“Do not spoil what you have by desiring what you have not; remember that what you now have was once among the things you only hoped for.” – Epicurus
It’s been a year and a half since purchasing a ~400 square foot smaller home and I’m absolutely loving it! While my friends were buying ever more expensive homes, here I was downgrading to a home not only 20% smaller, but also 45% cheaper as well.
Yes, I did spend a good chunk of change building a new master bathroom because the old one was a puny 36 square feet. But having an amazing bathroom where I can work in the hot tub for several hours every morning is a dream come true. After all the remodeling, including creating a sanctuary, my all in cost for my existing home is still about 36% less than my old home.
BENEFITS OF LIVING WITHIN YOUR MEANS
If you think about your biggest expenses in life, they are: taxes, housing, education, transportation, food, and children, if you have any.
Besides living in a much cheaper home, I also drive a $20,000 economy car compared to the median car price in America of $32,000. $20,000 is inline with my 1/10th rule for car buying, which also aligns with the ideal income for maximum happiness of $200,000 – $250,000 per person. It continuously amazes me that a median $52,000 income household would lease or own a $32,000 car.
The gas mileage on Rhino is wonderful, and the ability to park in 20% more spots due to its small size is priceless. At a lease cost of just $235/month after tax, I don’t even notice the expense since it is also a business expense for my main business and driving side hustle.
In terms of clothing, I haven’t bought anything in years because I no longer have to dress up for work. In fact, I now have an oversupply of formal clothes. To look good, staying in shape matters more than what we wear. I usually just wear jeans and a t-shirt or long sleeves, with a cotton jacket if it’s cold.
Let me share some various benefits to living below your means.
- Fewer taxes. Given the government is incredibly inefficient with our tax dollars, it feels horrendous to pay lots of taxes. My new house’s property tax bill is $6,000 less a year and it feels amazing. There was no way I was receiving close to $21,000 a year in property tax benefits living in my previous home.
- Less fees and insurance. Owning an economy car means less government fees. My annual car registration renewal costs several hundred dollars less than if I had brought the $78,000 Range Rover Sport HSE I’d been eyeing. Meanwhile, insurance costs for both my house and car are much lower as well.
- Less maintenance. Unlike a lot of unfrugal people who hire people to clean their house, I clean everything myself because I can. It would be mind boggling to try and clean more than three bathrooms and three bedrooms every month. Also, everything breaks after a while. The more pipes, electrical outlets, and appliances you have, the more you’ll have to fix down the road.
- Cheaper food. It used to cost me $10 – $15 to go out for lunch in my old neighborhood, the Marina district. In my new neighborhood, Golden Gate Heights, I can have an equivalent meal with more variety for just $5 – $7. Consistently paying 50% less to eat is a huge deal.
- Cheaper haircuts. In my old neighborhood, the cheapest place for a decent haircut cost $18 +$3 tip. Here, I get a similar quality haircut for $10 +$3 tip. Yes, I should probably adjust my tip down to $2, but I almost feel bad that I only have to pay $10 for a haircut! Even if my barber kept 100% of her income each day, she would still only make $80 standing on her feet for eight hours. Tipping is important for helping my fellow hourly wage workers.
- Less traffic, more peace and quiet. My old neighborhood was about 30% denser than my new neighborhood. As a result, there was more noise and more riffraff roaming the streets. Now that I’m five miles west of downtown and on a hill, it’s so quiet. Nobody bothers to walk up a hill when they could just harass people and puke on flat land.
- More space. Even though my new house is a couple standard rooms smaller, my lot size is 2X larger than my old lot. Instead of sharing walls, it feels nice to have a completely stand alone house where there’s at least 15 feet of space between you and your neighbors. It’s nice to know I can add value by expanding if I wanted to.
- Less physical risk. When you live in a humble looking home, you don’t attract as much interest from strangers. When you see an expensive looking home as a robber or kidnapper, you think equally expensive stuff inside! If you’re going to bother breaking in or kidnapping someone, you might as well go for a multi-million dollar unarmed home than one worth just the median.
- Greater flexibility with friends and acquaintances. If you invite your friends to your mega mansion for a party, they’ll automatically expect only the finest food and beverages on you. That’s annoying. If you give them a ride in your $120,000 S550 Mercedes Benz, they might hit you up for money, or suffer pangs of envy because you’re living nicer than them. Nobody is going to be envious about my Honda Fit or cozy home in the hills.
- Less need to work as long or save as much. The more you can live within your means, the easier it is to create financial freedom. Just run your new, lower expenses metrics through a Retirement Planning Calculator to see how much easier it is to achieve your financial goals. For example, if you were to reduce your expenses by $3,000 a month, that’d be saving the equivalent of working a year at a $50,000 gross salary job. Now that my expenses are thousands of dollars less each month, I have more money to invest, and less pressure to make more money. Larger investments may equate to larger returns which will beget even greater financial freedom.
- Greater physical freedom. If you’ve got a huge amount of living expenses to pay each month, you’re going to have a harder time traveling for an extended period of time. If you have a small expense foot print, it’s much easier to pay double rent as you explore the world. Meanwhile, because you don’t live in a luxurious home, you can appreciate your travel living accommodations more. One of my friends lives in a $10M house about 8,000 square feet in size. Because he’s so used to his living arrangements, he needs to spend $2,000+/night to rent out villas or double suite hotel rooms when he goes on vacation with his family. Crazy!
- The ability to match. If you’re spending everything you have, then it’ll be tough to hang out with someone who has even more. By living well within your means, you can always spend up to match someone else without feeling uncomfortable.
FIND THE MINIMUM AMOUNT REQUIRED TO BE HAPPY
Society has happiness backwards. Instead of always spending more money for bigger, fancier, nicer things to attain happiness, we should be going in REVERSE to see what is the minimum amount of stuff required to be happy.
How many people do you know actively try to minimize what they have? It’s hard to do when we’re in the accumulation phase. But as you hit middle age and beyond, it’s much easier to appreciate the merits of a simpler life. This is why you see many retired folks sell their single family homes to live in service apartments.
Finding more happiness with less is one of the biggest takeaways I’ve garnered from early retirement. I have a feeling that a large number of people are working too long and trying to save too much for some elusive financial goal they think will make them feel secure. We really don’t need that much stuff once we no longer have to work because there are so many amazing activities that don’t require much stuff at all.
The key is to optimize our inventory with our usage. We’ll create a much healthier environment for us all. Imagine if we got rid of everybody with an SUV who never goes up to the mountains, and doesn’t have more than four people in their family to transport? Imagine if all our leftover food was re-allocated to people who feel hunger pains every day? Imagine if all the rooms in our homes were occupied, instead of having houses left completely empty thanks to speculators parking their cash.
Less is so much more! We just have to find how little we really need to be happy.
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Shop around for a mortgage: Check the latest mortgage rates online through LendingTree. They’ve got one of the largest networks of lenders that compete for your business. Your goal should be to get as many written offers as possible and then use the offers as leverage to get the lowest interest rate possible. This is exactly what I did to lock in a 2.375% 5/1 ARM for my latest refinance. For those looking to purchase property, the same thing is in order. If you’ve found a good deal, can afford the payments, and plan to own the property for 10+ years, I’d get neutral inflation and take advantage of the low rates.
Updated for 2019 and beyond. Stay frugal and conservative. The economy is starting to weaken.