Why I’m Moving Away From Frugality

(I explain my new wealth strategy in this video)

Say What?

Yes, I know. Bold statement for me. 

I’ve spent the last few years working hard to lower my expenses to create more disposable income for myself. I’ve been using this income to invest in Stocks and Shares which provide a passive income stream which I’ll eventually live on.

The later half of that strategy (investing in Shares) will continue to remain in place. However, the first half of it (reducing expenses) will play a much smaller part in producing disposable income. 

To clarify, I won’t be going on mass spending sprees or ignoring savings. I’m now spending my time and energy on income generation, which is done by providing value to others in the form of goods or services. 

This video was inspired by a podcast I listened to in November last year with Hal Elrod and Garrett Gunderson. Garrett explains his philosophy on how you should think and handle your money. This podcast was the catalyst for me changing my strategy and ultimately taking a U-Turn on finishing my book on Budgeting. 

In this video I share:

  • Garrett’s 3 principles to becoming more wealthy.
  • How budgeting can constrain you and squash value. 
  • How frugal living and budgeting created scarcity in my life and prevented me from having more disposable income. 
  • Why you should think about PROduction rather than REduction.
  • How to create more value, and subsequent wealth in your life. 

I didn’t take the topic of this video on lightly. Most of you loyal Blog readers have identified and been interested in how I live a frugal lifestyle. You just need to flick through the archive of this Blog to see how the steps I’ve taken to reduce expenses like ditching Sky TV and Selling my Car to live under £10,000 a year. 

A lot you write about or strongly believe in living frugally. My intention is not to cause controversy, to judge anyone, or criticise those that choose to live this way. I’m merely explaining how I’ve changed how I think about money and why. 

I’m now moving into a new phase of my financial development where I will not only attract more money in my life, but I’ll help 1,000’s and perhaps 10,000’s of people whilst doing so. 

I appreciate that some of you might have strong opposing views to what I’m doing, and I welcome your thoughts and comments below. 


Click HERE if you’re interested in listening to the podcast in full.  

0 Comments

  • Dividend Legion

    Reply Reply 10th February 2016

    Hey Huw!

    Wow, brave post indeed! I completely agree with with you though. Financial Independence is achieved by making a more money, spending less and investing wisely. I think the whole one that has the most potential is earning more, as there is a limit on how little you can spend, as well as how good your investmenta will turn out.

    I also think that frugality is a skill that can definitely be trained. It's not about spending as little as possible, but about spending to maximise happiness. This is the biggest lesson in I've learned in my own FI journey. I have learned to think critically about how much happines each expense is bringing me, which I find brings balance.

    Looking forward to read about your progress in generating more income, it's super inspiring!

    Cheers Huw.

    Dividend Legion

  • Huw Davies

    Reply Reply 10th February 2016

    Well put DL, and thanks for the kind words!

    You're spot on. Frugality is at it's best when you're doing something to enhance your life – ie. walking to work rather than driving.

    I found that I was benefiting from it in those ways, and I wish to continue doing so, but I fell into the trap of being 'tight', and not spending money on things that would provide value in my life – ie. contributing to charity, personal development etc.

    I found the lines become blurred between Frugality and 'tightness' in things like personal development. There is an unknown value to developing, and I was blind to it in some occasions. ie. I would never have purchased a course for £350 in 2014 like I did last month. I couldn't get past the initial outlay. In reality, the money I'm able to make from such purchases is likely to be 10x the initial outlay.

    Great response, well put, and thank you for sharing your views!

    Best
    Huw

  • Clare and Maggie

    Reply Reply 11th February 2016

    It's amazing what a change of mindset can do isn't it! If you live the same way and focus on wealth building, you'll feel a lot 'richer'. Really interesting 🙂

  • weenie

    Reply Reply 11th February 2016

    Very interesting points made in your video Huw, and if I were honest, probably not too surprised you have changed your strategy.

    Efforts made with frugal living can only help increase your savings/investments up to a certain point. Once you've 'trimmed all the fat' off your expenses (and from the sounds of it, you had gotten quite 'extreme'), that's pretty much it and the only way to then grow your savings more is by earning more.

    It makes sense for you to concentrate your efforts on increasing your income from Kindle and your other projects. The money you spend on courses etc are definitely classed as investments, in investments in your personal development.

    That said, just because you're not focusing on being frugal, I don't think it'll mean that you will suddenly be frivolous with your spending. Even if your monthly expenses went up a little from your frugal days, it would be more than covered by your new income.

    I'm frugal in some aspects of my life but not in such a way that any of my friends could call me 'tight', which to me means that if I wanted to, I could be more frugal – but I don't want to be.

    All the best with this latest strategy!

  • Huw Davies

    Reply Reply 11th February 2016

    I totally agree C&M. Thanks for sharing your thoughts.

  • Huw Davies

    Reply Reply 11th February 2016

    Thanks for sharing your views Weenie. I find the topic interesting too.

    DL did a great job of summarising it in the comments above. Trimming expenses is beneficial, but be mindful not to 'trim' things that bring value in your life. Also, on the flip side, experiment with trimming things out of your life in order to gain more value – such as walking more.

    You're right, the ceiling for growth is so much bigger on the income side than it is on the expenses side.

    I can't imagine I'll ever be too frivolous, and not doubt friends/family would still class me as tight on certain things, as they don't see the money I put into myself and contributing to other causes. My expenses have gone up, but I'm comfortable with that and I'm managing to save significant sums on top of that.

    One thing I didn't mention, my 'Drugs, Booze, and Hooker' money allocation will go up with my earning too. Rather than it being capped at £50 regardless. It's a % now, so if I have a bumper month, I'll that that much more to spend on whatever the hell I want. I think it's healthy and beneficial to have that in your life. Much like keeping a solid diet all week, and having a blowout meal or even a day once a week. EG. You can spend safe in the knowledge that although you've blown £500 on crap that month, you've invested £5,000 so you're more than covered.

    One thing has changed for me. I want to live more for today, than for 10 years in advance. I want to make sure I'm enjoying the ride so to speak. Granted, that doesn't mean I have to spend money to have fun, as that isn't the case. But it also means spending money if needed to have amazing experiences, going out for dinner, rewarding myself for progression.

    I think it comes down to – are you happy and fulfilled? Being more or less frugal can enhance that. In my case, being less will bring me more.

    Thanks for the well wishes and for sharing your views!

    Best
    Huw

  • M from There's Value

    Reply Reply 11th February 2016

    Love this. Obviously I'm biased, because this is basically what we do. It got some raised eyebrows at the last FIRE Gathering, but saving 10% of T's salary for travel is a pretty large figure (which could be going towards stock market investments). But that is investing in our own enjoyment of life and we are ultimately learning about other cultures in the process.

    The thing that really helped us move towards this mindset in a bigger way last year was Li Ka-Shing's advice on how to divide your income. We spoke about this before, so I won't rattle on here, but just to say that choosing in advance how you would most like to spend your money is a positive way to approach budgeting VERSUS the negative mindset of how to be as frugal (stingy!) as possible. One of the key part's of Li Ka-Shing's advice was also the self-education part, which I'm really glad that you mentioned here – investing in your own education (and health) is super important and more important than financial freedom at the end of the day.

    Cheers

  • jiminyork

    Reply Reply 12th February 2016

    Hi Huw, I'm not surprised because as a late-comer to your blog I never actually realised you were trying to live the frugal life. My impression was quite the reverse – it seemed to me you were really quite focused on increasing your income, but through doing things that you enjoyed and gained fulfilment from. And, if you happen to become well paid for it in the process, what's wrong with that?

  • Ian Holliday

    Reply Reply 12th February 2016

    Hi Huw

    Yes – really interesting stuff. I am sure that the two phase approach to finances you talked abtou is right – get your house in order then focuss growing your income generating potential. Following your passion is good advice too I think, especially if it leads to working towards getting out of jobs you are no longer enjoying or not suited to, but care has to be taken. Often it is possible to move job types within an organisation or industry and progress up and enjoy working more. And if your passion is cataloging national grid pylons there may not be a lot of cash in it. Here's an alternative perspective by Cal Newport on Todd Tressider's financial mentor podcast http://financialmentor.com/podcast/follow-your-passion/11640.

  • Huw Davies

    Reply Reply 12th February 2016

    Hi M,

    I hope you're able to make the FIRE Escape meet, as it would be great to have a good old chat on the topic. I didn't realise your allocation prompted eyebrow raising. I'm clearly biased too because I wrote the post, but finding an adequate balance between living for value now and for future is very important to me.

    Yes, Li Ka-Shing's article was interesting. It was around the time I initially listened to the podcast that I talked to you about this. I'm an advocate of pre-selecting how you allocate your money too. It takes the thinking (or for some stressing) out of it, whilst meeting the various needs in your life. Putting 70% of my wage into stock wasn't stupid, but it wasn't optimal for my overall well-being and benefit. For example, no money was allocated for learning (something I'm passionate about) or long term spending money for Car's/Holidays etc.

    Thanks for sharing your views. I was in agreement with the whole thing!

    Huw

  • Huw Davies

    Reply Reply 12th February 2016

    Hi Jim,

    Of course, I met you initially in York when I had either handed my notice in or was about to.

    In short, solely focusing on expenses can change you and your families lives. Focusing on Income can change your family, friends, community and potentially 1,000+'s more.

    As I've only got once swing in life, I'm going for the home run!

    Huw

  • Huw Davies

    Reply Reply 12th February 2016

    Thank you for sharing your views on the topic and for suggesting the podcast Ian.

    I'm in agreement with you.

    It's funny because I really enjoyed my job, and the company I worked for, but it wasn't 'truly' satisfying in the way working for myself is. There's nothing wrong with working for a company your whole life as long as it brings joy into your life. I would NEVER work in a job just for the money. Life is way to precious, work takes too much of that time, and the money isn't worth it.

    Best
    Huw

  • Organised Redhead

    Reply Reply 13th February 2016

    Hi Huw,

    I've only just discovered your blog within the last week or so. The first post of yours I read/watched was your progress update on your 2016 goals – I find it fascinating having an insight into your life and your pursuit of achieving your goals. As a result of that post I decided I wanted to understand more about your journey to-date as it feels inspirational to me, so I'm working my way through your archive of posts from the beginning! I'm still in 2014 (not a particularly fast reader) which means I'm still reading about your initial approaches to pursuing financial freedom by forty, particularly involving frugality.

    Today I saw you'd posted this addition about moving away from being frugal, so I thought I'd "jump ahead" in my reading to see what you now have to say on the subject. It's very interesting to me to see that you have obviously been on a real journey of change, which is what life's all about really isn't it? Good for you.

    As I read the rest of your archive I'll keep in mind where you've evolved to and I look forward to catching up with 'real time' so I can continue to follow along with you.

    For me, I'm at the start of my FI journey really. I've been interested in becoming financially independent for about a year now, but I'm very much still finding my feet. Sadly I've missed the boat to become financially free before 40 as I hit the big 40 last year. I'm hoping to ensure that I can secure my freedom before 50 though – and the sooner the better!

    Thanks for sharing all your insights and tips – I will be following from now on with interest.

  • Huw Davies

    Reply Reply 13th February 2016

    Hi OR,

    Love the name BTW!

    It's comments like this that remind me why I love Blogging so much. The act of putting yourself out there and becoming accountable to others is a big reason, but receiving message that people read, enjoy, find inspiration from what you do or say makes the whole process so rewarding. I hope you can continue to get value from my work over the years.

    I certainly have been on a journey of change, and I hope to continue developing so I can look back in 12 months and see how much I've come on. I'm in agreement, I think life presents the opportunity to grow and develop everyday in every area, and I want to make the most of it.

    Congratulations on taking the step yourself. It isn't easy to make the leap initially. I heard a great quote that said:

    "People overestimate what they can do in a year, but over estimate what they can do in ten"

    You can achieve anything in 10 years with the right mindset. I'm less than 2 years into this Blog and I've quit my 9-5 job and I'm earning money I never thought I could. I wonder where I'll be in 5 years time?!

    I don't think being a millionaire s everyone's goal, but becoming Financially Independent is something everyone can achieve in a life time and it presents many more opportunities. Shooting for 10 years is realistic, yet challenging and being FI by 50 is still a remarkable achievement in comparison with the rest of the world.

    I wish you the best of luck my fellow Redhead. Please keep me posted!

    Huw

  • Anonymous

    Reply Reply 15th February 2016

    "under estimate"

    good blog, enjoying and learning

  • Huw Davies

    Reply Reply 15th February 2016

    Thanks Anon! Good spot.

    "People overestimate what they can do in a year, but underestimate what they can do in ten"

  • Nick Shaw

    Reply Reply 22nd February 2016

    another timely post Huw, very interesting reading and something I've been rubbing against recently which seems to be leading to a bit of disatisfaction. Perhaps it's time for phase two..

  • Huw Davies

    Reply Reply 22nd February 2016

    Great to hear Nick!

    I find it very interesting too. Keep me posted with your efforts and good luck!

  • Massive

    Reply Reply 13th March 2016

    Love the post Huw.

    I have also transitioned from Phase 1 (Frugal accumulation) to Phase 2 (Abundant accumulation).

    Interestingly, this is a pretty common path for FIRE people – even the Ermine has had to confront the tax implications of some post-retirement earnings.

    In my case, I am still using Phase 2 to pursue my phase 1 goal of achieving sufficient genuinely passive income to remove the need to work.

    My question is whether this post implies that you will be changing your 2016 Financial Goal of accumulating 50,000 in share investments?

    Just interested.

    Cracking blog – though I prefer text to videos but that may just be me.

    Massive

  • Huw Davies

    Reply Reply 14th March 2016

    Hi Massive,

    Thanks for stopping by and sharing your position. I wish you the best of luck in your wealth accumulation phase.

    My goal sounds somewhat similar to yours, in that I plan on making more disposable income to enable me to invest more money in passive income streams like shares and property. I am working towards FI, where I can choose not to work, but in reality, I never want to stop working. I've been exposed to living a lifestyle of my choosing and I plan on continuing to grow and progress in the areas of my life I'm passionate about. Work to me is engaging, challenging, fun and rewarding.

    I like the thought of having the option of not working, but I imagine when I reach that point in the next 2 years or so, I'll have even more work opportunities to explore.

    Thank you for your feedback too!

    Best
    Huw

  • MrsChai

    Reply Reply 25th March 2017

    I am new to the concept of FIRE, having recently listened to podcasts by Mad Fientist and JD Roth. I have always been frugal, largely because I am not that interested in brands or keeping up with the Jones. I read a posting by JD Roth who said don't imitate others when building wealth and I think that's true, take the framework and the guidelines and then do it your own way! So if this is the way you feel you need to go then good for you. I don't think you need to give up completely on frugal living though as goodness knows the world needs us all to stop consuming item after item. However, giving up contributing to gifts and not giving to charity was probably straying into scarcity mindset. I agree that cutting back should never be about cutting out joy from your life but about taking a mindful approach to spending! Good luck!

  • Huw Davies

    Reply Reply 26th March 2017

    Hi Mrs Chai,

    I've not heard that before, thanks for sharing. I tend to find a way that works for me, and I suppose money is no different.

    Believe it not, I've changed how I feel about this post. This accurately depicted how I felt at the time, but recently I've spent time reading Stoicism and found myself drifting back to frugal living.

    I'll always be somewhat frugal at heart. I'll always seek value, and forgo waste. I suppose the main point of the article was to focus on Production rather than Reduction, which I think I needed to do at that time in my life.

    Thanks for sharing your views. Have a wonderful weekend!
    Huw

Leave A Response

* Denotes Required Field