What if I told you there is a way to live frugally, while still enjoying select creature comforts. Guilt free. For life. I believe there is.Much of the Financial Independence and Early Retirement ethos is rooted in frugality.
“Spend less than you earn”
“Live within your means”
It is difficult to disagree with the logic of these arguments, but when taken to their Jacob Lund Fisker style extreme they can certainly make for a miserable existence!
Frugality is no funI love the concept of Financial Independence. I love having Jim Collins style FU money. I love being able to pick and choose my clients, my working patterns, and most importantly how I will spend my time.
However I also love my Amazon Prime.
I love watching Formula 1 and Cricket, and despite resenting the hell out of the fact they are locked away behind a pay wall (I’m looking at you Bernie Ecclestone and Rupert Murdoch!) I must confess I pay to watch them anyway.
If frugality means I can’t have those, then I say bollocks to that!
People my age have baby boomer parents, which means we had depression era grandparents.
Those tough old folks could pinch a penny harder than Ebenezer Scrooge. They were the “waste not, want not” generation who would do crazy things like wash aluminium foil and use it again, and would buy heirloom quality furniture because they “weren’t rich enough to buy cheap things that wouldn’t last”.
Basically they were the anti-millennials, were the purportedly aimless hopeless useless youth of today to actually resemble the “spend it while you’ve got it, live for today” stereotype they have been assigned by popular culture.
What if I were to tell you that there is a way to live frugally like our grandparents, while still enjoying select creature comforts that will bring you much Millennial style happiness? Guilt free. For life.
I believe there is.
Have your cake and eat it too... everybody loves cake!For each of life’s little luxuries you wish to enjoy, establish a self-renewing passive income stream to pay for it.
Take a Netflix subscription for example.
Currently that costs £5.99 per month, or £72 per year.
At the time of writing the HSBC MSCI World UCITS ETF global index tracker pays out a dividend yield of 1.88%. By all means pick a fund of your own, I chose this one for the example because it mimics the global stock market.
Therefore were you to the invest £3,830 (£72 annual fee / 1.88% dividend yield), your investment would throw off an income stream capable of providing you with a lifetime of guilt free Netflix goodness.
Amazon Prime? Invest £4202.
Sky Sports? This one requires a bit of soul searching, you would need to invest £21,696… which is nearing the average UK annual wage of £24,700.
I found adopting this approach provided a feeling of progress on my own journey towards Financial Independence. By investing £75,000 I should never need worry about paying my gas and electricity bills again. Another £12,765 meant my mobile phone bills should be covered forever. And so on.
|Relaxing like a boss!|
Inevitably nothing in life is truly free, so you will need to make some prioritisation decisions. Below is a table illustrating some of the common everyday expenditures, and how much you would need to invest in order to have those bills perpetually paid for by your passive investment cash flow.