position to make lifestyle decisions not based on money but rather the pursuit of happiness is, in my view, a wonderful way to approach life. I’ve found that I think not about money when I make decisions but instead about whether or not something makes me happy. And it just so happens that what makes me happy doesn’t cost very much money. It’s an incredibly virtuous cycle that’s part of an overarching holistic lifestyle that feeds into itself. Once you open your eyes to it, it’s almost like you can’t help but succeed, become financially free, and live life on your terms.
What do you think? Is frugality and seeking value about the money or not? Would you spend a lot more money if you had access to unlimited wealth?
Thanks for reading.