What I've been trying to say
You can choose how you want to live. If you choose to live simply, you gain a certain kind of freedom. In particular, you're free to choose to do the work that's the most satisfying, rather than the most lucrative. Choosing to live simply doesn't mean that you have to give up all the cool stuff you want. It means, rather, that you have to focus on a small number of wants--the ones that matter the most to you.
My brother suggested that I should put together a talk to give, so I'd be ready on the off chance that someone wanted to hire me to speak about personal finance and frugality. Toward that end, I spent some time looking over the posts I've written, and realized that I could boil down much of what I've been trying to say into just a few key points.
With your indulgence, I'll mark my one-year anniversary of writing for Wise Bread with a brief summary of what I've been trying to say, together with some links to the posts where I tried to say it.
You design your life
If there's an over-arching theme to my posts, it's that you're responsible for designing your life. Inevitably, all the key decisions that have been made so far were either made by someone else altogether (your parents) or else by someone less experienced and less wise than you (that is, you--when you were younger). You can't go back and change decisions that have already been made, but that doesn't mean that the design for the rest of your life is immutable. Start today to design the life that you want to be living.
Everything else is tactics.
Tactic one: Live intentionally
Figure out what you really care about and live in accordance with those values. This is the key enabling step for living frugally. If you don't know what you want, you'll try to fill the gap with stuff--and that never works.
There's a lot of talk in the frugality community about understanding the difference between needs and wants, which I think kind of misses the point. Your actual needs (food, shelter, clothing) are so minimal that (in a rich country) you could probably satisfy them for free--but that's no way to live. (For more info on that, read about freegans.)
My point is that almost every dollar you spend--even those spent on food and shelter--actually goes to satisfying wants as much as it does needs. That makes it critical that you come to understand your wants. If you do, you can focus your spending so that it satisfies your most important wants as cheaply as possible. Satisfying the next tier of wants--the ones bring a feeling of luxury and splendor to your life--depends even more critically on having a clear understanding of what you want.
That same clear understanding is also what helps you deal with pressures from friends, family, neighbors--and that automatic urge to have what the next guy's got. If you keep things in perspective, it's possible to live like royalty on $20,000 a year. It helps if you choose to have style, rather than a lifestyle.
Part of this, perhaps the most important part, is to pay attention. Pay attention to your spending. Pay attention to your earnings (and what you have to do to earn them). Pay attention to your feelings--that's the only way to come to understand your wants. Remember that a budget is a tool, not a constraint.
Tactic two: Raise some capital
A lot of personal finance and frugality sites seem to focus at the two extremes of personal capital--the one of trying to get out of debt (i.e. negative capital) and the one of trying to save for retirement (i.e. enough capital that there's no need to work). I like to point out that there's a huge and very fertile range in between.
Some people target all their saving and investing at something in particular--buying a computer, buying a new car, putting a down payment on a house, sending the kids to college. These are all worthy goals, but the sequence of them can easily eat up all your savings for virtually your entire life. I think people who do this miss out on certain large advantages that come from having some untargeted capital. Having a little capital saves you buckets of money. It also gives you a lot of flexibility in how you live your life.
Establish an emergency fund, then start investing. Keep your money in the right kind of compartments for the maximum tax advantage, but consider investing some after-tax money as well. Focus on investment returns that support your true goals, not the false goal of maximizing your investment return. Be sure to consider non-financial investments (such as insulating your house, buying tools, learning a skill) and don't miss out on the huge tax-free returns that come from stockpiling stuff that you're going to use.
Tactic three: Find your true calling
Find meaningful work, so that you can spend your time doing something that you care about. After your family, nothing matters more for your overall happiness than your work. It should be something that's important, that uses your talents, and that garners you the respect of your peers.
Freeing up money to save and invest is really the less important advantage of living frugally. A much bigger win comes from the fact that it gives you the opportunity to do the work that you feel called to do, rather than whatever work might earn you the most money.
My biggest piece of advice for someone in school is this: Quit your job. At least, quit your job if it's just a way to earn pocket money. If you're in a position where you'll have a roof over your head and food to eat, even if you don't work, seize the opportunity to try doing whatever work you think might be your true calling in life--even if you have to do it without pay. Finding your true calling is infinitely more valuable than whatever money you might earn at a part time job, especially if you can find it early. Even negative information--knowing that some particular kind of work is not your true calling--will be worth more than pearls as you go on to design your life.
Being an employee is only one option, but it's an important one, so it's worth knowing that the way to catch the eye of an employer is by being your own unique self, and that the way to get a job once you've done so is by taking the trouble to figure out what they need done, and demonstrating that you can do it.
Before changing jobs, give some careful thought to exactly what it is that you dislike about your current job. When you're unhappy with your current job, it's easy to imagine that anything would be better. In fact, though, plenty of other jobs would be just as bad or worse. Happily, it's not too hard to figure out if a potential new job is going to have the same sort of problems that you're suffering from already. (Basically, just ask.)
If you're ever in a position to hire employees, I suggest that don't worry nearly as much about whether they can do the specific task that you have in mind for them as you do about whether they're the sort of person that you want to work with every day.
Your best investment--much better than anything you can buy with mere capital--is an investment in yourself. A skill is something that will never have to be left behind in a flood, never get burned up in a fire, never be expropriated by the taxman, never seized by a creditor, and can be carried across any international border without payment of duty with the simple statement, "Nothing to declare."
Tactic four: Do for yourself
There's great profit to be found in specializing. If you do what you do best and I do what I do best, we both come out ahead if we exchange goods and services, rather than each of us doing a poor (or even workmanlike) job at the other's skill. That's true enough, but it leads to the perverse notion that the market value of what you produce is the true measure of its value, which leads to the perverse result of people deciding that it makes no sense to spend time and effort doing or making things themselves, because it would be more profitable to spend their time working for money and then hiring any other work done. The fact is, there are many good reasons to do things yourself. One is simply because it's an activity that you enjoy doing, whether or not you can earn any money at it. Another, though, is to move the activity outside the money economy--and if you can move a substantial fraction of the most essential activities of daily living outside the money economy, you can protect your family from any purely financial problems (of which there seem to be plenty just lately).
Once you focus on satisfying your most important wants, you'll surely find some lessor wants that don't quite make the cut-off. Sometimes you can find a cheap way to satisfy some of these. Often, though, the cheap substitute is poor enough that you're better to just do without than to settle for what you can afford.
Tactic five: Value community and experiences over stuff
The economic structure of a household with a single adult in it is simple: Earn enough money to buy everything your household consumes, plus provide through direct labor all the other needs of your household. Add one or more adults to the household and your options expand considerably.
One of several advantages is that there's a great deal of stuff that you can share. Sharing within households seems quite natural. Sharing between households is less common, but there's no more powerful tool to raise everyone's standard of living than to share.
And stuff, whether shared or not, is really the least important part. When you want someone to know who you are, you tell them what you've done, not what you own.
Simple living isn't just tactics. For many people, it's also an expression of their values. Living light on your wallet is also a way to live light on the planet.
There are a few things that are not so much tactics as they are background information. I happen to know a bit about economics, so I've written a bit about issues in the economy that you should take into account when you're designing your life. The main ones on the economy in general are:
- Preparing for a recession
- How to live with inflation
- More than just inflation
- All about stagflation
- Credit squeeze (formerly known as a panic)
- Will high inflation persist?
- The weird logic of economic growth
And, because I think it may be the most important issue facing the economy just now, I've also written a number of pieces about energy prices:
- Plan for expensive fuel
- What if energy costs keep rising?
- Rural living in a world with expensive fuel
- Spot shortages of gasoline
- The good life on less energy--even in the US
A life of freedom
Near the beginning of Walden, Henry David Thoreau writes:
I went to the woods because I wished to live deliberately.
Thoreau had a kind of education that most people don't get any more, so he would have known the etymology that the word: de-liberate means "from freedom." He goes on to say:
I wanted to live deep and suck out all the marrow of life, to live so sturdily and Spartan-like as to put to rout all that was not life, to cut a broad swath and shave close, to drive life into a corner, and reduce it to its lowest terms, and, if it proved to be mean, why then to get the whole and genuine meanness of it, and publish its meanness to the world; or if it were sublime, to know it by experience, and be able to give a true account of it in my next excursion.
I'm afraid I'm no Thoreau to write so clearly and vividly as that. But I've written as clearly and vividly as I know how to say that designing your life is your most important task, to provide a few clues and tools about how to do it well, and to give you a bit of insight into how things work in those parts of the world where I have a bit of understanding. As of today, I've been doing it for a year, and I plan to go right on doing it, as long as I can think of useful things to write, and clear and vivid ways to write them. Thank you very much for your attention. I hope it has been, and will continue to be, rewarded.