Today’s guest post is brought to you by Nords of The-Military-Guide.com. This is a great blog about leveraging both the training in Badassity and the career perks offered by the US military to earn yourself some very early financial independence.
Some of you may already know him from Early-Retirement.org or his guest post at EarlyRetirementExtreme.com.
The book “The Military Guide to Financial Independence and Retirement” was written from the words of over 50 military contributors. All of the royalties are donated to military charities.
Frugality is not deprivation
I usually write for a niche audience of roughly four million people: U.S. military servicemembers, veterans, and their families. Of the 1.4 million servicemembers on active duty today, only about 15% of them will stick around for the typical 20-year military retirement. The reward for those few is an inflation-fighting pension with cheap healthcare.
Here’s an interesting point. MMM has been showing us all how to become financially independent and retire early with no pension at all, and while paying for our own healthcare. A military pension and Tricare must make financial independence easy for everyone who retires from the military!
Sadly, that’s not the case. Nearly 90% of military retirees pursue a bridge career. Yet they’ve already solved two huge early-retirement challenges: inflation and healthcare. So why aren’t there more financially-independent military retirees?!?
It turns out that most military retirees aren’t financially independent because… they aren’t saving enough money. (Ouch.) The military has trained us to be financially responsible (“Stay out of credit-card debt!”) but not to be financially independent. It just never occurred to most of us that we could retire from the service and stop working. We were putting in too many long hours in too many isolated places to find the time to read blogs about financial independence. Despite our low-cost lifestyles, most of us are blissfully ignorant about the retirement potential of high savings rates.
I’m trying to remedy that ignorance. Let’s start by distinguishing between the concepts of “frugality” and “deprivation”. If you’re not in the military, just pretend along with me for a few paragraphs.
Oddly enough, the military teaches everyone how to live an extraordinarily frugal lifestyle. No matter what reputation your service has, at some point you’ve lived in a very small room with a narrow bed and almost no storage. Maybe you even lived outdoors without a bathroom (let alone a bed) and all your possessions had to be carried on your back in one piece of “luggage”. Food was mass-produced or delivered in a pouch, and snacks were hard to come by. Entertainment was rudimentary at best– no satellite HDTV or Internet access, let alone clubbing downtown!
If we all know how to live as cheaply as Tibetan monks, then why don’t we practice that lifestyle and save 80% of our paychecks? We’d all set new records for early retirement! Servicemembers could eat all of their meals in the galley, spend their spare time reading library books or studying for advancement exams, and work out in the (free) base gym. No money would be wasted on gasoline, energy drinks, alcohol, tobacco, or video games. No one would even need to buy civilian clothes. Veterans would have no problem retiring, and they could even continue the lifestyle– the galley, the library, and the gym.
The irony of this example is that we all actually do know servicemembers who live like that. They’re perpetually hoarding their money, rarely socializing, and hardly ever going out. The problem with this single-minded focus on a Spartan lifestyle (and its extremely high savings rates) is that it’s very difficult to sustain. For the vast majority of us, that life seems boring and frustrating. These people seem to be pretty one-dimensional and not much fun. Maybe they have a very good reason for squeezing every nickel (or maybe they can’t stop themselves) but it doesn’t look like a way to enjoy a career or a life. They’ll make their short-term goals, but in the long term they’ll drive themselves (and everyone around them) nuts.
There’s a happy compromise to that cheerless existence. Frugality is just simple living: a lifestyle that avoids waste and matches your values. Extraordinary frugality, however, can be deprivation. Everyone can learn how to avoid waste, but everyone also has a standard of living they’re not willing to give up.
Financial independence benefits from frugality, but it does not require extremes. It’s your choice to balance lifestyle (and values) with the time it takes to achieve financial independence. It can be as little as five years, but most military could choose to do it in 20.
The difference between frugality and deprivation is derived from your values. Everyone has a dividing line between the two. Frugality feels good and makes you enthusiastic about reaching your goals. It’s a challenge, and when you’re doing well at it then you feel like a winner. You might not even miss the consumerism and the materialistic lifestyle. Frugality matches your values and frees up quite a bit of savings for financial independence. You’re living a life that you enjoy and you’re making progress toward your goals– it’s easy to feel good about it. Deprivation sacrifices your values for a higher priority. It feels more like slavery than volunteering. You may be making great progress but it’s definitely not easy and you will not feel good about it. Prolonged deprivation is extremely difficult to sustain and it usually leads to unhappiness.
The military teaches frugality, but that can put you at odds with a materialistic society. We even have expectations of the ranks– junior officers drive hot sports cars, senior enlisted have hefty pickup trucks, senior officers buy luxury SUVs and nice houses with lots of electronics and big yards. Even junior enlisted can stand out among their barracks peers with a nicer laptop or a new smartphone. If you’re one of the few who can’t flash an attention-getting possession, then you may be pitied. And everyone teases the junior officer driving a bicycle!
The more frugal you are, the more you may appear to be “left out”. Again the difference between frugality and deprivation is how you feel about it. If you relish the challenge, enjoy the achievements, and have fun while saving money, then you’re doing great. If you’re amused by the comments of your shipmates then your frugality reflects your values (and probably your net worth). If you’re feeling isolated or even unhappy about the lifestyle remarks, however, then you’ve probably crossed the line into deprivation. Unless you’re recovering from a short-term crisis, you need to re-think your values.
Frugality and deprivation can change your values, maybe even permanently. An extreme example of this is the Great Depression. In the 1920s much of society was living very materialistic, even luxurious lives. In the 1930s many suddenly found themselves struggling to find enough food and stay warm, let alone have a job or even luxuries. They didn’t volunteer for deprivation but they quickly became extraordinarily frugal and managed to cope with the trauma. Over the years their habits became ingrained and part of their value system. When the Depression and World War II rationing ended, these members of The Greatest Generation didn’t completely revert to their carefree spendthrift ways. We all know elders who can whip up a gourmet meal out of leftover cornflakes. They can fix anything in the home and think nothing of (*gasp*) walking to their destination. They even know how to do without! The other side of their frugality, though, is that many of these people will not spend money. They may still shun mortgages or credit cards, might not even invest in the stock market, and won’t buy newer technology. They may castigate others for waste and may even have difficulty treating themselves to a luxury without feeling guilty. Their values were significantly changed by earlier trauma and they may struggle with what they see as modern society’s degenerate lifestyle.
Many people see frugality as tedious, time-consuming labor. Once again, it depends on what you value. Cooking a meal from scratch is almost always more effort than dining out or picking up fast food. But you may feel that you get more value from preparing your own healthy, creative, high-quality meals. You might enjoy cooking as a hobby, not endure it as a chore. You may think that restaurant meals lack your talent for nutritious ingredients, proper seasoning, and creative presentation. The crowds, noise, and traffic might be discouraging. Or perhaps you prefer to save dining out for special occasions, and the experience would be less enjoyable if you did it every day.
But while you’re quite happy to eat at home, you may draw the line at rinsing and re-using plastic bags. It doesn’t matter to you that others see this labor as keeping waste out of landfills. You’re not willing to spend your time on the same goal.
Practice the frugality that brings value to your life, keep an open mind for new ideas, and stop short of the deprivation line.
Frugal zealots may be accused of taking advantage of others. For example, there’s nothing wrong with choosing to drink water during a restaurant meal (instead of sharing a pitcher of frosty beverage) or to order smaller, cheaper menu items. However if you’re sharing with others then buy the next round of drinks. Don’t help yourself to food that you’re not paying for, or to skimp on your portion of the tip. That’s not being frugal– that’s being cheap. Frugality means avoiding waste and spending money on the things you value, not tricking others into spending their money on you.
Frugality is a flexible lifestyle. Learn about as many techniques as you can and then choose the ones that you feel bring value to your routine. You may enjoy the daily challenge or you might decide to only be extra frugal if you had an emergency expense that month. Start with small steps (like bicycling for short trips) and then take bigger ones (bicycle commuting). Drying laundry on a clothesline is no problem when you’re single, but the labor might be a bit much with a large family of small children who are too young to do their own laundry. Monitor your spending, decide what’s worth your effort, and change your habits as necessary.
Families can adopt frugality very easily and raise children with strong life skills. If you attempt to impose deprivation on your family, however, then you’ll be facing rebellion in the ranks. Start with small steps, be patient, and be ready to compromise.
When you cut your waste and reduce your consumption then it’s easy to raise your savings. And once you start that then you’re on the road to financial independence. The length of the journey and the route you take are up to you.
Many thanks to Nords, (who I like to call Mr. Military Mustache) for sharing this perspective with us. You might also enjoy his blog (The-Military-Guide.com) and his article that appeared on Early Retirement Extreme last summer called “Join the Military to Get Rich?”