On the importance of having capital
One of the most frugal things you can do is have capital. Whether it's money in the bank or a nice chunk of reasonably liquid investments, having capital not only makes money (through the investment return), and gives you security and flexibility, it also cuts your expenses.
I wrote a while back on the difference between voluntary simplicity and poverty, even if the amount of money spent each month is about the same, and how the difference had a lot to do with choices.
There are two key elements to the difference. One is spending less than you earn, which gives you flexibility in almost every aspect of life. The other, though is capital. Having some capital often makes all the difference in what choices you have available to you and how you are treated.
The extra income, security, and flexibility are nothing to sneeze it, but for this post I want to talk about the frugal aspects of having capital.
The most obvious way that having some capital lets you save money is that it lets you arrange your purchases to take advantage of deals. If you have capital, you can take advantage of store sales and seasonal low points in prices . You can also make bulk purchases. (To take full advantage you need to have a clear idea about both what you're going to need and about what is a good price, and you need the storage space and the organizational skills to put things somewhere and find them again.)
Less obvious are the frugal options that come when you're in a position to put some money at risk. For example, suppose there's a house-sitting gig available where the owners haven't found anyone they know personally and are considering strangers. If you want that gig, your chance of getting it might go up quite a bit if you're in a position to offer a substantial damage deposit.
To carry that example a bit further: Suppose after the house-sitting gig wraps up the homeowner tries to cheat you, offering to return only part of the damage deposit. If you lacked capital, you might have to settle for what they were willing to give back, because you needed the money to rent your next place. If you've got some capital, you can play hardball for what's owed to you--not only refusing to settle, but also credibly threatening to go to court.
Note that none of these things actually cost any money (except perhaps the interest that you might have earned on the damage deposit). Because you had capital, you had additional opportunities without needing to actually spend extra money.
People with capital get the best rates on loans--in large part because they're in a position to forgo the loan and just use their own money, if they're not offered a good rate. They also get freebies from banks and investment companies--advice, personal service, access to special programs, and so on. Even just a little gets you free checking.
And, if only as a psychological effect, being prosperous can make you feel less like you need to look prosperous, making it easier to resist the urge to spend money merely to keep up appearances.
It's a truism that the rich get richer. This is part of the reason why.
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