I must confess I don’t live a frugal life.
Being a FIRE blogger, this is something I have thought a lot about in the past few years.
FIRE and frugality often goes hand in hand, but in my case it doesn’t – at least not at this point in my life.
My wife and I live a life with spending above most other people in Denmark in absolute terms.
Sure, we still manage to save about 50% of our net income each month, but we could do better if we didn’t splurge so much on some things.
Why do we spend more than we have to? We choose to spend more than average on a few expense categories because we believe it gives us more happiness than to keep the money in the pocket.
I am a firm believer in the fact that the journey towards financial independence must be as good as financial independence and early retirement itself.
We have a network of friends who also spend a lot which is naturally also a driver of spending money when we are hanging out with them.
We splurge on some things
There’s generally three things we splurge on today.
Housing is probably our biggest non-frugal spending category. We have decided to live in the middle of Copenhagen in a large spacious house. This comes at a cost of 30% of our joint salaries each month, where 10-15% is used on paying down the principal on our housing loan (i.e. illiquid savings).
We know that we will not be living in the house forever, but we wanted something spacious to have our first kids in which is close to the parts of the city we like spending time in while we are young.
If we disregard the high monthly cost, it has been an excellent investment so far. Owning a house in the middle of a growing city means that prices are on an upward trajectory. We have gained roughly 10% in just over a year, but this is of course illiquid money and should not be an excuse to pay a lot on housing each month – and the real estate market might crash tomorrow.
The second largest splurge category is vacations. We splurge on vacations, and while we also have frugal vacations at home, we do take a few expensive trips doing the year to exotic places, stay at nice hotels and eat well.
I don’t really have an excuse for this one because I know that we could have equally good, frugal vacations, it is simply just a personal preference that we have.
The last thing we splurge on is restaurants. My wife and I like to go out and eat together, and we like to go out and eat with our friends.
Going out to restaurants costs more money than one would expect. When I look at a normal month’s expenses, this is something we spend a lot of money on.
It’s often the “easy” thing to do when we hang out with friends and it’s delicious to eat out in Copenhagen! However, we also enjoy making dinners at home and inviting friends over, so we do that often too.
… but we also save on other things
It might sound like we are living a luxurious life, but I don’t think we are.
There’s a few things we splurge on, but I also think we are very rational and consider our spending a lot.
We never buy crazy expensive clothes.
We never buy things of low quality that are not durable and can last many years.
We never buy big bottles with fireworks on clubs.
We never buy crazy expensive 5-star hotels.
We don’t own a car and always bicycle everywhere.
We make relatively cheap dinner at home many evenings and avoid food waste.
We don’t have cable nor any other media subscriptions.
We rarely take taxis around the city.
We always discuss our purchases and research for the best prices online.
We watch our savings rate and investments religiously.
I don’t consider us frugal though. This might be uncommon for a FIRE blogger, but we definitely have some frugal elements in our life.
If we decided to move to the countryside, go on low-cost vacations, skip the restaurant bills and optimized our spending on a few other categories, we would be able to save up towards 80-90% of our salaries meaning that we could retire within 1-2 years.
Will we do it at some point? Maybe. We are thinking about it, but for now, we enjoy life in the city and the occasional splurge. I think we will start living more frugally when we get closer to financial independence, but only if it gives us more happiness.
Your turn: Are you very frugal, or do you also splurge on some things?