Why Live Frugally Now? Reason #4 (Janssen)

I am willing to live frugally now so that in the future I can be financially independent.

I was listening to Dave Ramsey's podcast recently and a woman in her late forties called in to say that she was really anxious to start paying down their debts and getting ahead financially. Her husband (who was in his early fifties), however, was not at all on-board, feeling that they were just fine the way they were. After all, they made a pretty substantial income and they could certainly afford their monthly payments.  Dave Ramsey asked her how much cash they would have if they sold everything they had, including cars and their house, and paid off all their debts. Her answer? About $50,000.

Can you imagine being ten years from retirement age and having a net worth of only $50,000? This woman's husband had probably been working for 30 years, which means he had less than $2,000 per year to show for all his hard work. You could not live for very long on $50,000, especially when that $50,000 is tied up in your house and car.

This couple is in the financial position of people a fraction of their age - people in their late twenties, perhaps. How will this couple, or others who live like them, ever be able to retire? If you spend everything you earn, you are just treading water, never getting closer to being able to retire and to letting your money earn enough to cover your expenses.

At some point, wouldn't it be nice to wake up every morning and go to work just because you WANT to, and not because you NEED to in order to keep a roof over your head?

Ideally, after thirty years of work, you'd have a house that you owned free and clear, one or two cars that were completely paid off, an emergency fund that could cover your living expenses for 6-12 months, and some hefty retirement and investment accounts. And it'd be even more awesome if, because you'd been frugal, you'd also been able to be generous with your money, and to have taken some nice vacations as a family or a couple over the years.

Most of us will make more money as time goes on - better jobs, more experience, more responsibility, new raises, etc - but if spending increases at the same rate (or, terrifyingly, even faster), we'll never be able to retire because our expenses will be increasing and we'll never move any closer to the goal of being able to live without jobs to support us.

If you pay for a big house, fancy cars, a boat or ATVs, ritzy vacations or whatever your splurge of choice is, but you pay for it all on credit and you'd lose it if the economy tanks (does that sound familiar?) or if you lost your job, you. are. not. wealthy. You're just living like you are. Wealth is owning your own possessions, being prepared for emergencies, and not being dependent on your next paycheck in order to keep your BMW sitting in the driveway.

My goal is for each year to bring us closer to financial independence - for our lifestyle to not be dependent on a steady paycheck. Instead, ideally, our savings and investments will grow enough to cover all our bills and still continue to grow. I'm willing to watch my spending and practice frugality now in order to see progress on a monthly and yearly basis toward my long-term goals, so that when my husband and I are in our fifties, we aren't in the same financial situation we are in today.