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The New Frugality

Does frugality still work? If so has it changed?

I learned a lot from my grandmothers. One ran a business with my grandfather and the other invested in dividend stocks. They were both ahead of their time in the 60s and 70s. I remember my grandmother showing me her stock certificates and explaining how dividends worked. She explained how she used dividends to support herself after my grandfather Tom passed away at the age of 58. I remember the railroad and utility stock certificates with their elaborate etchings and visiting her stockbroker to execute a trade well before computers arrived.

I didn’t get to really meet either of my grandfathers since they both died young. I did spend quite a bit of time with both grandmothers, either staying overnight or while visiting cousins nearby. By the time I was a young man, they both had lived through two world wars, the depression, Vietnam, the Womens and Civil Rights movements, the Kennedy assassination, 1973 and 1974 energy crisis, inflation, cold wars, and multiple recessions. As savers and investors they had seen some setbacks.

The Old Frugality

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Eat, Walk and Think.

06/19 by The Frug 2 Comments

What an ancient proverb taught me about walking and thinking after every meal.

By Brad Beckstrom

There is an ancient Chinese proverb that goes: “take 100 steps after every meal and live to 100.” That’s not an exact translation but it just flows better. There’s also an ancient Indian term Shatapawali. The word is a compound from shata meaning “hundred” and paaul which means “step”, this refers to an age-old Indian custom of taking a stroll after a meal. It’s interesting that, like the Chinese proverb, they also mention 100 steps.

I’d like to think that 100 steps is a good starting point because most people could do that in about 1 minute. The key idea here is that once you take 100 steps there is a very good chance you’ll keep going. You’re creating a habit and a trigger to make it a permanent habit.

Just like an old roommate used to say “my goal for today is to walk to the stop sign at the end of the street and back.” You need to start somewhere. He was in his 20s at the time. I’m hoping that he kept up with the habit and maybe started walking a little further.

Further

I’ve always been one of those people who vanished around lunchtime. It’s not that I was antisocial, it’s that I wanted to spend at least 30 minutes walking after I finished eating. When I worked in an office, I’d often accomplish this by picking a restaurant that was at least a 15 to 20 minute walk. Then I’d usually take the long way back. The meal would be usually the shortest part of the whole process, generally I was gone for about an hour.

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Take Imperfect Action.

10/18 by The Frug Leave a Comment

How regularly screwing up can help you get stuff done.

By Brad Beckstrom

I’ve always liked taking action. Getting stuff done. A friend once told me, “The best way to fall asleep is to lay in bed and think of each thing that you did that day from beginning to end. Include the little stuff, washing your face, taking the dog out. If you’re like most people you probably do a lot of things even though at times it doesn’t feel like much. By the time you get near the end of the list, you will be asleep.” This trick didn’t work too well for me, sometimes I would lay there and think of the things I forgot to do which was a great way (not) to fall asleep. It’s okay that it failed. I was trying to do something that would help me fall asleep. I’ve learned something by trying this out, it didn’t really work, I’ll try it again, I took imperfect action.

What’s “imperfect action”? My first thought was doing something that didn’t work or trying something like a shortcut that just made the task longer. It could be something that was unproductive but got you 1% closer to reaching your goal. Maybe it wasted a good chunk of your day but you learned something from it.

Taking imperfect action is something that can help both the perfectionist and the procrastinator. [Read more…] about Take Imperfect Action.

Knowing Things Instead of Buying Things.

08/18 by The Frug 1 Comment

By Brad Beckstrom

What if every time you thought of buying something, you decided to know something instead? You’d probably build up a pretty good “store” of knowledge. You’d constantly be refreshing that knowledge whether you’re in a grocery store, online or shopping for a large purchase. I’ve used this strategy on large and small purchases. Something simple like “that health bar has more calories than 2 whole eggplants.” Now whenever you look at those 240 calorie health bars you’ll think about the equivalent of eating two entire eggplants.

Knowing things can impact larger purchases.

I’ve been putting off replacing our old car. We probably should’ve sold it a year ago but that time has not been wasted. Since then we’ve been learning about:

Making 30% more by selling a used car on craigslist instead of to a dealer.
How new cars lose 20% of their value just 6 months after you drive them off the lot.
You can find some really great cars using an app like Carvana once you know what you’re looking for.
Whether an electric car or a hybrid car is a better fit for our daily driving.
All of the benefits of having a car that’s paid for and skipping the commute.

You can even apply this thinking to investments. When you pay high annual fees on your investments, your spending money. Years ago I used to sell off underperforming mutual funds and search for up and comers. I stopped doing this and took a few years to completely revamp my investing strategy. I learned that many funds I had been buying had high fees of around 1% per year. I also came across a study that Fidelity had done about the most successful individual investment accounts. The winners were investors who were dead or had not touched their retirement accounts for years. After some research I decided to buy and hold ultra low-cost index funds with fees less than 0.060% and exchange them only when I needed to rebalance my portfolio. This one change has saved me thousands of dollars every year, and will continue as long as I hold these index funds.

Often when I’m interested in something, I decide to research it and by doing that I delay the purchase. I believe that delaying purchases is one of the best ways to cut your spending. Even a delay of one or two days to do a bit more research (learn something) can make you rethink that impulse purchase. I also have a simple rule of not replacing something until it is completely worn out or, in the case of perishables, gone. When you run out of something and stay out of it for a few days sometimes you realize you don’t really need it. If it was really amazing you’ll remember to replace it. (sorry kale snacks)

Here are some tried-and-true ways of knowing things instead of buying things. [Read more…] about Knowing Things Instead of Buying Things.

It’s An Emergency.

07/18 by The Frug Leave a Comment

For investors, the time is now to put together an emergency fund that’s more than just cash.

Preppers be Prepping

Just before I left the country with the family on vacation I reflected on how fortunate we’ve been, saving and investing during a bull market. Index funds including; S&P 500, International, emerging markets, real estate investment trusts, and bond indexes; have all grown during the second longest bull market in history. 2009-2018

This growth over the past 9 years can make investors complacent. 401K millionaires feel like geniuses, what they’re really experiencing is the power of compound interest during a sustained period of growth. I also realize the market could enter bear territory at any time (a correction of 20% or more), which many believe it’s overdue for. The fact is, no one can predict when these market downturns occur. This always seems to be the case. Past summer holidays have included front row seats for Brexit and the EU debt crisis. It turns out these were both distant, false alarms and the bull just kept on running.

The sky was not falling. Would I be ready if it did?

Through all this I stayed heavily invested in low fee total stock market index funds, letting it ride, reinvesting dividends. Even though I’m financially independent and working less than full-time, I hold only about 20% of my total investment portfolio in bonds and cash. Which is considered aggressive by many common allocation models. I keep a 30% allocation in low fee bond index funds, in my retirement accounts where dividends can be reinvested and compound tax free.

It seems odd that I’d take an aggressive stance at my age (56!) especially since I I’ve lived through several large market declines and recessions including 2001 and 2008. During those periods I stayed fully invested in the market as well, and have benefited. This includes the period some called “the lost decade” in investing 2000 through 2009 when the S&P 500 recorded its worst ever 10 year performance. However, that poor performance only hurt you if you were pulling money out of the market during that period.

For those that stayed fully invested and purchased stocks and bond funds in the market during these years, they’ve done well, but could say they have some battle scars. [Read more…] about It’s An Emergency.

Prestige Syndrome and the Startling Difference between Vertical and Horizontal Wealth.

05/18 by The Frug 4 Comments

By Brad Beckstrom

If you read enough, eventually you come across some big concepts. Whenever I see one, I like to jot a quick note or clip entire articles in Evernote. Sometimes these ideas just sit there and I later come across them accidentally when searching for something else. One of the things I’ve been thinking about for a while is prestige or, more specifically, Prestige Syndrome. A syndrome is defined as “a group of symptoms that consistently occur together or a condition characterized by a set of associated symptoms”. So, just for kicks, let’s take a look at something I like to call “Prestige Syndrome”.

Prestige Syndrome

Prestige Syndrome can be caused by earning more money and then feeling the need to spend that money to exude prestige, to do what rich people do. Continually upgrading your home, transportation, entertainment, and clothing choices to be aligned with that certain level of prestige that comes with your new higher-paying job. Sometimes this lifestyle creep can be very subtle, spending away our discretionary income on luxuries that suddenly seem more affordable to us.

An even larger problem, especially in our country, is spending money you don’t have to exude prestige. This is also more commonly known as “ Keeping up with the Joneses”.

We don’t have to look far to see examples of Prestige Syndrome. McMansions with three extra bedrooms and four extra bathrooms “just in case”. Massively oversized SUVs primarily used to run to the grocery store and sit in traffic. Prestige Syndrome can occur at all income levels.

The interesting thing about Prestige Syndrome is that there is no top. If your friends and business associates own Gulfstream jets than Prestige Syndrome tells you you should own one. You’ve earned it, and you believe people do things differently at this income level. The spending levels simply increase with the career ladder. The McMansions, vacation homes, yachts, limo services, security, valets, and private jets are all just steps on this ladder.

Vertical Wealth

This ladder is what we call vertical wealth. Spending goes up as your income increases, often surpassing your income. This is how debt-fueled spending is created. [Read more…] about Prestige Syndrome and the Startling Difference between Vertical and Horizontal Wealth.