Making FIRE Possible When You Don’t Want To Pinch Pennies: How To Save Money Without Feeling Deprived

Recently I wrote about making FIRE possible when your life partner isn’t as committed to FIRE as you are. This was inspired by several questions that came up from a survey of participants of our course, Making FIRE Possible.

Another common concern was how to reach FIRE when you don’t want to pinch pennies or deeply cut your expense level. One course registrant mentioned she wants to save money, but “not feel deprived” – a reasonable goal. After all, isn’t the point of having all that FIRE flexibility so you can enjoy it?

Extreme saving is a legitimate FIRE strategy. The most famous example of frugality making FIRE possible is Mr. Money Moustache, who retired at age 30 by saving a double-digit percentage of household income. There are many other blogs that share tips and hacks on how to get by on less, and there are some great tips out there. I once got sucked into a reality show on extreme couponing and realized some of the lessons from extreme couponing apply to all careers!

Saving is necessary, but there is too much of a good thing

You absolutely want to save money. Your savings can be invested into assets that pay you – i.e., your money can start making you money. Your savings provides a buffer in case you have an unexpected large expense (e.g., a medical emergency). Your savings can also be the engine for your dreams. For example, you invest savings into a business venture, or you let your savings support you while you make a career change to your dream job.

That said, too much of a focus on saving can be damaging. On the FIRE front, an overemphasis on saving can blind you to income producing strategies, and boosting income is a much more efficient path to achieving FIRE. Furthermore, consistently depriving yourself creates a scarcity mindset, which can lead to poor decision-making and an inability to enjoy yourself without guilt.

Retrain a stingy mindset to have a more balanced approach to money

I am a natural saver so, if I hadn’t retrained my own habits and tendencies, I still might be depriving myself. Worse than that, my unhealthy emphasis on money would have prevented me from leaving a high-income job in order to make a career change, which led me to entrepreneurship, which ultimately led me to FIRE and a much more balanced approach to money.

Here are three strategies that helped me save without depriving myself or forgetting about the importance of investments and income production as well:

1 – Focus on value, not just price

Absolutely be mindful of prices. You don’t want to overpay. You don’t want to be overcharged and carelessly fail to notice. However, the price of an item isn’t the only decision factor and arguably shouldn’t even be the primary decision factor. There is a difference between value and price.

Price is what you pay, but value is what you receive. We all have bought things that we regret – in those cases, the price (whatever we paid and even if we got it “on sale”) was too high. On the flip side, we have all have bought things that we cherish – in these cases, the price (even if we spent more on these things than on others) was worth paying.

A recent study showed that 74% of Americans cherish experiential purchases over things. Whatever the studies show, the only value that matters when it comes to your spending is your own determination of value. Spend your money on what matters to you. This means you might spend on pricey coffee drinks, if a warm drink is an important treat for you (you might be in that 26% that prioritizes things over experiences).

The retraining fix: Make a list of your top spending priorities. Feel good about spending in these categories, but ruthlessly look for ways to save or eliminate other spending. For example, spend on the coffee and save on takeout (home cooking is healthier anyway!).

2 – Honor your time

While I find the DIY nature of the extreme frugality movement to be admirable, there is still a cost to doing it yourself – the cost is just in time, not in money. You can always earn more money, but you can’t get back lost time. Therefore, time is a much more precious resource than money. If you want to err on the side of overdoing saving, you are better off being overly stingy with your time.

By time, I also include time spent trying to save money – e.g., traveling an undue distance to get a cheaper price, spending time clipping coupons (unless you’re training for that extreme couponing show). Your time can be better spent thinking up income-generating ideas or simply getting refreshed.

Remember that the cost of outsourcing some of the chores and tasks that you could do yourself might be outweighed by income you generate during the time you save. Sometimes money is invested, not simply spent, especially if it buys you precious time.

The retraining fix: Look at your To Do list in the upcoming weeks. See if you’re spending too much time to save money. Rethink whether or not to outsource based on the time, not just the money.

3 – Prioritize psychic compensation, not just financial

Related to point 2, don’t feel like you need to take all the time you save from outsourcing and try to turn it back into money. I did mention you could simply take your time savings and “spend” it on getting refreshed – e.g., doing a favorite activity, seeing a friend. Not every activity needs to make money in order to be worthwhile. Some activities bring you psychic compensation, not just financial compensation.

For example, the person really driven by mission happily works at a non-profit that serves that mission even though the pay might be less than they would make in another organization unconnected to that mission. The psychic compensation of being involved in the mission adds to the financial compensation to make that worker whole. In your case, the psychic compensation of taking part in a favorite activity adds to your savings account as much or more than the money you would have saved by not outsourcing the task.

The retraining fix:  Like your spending priorities, make a list of activity priorities. Make sure you dedicate time to these, even if it means you need to spend some money to buy back that time.

To save money without feeling deprived, spend liberally but only on the things that really matter

Making FIRE possible by saving more is a good strategy, as long as the saving doesn’t lead to poor decisions, doesn’t waste undue time and aligns with your priorities. Don’t just save without thinking of the consequences to extreme saving.

That said, wasteful spending isn’t good either. I have been guilty of wasteful spending – e.g., emotional shopping or buying something without thinking it through enough. Now that I’m better about not pinching pennies too hard, I also take care to be mindful of my spending.

Don’t trade one bad habit for another!

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Interested in the concept of FIRE, but feel like you don’t know where to start? Our course, Making FIRE Possible, will help shift your mindset on income, expenses and your FIRE potential. This FREE course will run again in January 2020. Sign up to be notified when registration opens.

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Check out more of our Making FIRE Possible series:

• Making FIRE Possible When You And Your Spouse Disagree
• Making FIRE Possible When You Don’t Want To Pinch Pennies (current post)
• Making FIRE Possible When You Haven’t Saved Enough For Retirement
• Making FIRE Possible With The High Cost Of Elder Care

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