Episode 034 - The Frugal Millionaire Part 1 - Philosophy
This is the first in a small series on frugality and cutting your expenses. I thought it was timely since people are living in a world where they are losing their jobs, reduced income, small business closures, etc. and the natural path is to find ways to get by with less. But this is the way of the millionaire and I'll explain philosophy in this episode.
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Part of the 5 stages of grief, is allowing yourself to get to the acceptance part. That’s where the next few episodes of the podcast come in where we start to get active about what you have to do if you have lost income, a job, etc. from this pandemic.
Frugality isn’t something that should be enacted when times are tough. The rich know that this is a habitual practice that should be a part of everyday decision making. But as they say, there are two best times to start habit change that bring positivity - 1 was years ago and the second is today. My hope is that this series helps you start something you can practice proudly for the rest of your life.
Those in the FI community have been doing this for years, but their reason for doing it was wrong. The idea of saving money to then save money is not working in 2020. This is not a time for savers. Yes, it does help you if you hold cash when opportunities present themselves. But to hold cash on some mythical goal that one day you will have so much you can retire and head off into the sunset is pure fiction. We have an upcoming episode to help you understand that the long term holding of cash is a fools errand due to inflation, and that you need to deploy wealth in order to keep and grow it. What you deploy it into is important, but of course you first must have wealth.
In this time when our wealth is threatened, we both need the security of having funds to get through life’s expenses, but we also need to know that should an opportunity present (and it will) that you have the courage to take it. If you fail at taking the opportunity because of fear, you will live to regret it for the future. The balance is to find security AND seize opportunity, and those that can straddle that line are the true wealthy.
Looking back in the rear view mirror, remember what I’ve been saying forever.... Anyone can make money in a bull market. Now that the bull market is well behind us, and the future is looking far bleaker, this is when the truly prepared will receive wealth at a level we haven’t seen in decades. Be on the right side of this equation, but the key is to reduce your burn rate to the absolute minimum - not just for your immediate security, but so that you can keep and grow capital, which then allows you to seize the opportunities as they present.