There’s a notoriously low bridge on Storrow Drive in Boston. The clearance is only 10 ft. There are warning signs for trucks leading up to the bridge, but some drivers ignore them. And then, they get Storrowed. The lucky ones stop in time and have to back up or get wedged under the bridge. The unlucky ones have their roofs ripped off. The obvious lesson is to pay attention to road signs that warn of navigational hazards. And even though box trucks are at risk when traveling on Storrow Drive, regular cars and trucks aren’t. They have plenty of clearance to get under the bridge and continue on their way. Unless, of course, the road is blocked by a wrecked box truck. In personal finance, the gap between your monthly spending and your monthly income is your clearance. With your finances, you don’t want to get Storrowed. Frugality brings flexibility.
Frugality Gives You Clearance
One goal of personal finance is to maximize the clearance between lifestyle and income. I say lifestyle instead of expenses because your lifestyle dictates your expenses. Different car styles are built to be different sizes. Likewise, different lifestyles cost different amounts. A minimalist lifestyle, for example, is like a little compact car. A higher priced lifestyle is more like a Ford F350. The minimalist lifestyle has a ton of financial clearance. The “driver” of the higher priced lifestyle sweats it out under the bridge.
When creating a lifestyle for ourselves, we see the road sign warnings. We know the height of the bridge ahead- it’s our current salary. During the approach to the bridge, you don’t want your car’s height to be a mystery. That’s why tracking monthly spending is crucial. Services like Personal Capital (now Empower) and Mint allow you to monitor your monthly spending and cash flow. And unlike a big box truck, we have the ability to shrink our car as we approach the bridge. Being frugal- cutting excess discretionary expenses from the budget- prevents getting Storrowed. Using a budget tracking service enables you to easily find the excess and trim it off before hitting the bridge.
Clearance Gives Flexibility
More clearance gives more flexibility. For the early retirement folks, Mr Money Mustache has his famous “Shockingly Simple Math Behind Early Retirement” post. It details how many years you need to work to save for early retirement based on your savings rate, where
Savings Rate = Yearly Take Home Pay – Yearly Spending
The logic follows from here. Spending less means saving more. Saving more means working less. It’s the mathematical basis of the entire FIRE movement.
Beyond early retirement, more financial clearance brings lifestyle flexibility. A lifestyle with more clearance makes it possible to save for a house. It means buying a car with cash instead of going into debt for one. A flexible lifestyle allows you to invest more of the clearance at an earlier age. Or pay off student loans and other debts more quickly. My wife and I used our early marriage flexibility to set a good investment foundation, save for a house, and make great progress on her student loans. Most of that time we had twin boys! Career flexibility becomes possible as well. A lower paying but more satisfying job becomes financially viable. You have the freedom to make a change of pace, location, or lifestyle.
Start Simple, Get Intentional
A simple life is easier to manage- financially and practically. We should embrace simplicity in lifestyle to get that financial clearance. The ease of life increases as the things we have to maintain decreases. We maintain debts and subscriptions with monthly payments, and physical stuff with time and energy. When there are too many debts, debt payments preclude our ability to save. They curtail current and future flexibility. Stuff functions the same way. Every object that needs maintenance- cars, dirty dishes, laundry, patios, lawns, etc takes away free time. We can’t avoid all maintenance- you won’t get far in life by never washing laundry- but minimizing maintenance obligations is the goal.
Making intentional lifestyle choices is the first step towards removing unnecessary drains on personal finances. When we resist an impulse to buy something, that’s an intentional choice. Buying food that’s on sale at the grocery store and making time to cook it is an intentional choice. Choosing a reasonable used car instead of a new one is an intentional lifestyle choice. So is making a budget and sticking to it. Budgeting is not deprivation- it’s a balance between current needs/wants and future freedom. Make a budget to find enough. Every bit of extra clearance creates more freedom. Not freedom to buy more stuff, but freedom to choose a better life. Seemingly small intentional choices add together to form a large impact.
Be Frugal Because of the Flexibility
Most frugal people don’t practice Frugality because they’re stingy misers who would rather be cold and hungry instead of spending money. It’s one way to gain more autonomy in life. Being financially frugal is often the first step towards accomplishing dreams- from saving for a house to taking an unpaid sabbatical to write a novel. Creating extra financial clearance decreases financial stress. Not only are you free to pursue your dreams, but you’re less stressed while you do. The biggest benefit of frugality is the lifestyle flexibility. Take advantage of it to the fullest.
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Saw this blog the morning of another expensive emotional purchase. I ended up canceling the purchase before getting Storrowed.
Glad I could be of assistance!