Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
To get this back on topic - people who are wealthy and frugal may not need a designated emergency fund because there are always liquid assets (hopefully including cash) to draw on when the unexpected happens.
My definition of frugality is getting the best value for your money. And also not buying things you don't need or want. #2 is important because some people just focus on getting a good deal then they buy so much they are burdened with the "stuff".
I agree. Here are some examples of things I've done in the past month:
1. Took my 4-year old granddaughter on an overnight to Chicago- plane ride (used miles one way), stayed in a hotel (used hotel points) where we had a view of planes taking off and landing, dinner in nice restaurant, explored the airport (including a day pass to an airline Club) the next morning before flying home.
2. Refused to pay $3.50 for the edition of the paper with election results when their usual cost for the daily edition was $1.
3. Bought a pair of boots for $500. Wore them with a classic Brooks Brothers camel coat I bought in 1983 for $450.
4. Filled my gas tank and redeemed 4 cents off per gallon from a grocery store loyalty card.
5. Went to Las Vegas for a meeting of my professional society; I'm retired but they were giving me an award which would have covered the cost of showing up and staying a couple of nights- except it's taxable. Turned down one group going to dinner at the Bacchanalia Buffet at Caesar's for $98 pp excluding drinks in favor of another group going to The Wicked Spoon at the Cosmopolitan for half that. Great dinner.
6. Added another $1,000 to my younger granddaughter's 529 Plan.
So... you get it. Cheap here, extravagant there. Some things aren't important to me (the biggest, newest cars, the latest fashions) and some are high priorities. I always told DS when he was little that we could have anything we wanted (within reason) but not EVERYTHING.
For me, "living below your means" is when your bill plus necessities (like food & gas, etc) plus discretionary expenses are less than your usual income. How is that not a good thing?
I get the impression that your financial style is to cut back on discretionary outlay when an unusual expense occurs. Which seems to work well for you. But most households don't have such a large buffer of discretionary outgo so it is good to set back a little each month for an "emergency fund" for non routine expenses.
how is just being below income not a good thing ? it is always a good thing but it may not be structured to be the proper way or to mean much in crunch time .
because if 80-90% of your budget is for needs and things you can not have latitude in what you spend and must pay that bill as is , then you set a dangerously high lifestyle with little margin for cutting back if crap happens , that's why .
retirees fail to make the distinction all the time . so they set a lifestyle that fits within budget , but then bad things happen and they have no where to cut from for extended periods of time because 80-90% of the budget must be paid as it is with no latitude because they are needs and those amounts are fixed as is . . .
remember , they still need those wants too, as those are things like food which they can have discretion over , trips , gifts ,clothes etc . it does not mean all that discretionary money is available , it just means you have some latitude in what you buy unlike your mortgage, rent, insurance , utility bills ,taxes , etc .
so in this case there are a few different ratios for setting that lifestyle so you have a suggested wider cushion to play with if push comes to shove .
that is quite different then i am just under my income . how much under income is healthy ? and the major question ,how much of the rest of that spending is flexible if push come to shove ?
see the difference ?
Last edited by mathjak107; 11-14-2018 at 04:32 PM..
I think I agree with you that living just barely below one's means is not a good thing. So let's talk about necessities being 70% of one's budget. (we'll assume funding for a 401K or IRA is in the 70%). Because your income & outgo is so high, MathJak, the 30% will be more than enough to cover any unusual expense. But for the typical household, it is a good idea to keep the discretionary spending to 15-20%, and save 10 to 15% for unexpected expense. Because for most Americans 30% of one month's net income wouldn't cover what they need.
Of course few people do this and neither did I!* But that doesn't mean it isn't an Ideal. My approach for unusual expense was to keep a line of credit open at a reasonable interest rate and not draw on if for frivolity so it would be there for a roof or a furnace or whatnot. This might not work for someone without paid off rental property.
* though instead of actively saving I was passively saving by using 15 yr loans for automatic principal reduction. And sometimes I would pay down on the loans if there was a cash surplus.
The point of frugality, in my opinion, is to get the expenses down so there is a good gap between one's income and the basic necessities.
the actual ratio is gong to be different for many of us .
as an example i depend on markets for the bulk of my retirement income . someone else with a pension may not need the flexibility i do . i have to be concerned with prolonged down turns .
we set a lifestyle about 50/50 .. 50% discretionary ,50% non discretionary .
You may not realize it MJ, because you can afford to live in Manhattan but don't - you are actually frugal in your housing expense. It's like you set the goal: how can I live within .X hour of my grandchildren and have a good quality of life? You didn't gravitate to the most expensive alternative. And you set about finding an alternative or maybe stayed put and saved the moving expense.
How do you adopt a frugal lifestyle when you're rich? Say like a pro athlete.
Being frugal is a mindset/choice. While your wealth certainly has an impact on you being frugal. It's not exactly something you have to give up at a certain point as your wealth goes up.
Like anything else, "frugal" is relative. Most will say that flying first class isn't exactly frugal. But if you have the means of chartering a private jet, flying first class can be considered the frugal option.
I don't know that frugal means living below your means. What about just not living above your means? And that would mean investing a portion of your income, not spending it all. Delayed gratification, too. Good things are worth waiting for.
good things may be worth waiting for, but better to get them now if you can afford them.
You may not realize it MJ, because you can afford to live in Manhattan but don't - you are actually frugal in your housing expense. It's like you set the goal: how can I live within .X hour of my grandchildren and have a good quality of life? You didn't gravitate to the most expensive alternative. And you set about finding an alternative or maybe stayed put and saved the moving expense.
most retirees end up having to back in to their lifestyle , self included.
what they lived on when they had possibly two pay checks coming in is kind of irrelevant when the pay checks stop .
it does not matter what was . now all that counts is the resources you have to work with . you can spend your working life thinking you need 80% of your old income at retirement like these ridiculous articles tell you , but it does not matter what you think you need . all that counts is what you end up with to work with .
so now most of us back in to the life we can afford, and that is true for just about all of us .
but how you configure that life and how much flexibility you have in non fixed bills is important .
so many struggle because they just believed "live below your means " was the only thing to worry about but it really isn't .
you need a fair amount of flexibility in a lot of bills where amounts are not written in stone .
so it may involve buying a smaller house then your "means dictates " or living in a different area . but that ratio of " flexibility in choices of what to pay " is an extremely important number .
the retiree failed retirement graveyard is filled with those who thought because they were spending less than they could they were living below their means .
then an extended expense strikes or bad market years and they have little flexibility to adjust .
so that is why when you hear people tell others " live below your means " i equate it to people telling others who want to lose weight " just eat less "
eat less of what ? how much should i eat in calories ? what should those calories consist of in protein va fat vs carbs ? how often should i eat ? how much weight should i lose ?
just eat less is not actionable ... it tells people nothing and if they eat to little just following that advice and don't get the nourishment they need it can harm them . that is exactly how i feel about the words just live below your means as advice bantered about .
this applies to being " frugal " too which is very different from those words i dislike " living below your means " . they have little relationship to each other since buying only the things of greatest value you need which is what frugal means , does not mean you should or could .
Last edited by mathjak107; 11-15-2018 at 03:21 AM..
the actual ratio is gong to be different for many of us .
as an example i depend on markets for the bulk of my retirement income . someone else with a pension may not need the flexibility i do . i have to be concerned with prolonged down turns .
we set a lifestyle about 50/50 .. 50% discretionary ,50% non discretionary .
That's close to mine- a big % of my expenditures are travel, charitable donations and adding to the granddaughters' 529 accounts. I'd hate to cut any of those back but I could if I had to.
When I read about seniors "losing all their investments" in a stock market crash, I figure it's one of two things: either they panicked and sold at the bottom, or else whatever withdrawal rate they were using was largely for necessities and they couldn't reduce it, so they kept withdrawing the same $$ amount from a smaller pot.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Turned down one group going to dinner at the Bacchanalia Buffet at Caesar's for $98 pp excluding drinks in favor of another group going to The Wicked Spoon at the Cosmopolitan for half that. Great dinner.
