Frugality as an Essential Ingredient to Doing What You Want With Life
Source: viZZZual.com at flickr
It would be really interesting to me to see some type of study that compares the following two people from age 20 to 40:
- Person A, let’s call him Todd, who spends his entire paycheck every time he gets it, always having the newest computers, cell phones, cars, etc.
- Person B, let’s call her Sally, who never spends her entire paycheck and is happy to use older computers and may not even own a cell phone
Just based on those two descriptions alone, is there some way to predict the overall success of their respective lives? Or is it still completely 50/50 random chance until we know more about their habits?
First, let me define success: success in this instance is being free to do what you want, not bound by financial constraints. Failure in this case is being forced to do things because you need the money or stopped from doing things cause you don’t have enough money. Is that a fair definition of success? I think so.
Now it is certainly possible that Mr. “Spend First Ask Questions Later” will either meet a rich heiress while he’s away on some vacation and will go on to marry her and live a fabulous life of the rich and famous. Or perhaps he will luck into a lotto win, or his prolific spending and risk taking will propel him to start a new online business and make a billion dollars.
But it’s more likely that he’ll end up broker than broke 5 years later, with $100,000 in credit card debt and most of his income going to make the payments. He’ll then be in a situation where he will need to stay in a miserable high paying job, or not be able to take a once-in-a-lifetime backpacking trip through China that will make his heart sing.
So the more I think about it, the more I would say that my number one advice to all young people who are leaving school and entering the workforce for the first time: resist the temptation to live beyond your means in your early years. Always set 25% of your paycheck aside in an account you can’t touch - half of it tax-sheltered and half of it not. Learn to live on only 75% of your income. Set that as a goal you must always keep for the first 10 years of your working life.
Then when you hit 30, you’ll have options. Lots and lot of options. Want to spend a year travelling? It’s an option. Want to quit a miserable job to go do something more fullfilling? It’s an option. And after living frugally for 10 years, you will likely be disgusted by the thought of spending $3,000 on a television even when you do have the money to do so.
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Just wanted to say HI. I found your blog a few days ago on Technorati and have been reading it over the past few days.