Cheap versus Frugal

I’m guilty of talking about money too much.  My wife reminds me on a regular basis to tone it down, especially around our children.  Unfortunately, I have a hard time not discussing it whether it’s about the price of something or investing; it’s an interesting topic to me. 

The other day I read an article that stated that people who talk about money all the time sound cheap.  It made me start to think about how people perceive me, and whether they think I’m cheap or frugal (as I prefer to describe myself). So, of course, I looked online to see what other people thought and for the most part, it came down to this.  The prevailing opinion online is that cheap simply looks at price only whereas frugal is more concerned about the best value regardless of price.  I’d like to think frugal fits me pretty well.

After working for many years and investing through market ups and downs, I think that I just have a healthy respect for the money that we’ve earned and saved.  It hasn’t always been easy and with age and experience you begin to understand it took a lifetime of work and discipline to achieve financial freedom.  So, when we’re going to purchase something I pay attention to what we are getting for our money.  

I try my best to not be manipulated by marketing and cultural norms on how money is spent.  This seems more like behavioral psychology to me than whether a person is cheap or frugal.  I just don’t understand many of today’s purchases that are considered “normal”.  This would include coffee, craft beer, eating out, new vehicles, etc.  They just don’t resonate with me or provide value in spite of their popularity with the rest of society.  I wouldn’t hesitate to enjoy any of them and spend the money if they provided value to me.  This is probably where I’m most at risk at looking or sounding cheap. 

My wife and I have set up a budget by category that I think we would both agree is pretty generous on spending for both of us.  We’re certainly not deprived and generally we both come in under the budgeted amount.  Interestingly it doesn’t matter to me where the money is spent during the year, the only time I get a little concerned is when I see the totals approaching our budgeted amount.  I think this is due to my concern for our long-term welfare as well as not being a burden on our children or others financially.

Money to me is simply a tool to achieve some of your goals.  Everyone has different goals and values and how they choose to spend their money.  My monetary goals at this point are few and very simple. They just don’t involve many purchases that our visible to other people.   

After giving it some thought, I’m comfortable with how I handle money, but my wife has a point- I can give the constant evaluation of prices a verbal break.  Maybe you can teach an old dog new tricks.      

Opportunity Cost

According to opportunity cost is defined as the benefit that is missed or given up when an investor, individual or business chooses one alternative over another.  Put another way, Peter Drucker the well-known management expert says, “everything in life is a trade-off.”  From a financial perspective, David Bach author of The Automatic Millionaire became famous for saying, “a latte a day keeps retirement away.”  He was equally criticized by many who would say that life is too short to give up their simple pleasures, but I think Mr. Bach has a point.

I was watching a YouTube video the other night about living off the grid on a sailboat.  The host of the video was describing how he was able to chase his dreams by saving a ton of money in his twenties and thirties and quitting full-time work at age 36.  He has been sailing around the world for the past 30 years.  He gave an example of saving a small amount that I hadn’t heard before.  Simply save $1.00 on every meal that you eat.  Whether you eat at home or eat out, just cut the total by $1.00 every time.  That’s $3.00 everyday which equals $90.00 per month.  Taken a step further, if you save $90.00 every month and invest in the stock market for 30 years at a historical return of 10% your total would be $187,000.00.  That’s $187,000.00 by simply planning your meals a little better, by not ordering a soft drink, by eating healthier (fruits and vegetables are cheaper) or by choosing a less expensive entrée occasionally.  This doesn’t really seem like you’re giving up much at all other than maybe a few minutes thinking each week about your meal plan.   

Think about how many things in life this could be applied to.  Not just David Bach’s latte, but it could apply to where you choose to buy gas (price), where you park (free or metered), where you shop for groceries, happy hour (less expensive drink), etc.  I’m not advocating that you need to apply all these things to your life; all you need to do is pick one or two to achieve a sizable amount of savings.  This doesn’t seem like deprivation to me and seems pretty easy to apply to everyday life.

Another potential missed opportunity cost may be where you choose to invest that savings.  Say you were to leave that $3.00 per day in a local bank savings account.  The historical return on cash is around 3% which after 30 years would yield a total of $52,000.00.  That’s a difference of $135,000.00 in lost returns just by where you choose to invest.

Getting back to the YouTube video, the host went on to say that his personal freedom was worth far more to him than having lived a slightly expanded lifestyle at the time.  Now he is living the ultimate expanded lifestyle sailing around the world with his significant other for most of his adult life.  That’s a trade-off that resonates with me. 

So, what’s your goal?  Are you missing out on your own personal opportunity costs?  Are you coasting along on automatic pilot?  Are you saving enough, or do you maybe need to consider some small changes to amp up your long-term savings?  Don’t miss out on your own life opportunities by not controlling your costs today.  Once again, it’s simple living and simple investing.



Reading is one of those things I wished I would have started when I was younger.  Reading has expanded my knowledge on so many topics and interests and by extension, those around me as well.  At the risk of hyperbole, reading has changed my life and continues to do so. I would like to share just a few examples of how reading has impacted me.

When I bought a small business, the first couple of years went pretty well but I came to the realization that I needed more knowledge to continue to grow..  I started to devour every business book I could find.  It helped me with gaining knowledge regarding employee relations, marketing, advertising, accounting, along with understanding the many personal aspects of running a business.  By the time I sold the business, store sales and profit increased significantly.  Much of the success can be attributed to my employees, but much of it wouldn’t have happened without the authors who took time to share their own business experiences.  They ultimately were a significant part of my success.

I have always had an interest in personal finance and investing, and it made sense to me that one should try to maximize their income and investments to help build whatever life they are looking for.  Initially, I learned information through magazines, newspaper articles, television financial shows, business channels, etc.  Slowly I started to understand that most of these sources didn’t really have my best interest in mind and were heavily influenced by advertisers.  I had learned just enough to figure out I needed more in-depth information and proof of what really works and what doesn’t.  So, I turned to books, literally dozens, and as time went by, I was able to sort out the reality from the nonsense.  The authors of these books helped both my wife and I achieve personal freedom at a fairly young age. 

I have also learned how to relate and understand other people better due to reading about personalities and psychology.  After taking the Myers-Briggs personality test, I read multiple books on my own results along with how my type interacts with my wife, children, friends, etc.  It has made me more understanding of others, along with hopefully making me a better husband, father and friend. 

On a recent vacation I picked up a book on eating a plant-based diet- The Whole Foods Diet by John Mackey, Alona Pulde, MD and Matthew Lederman, MD.  Never in my life would I have thought I would eat a strictly plant based diet!  This book convinced me there was something to this and after reading another dozen books or so, I have expanded my knowledge on nutrition greatly.  I have a much clearer understanding of how plant-based diets affects my own health and its impact on avoiding chronic illnesses such as heart disease, diabetes and hypertension.  My wife and I have started to eat far healthier along with understanding why and what we are eating more clearly.  We have thoroughly enjoyed the transition and the food. Again, in my view, a life changing event that occurred through reading.

After reading several books related to health and aging (based on the Harvard Study on Aging), I learned that early death has far less to do with genetics versus our own behavior regarding drugs, alcohol, diet, exercise, and smoking.  Many people think they are predisposed to certain diseases due to their family history, but it simply isn’t true in many cases.  It pays to take care of yourself; have I mentioned books can be life changing?

And where did the information within this website come from?  Books!  Many of my favorites are listed within the recommended resources tab of the website.  Whatever topic you are interested in there will be hundreds of books to help you find the information you are looking for. Start changing your life today.

Myth About Becoming Wealthy

One of the reasons I started this website was to help people regarding personal finance and investing.  One misconception that is popularized by politicians and reinforced by media is that it’s impossible to become wealthy, that the deck is stacked against the little guy.  In my view, this couldn’t be further from the truth.

The following table shows investing returns starting with $1 in your account at a historical stock market return of 10% over a 40 year working career.

Savings Per month                           Total

$50.00                                                   $277,562.67

$100.00                                                 $555,080.67

$200.00                                                 $1,110,114.89

$300.00                                                 $1,665,149.70

$400.00                                                 $2,220,184.52

$500.00                                                 $2,775,219.33

Now let’s take a look at the latest data on Net Worth in the United States.  The following is from the 2016 Federal Reserve Study of Consumer Finances broken down by percentile.  This is a study done by our central banking system every three years.  This shows what Americans are worth by adding up their assets and subtracting their liabilities. 

Net Worth Percentile                     Net Worth

10%                                                        -$962.66

20%                                                        $4,798.06

30%                                                        $18,753.84

40%                                                        $49,132.21

50%                                                        $97,225.55

60%                                                        $169,550.64

70%                                                        $279,594.27

80%                                                        $499,263.50

90%                                                        $1,182,390.36

So, if you can manage to save just $100.00 per month it would put you ahead of 80% of all Americans.  This probably is a surprise to many people.  One has a high probability of achieving this by simply investing in a low-cost total stock market index fund and staying the course, in other words by not selling out and continuing to save every month through the good and bad of market volatility.  It really is that simple.  Better yet, invest the money within a retirement plan and either have taxes deferred in a tradition individual retirement account (IRA) or no taxes at all on the gains with a Roth IRA. 

Another tax advantage that many people don’t realize is when you invest with the total stock market index in a non-retirement account you don’t pay taxes on unrealized gains, meaning you aren’t taxed on appreciation until you sell the fund.  Unfortunately, you are taxed each year on dividends paid to you, but the non-taxation of unrealized gains is still a great deal.  This is available to anyone regardless of their wealth and is an incredible advantage in building wealth.  Currently tax law even favors low-income earners.  If you sell the funds in your non-retirement account and are in the lowest two tax brackets you pay no tax on capital gains.

Investing in the total stock market index can done through a variety of companies including Vanguard, Schwab, Fidelity, and many others.  Currently Schwab doesn’t even have a minimum investment. 

Further research shows that the average millionaire is well, average.  In Chris Hogan’s book Everyday Millionaires, Mr. Hogan shows through surveys of over 10,000 millionaires that most of them work common jobs at average salaries.  This was also shown over 20 years ago in Thomas Stanley and William Danko’s book The Millionaire Next Door.  They saved and invested and didn’t buy into the consumer culture.  They invest simply and live simply and are very satisfied with their lives.

So, what are you waiting for?  Build your net worth and expand your opportunities.   

Read Two Things

If the only two things you ever read on personal finance and investing were The Total Money Makeover by Dave Ramsey and The Little Book on Common Sense Investing by John Bogle, you would be ahead of 90% of the general public in financial knowledge.  More importantly, if you followed the advice in these two books you would be ahead of 90% of the general public in net worth.  It really is that simple and both of these books are short and easy to understand. 

Let’s start with The Total Money Makeover.  It is focused on budgeting, living within your means, and erasing debt from your life.  Mr. Ramsey does a good job of showing examples of how our behaviors affect us negatively and then how to do things correctly.  He gives concrete examples of how much to save, how debt affects you, and personal examples from people who have followed his advice and turned their financial lives around.  In my view this book tells the truth about personal finance rather than how our culture currently tries to tell us what is important.  The only part of this book that I think can be done better than what Mr. Ramsey prescribes is the investing section which is why I recommend the following book.

The Little Book of Common Sense Investing is a concise book that shows simply how markets work and how you can receive the same returns as American businesses earn in aggregate by investing in low cost index mutual funds like the total stock market index.  Taken a step further, Mr. Bogle lays out the evidence showing how active investing (actively managed mutual funds or advisors picking mutual funds) clearly underperforms owning a broad-based low-cost index fund.  He goes on to show that market returns long-term are not speculative at all but simply reflect the earnings of business.  You share in those earnings when you own the total stock market index.

Most people don’t enjoy dealing with personal finance or investing whereas I find it to be incredibly interesting.  I have read hundreds of books over the years regarding these topics and although I pick up something new in almost anything that I read, it still boils down to just the core topics of these two books.  I would certainly encourage you to read as much as possible on any topic that will better your life, but I also understand the reality of most people’s lives.  That’s why I am suggesting just two short books.  You will achieve financial abundance but more importantly many personal options within your life.  Invest simply and live simply.

If I Could Do It Over

If I could start over in my adult life, I would save at least 25% of my income and invest in a low-cost total stock market index fund.  This would not only have increased my financial returns but more importantly it would have increased my personal returns.  Let me explain.

Throughout the years I have spent an inordinate amount of time trying to produce income.  There were multiple business ventures that failed along with multiple real estate purchases that didn’t produce any real income. In my sales career I was constantly expanding my product lines as a way to increase my income as well. The problem with all of these methods isn’t the failures but the time spent failing.  This time could have been spent on my family and our well-being.  Don’t get me wrong, I don’t think I neglected my responsibilities to my family but now that I understand how compounding market returns work, I just didn’t need to do all this stuff.  I could have been more thoughtful and intentional about how I spent my time.  I know this for sure- I would have been less stressed, healthier and more involved.  My lovely wife has been so patient with me over the years with the amount of time I have devoted to working. We have built a nice life, but it could have been done much easier.  I spent too many years like a pinball just bouncing around from one idea to another rather than taking time to evaluate things more thoroughly.  I really enjoy business and I’m sure that I still would have owned a business, but it would have been more thoughtful and in tune with the rest of my life, especially in my younger years.

We were married in 1983 and the US Stock Market has returned over 11% annually since that year and historically returns at around 10%.  Hypothetically, if one had saved $500 a month for 36 years, it would have produced around $2.4 million with only $216,000.00 in contributions.  Notice how little you had to contribute over your career to produce the overall total?  It’s phenomenal!  Five hundred dollars may seem impossible when one is starting out so you can adjust that number to come up with whatever fits for you, but don’t underestimate your ability to save with proper motivation. There are many online calculators that can help you with this.

The details of my story will be different than yours, but it is important to evaluate how one spends their time.  Do we give the things we value most, the time that we should?  By saving a large chunk of your income and investing appropriately the possibilities are endless. It will allow you to simplify your life and focus on the things that matter most to you.  These might include family, friends, your health, career, volunteering, travel, hobbies, etc.  The point is whatever brings you contentment.   Simple investing helps create simple living. 

There is detailed information on investing within my website on the investing page along with resources for investing and simple living under the recommended resources page.  Please feel free to contact me with comments or questions. 

Finance, Food & Alcohol

Recently I was browsing through a bookstore while on a road trip and happened upon a book titled The Whole Foods Diet by John Mackey (CEO Whole Foods Market), Alona Pulde, MD, and Matthew Lederman, MD.  This is not my typical fare, but it looked interesting and of course, it was in the bargain section, so I purchased it.  I spent the rest of the road trip completely engrossed in what I was reading.  It completely changed my paradigm on what I knew or believed about diet and nutrition and has led to me reading many additional books on nutrition.  This in turn, has led to many personal changes for me but what really struck me was how similar the food and financial industries are.  You may be thinking, what the heck is this guy talking about? 

Let’s take budgeting in personal finance.  If you have read any of my previous blogs or explored my website, you know that I believe a budget is essential to track where your money goes along with providing a complete picture of your financial status. Trying to lose weight is similar in a sense in that one needs to track what you eat.  One can track every calorie consumed or learn which foods are healthiest and incorporate those into your daily nutrition.  Either way it takes discipline to be successful financially or managing your weight/health.  If you trying to save money, one needs to budget and count every penny; if one is trying to lose weight – one needs to measure and count every morsel. 

The financial industry has many fees attached to the products they try to sell you or as they put it, have you invested in.  Many of these fees are “baked” into the product and are not visible to the average consumer.  These fees include management and fund fees along with loads, which is just another name for a fee.  The food industry operates in a similar way through their labeling process, which can mask ingredients in their products by using many different names for common ingredients Have you ever noticed any of the following when reading labels- fructose, lactose, sucrose, dextrose, maltose, glucose, ethyl maltol?  These are all sugars!

Both industries try to make things more complicated by the way they market their products.  The financial industry wants you to believe that investing is a complicated process and they have the ability to enhance your investment returns.  Neither of these is true.  The food industry uses words like natural and fat free, which really have no meaning to most people.  For instance, lunchmeat can be labeled as natural, but both the National Institute of Health (NIH) and the World Organization (WHO) have labeled all processed meats as known carcinogens.  Yes, potentially cancer causing!  You won’t see that on the label.  To understand the label on most packaged food products, you would need to be a chemist.   

Neither industry may have your best interests in mind.  For example, your portfolio return over time can be reduced by a full 65% if your financial investments are being charged just a 2% fee. That’s a massive amount!  The food industry adds sugar and salt in approximately 80% of packaged food products for the sole purpose of getting people to eat and purchase more of their products.  That’s even worse than losing 65% of your money; you literally are losing your health!  Do you think that may be possibly why close to 70% of the United States population is overweight?

Dave Ramsey, a nationally known personal finance expert, has a famous quote he uses to people who are trying to get out of debt: “Nothing but beans and rice, rice and beans.”  He also says, “You shouldn’t be seeing the inside of a restaurant, unless you’re working there.”  Note the connection between food and finance. The irony of these statements is they can be perceived negatively, when in truth, they are excellent choices from a health perspective even if you aren’t in debt.  I find this rather humorous as it is a good example of how counterintuitive the information we receive can be.

If you lumped the beer, wine and liquor industry in with the food industry, there are similar comparisons that can be made.  Most people don’t realize that the chemical name for alcohol is ethanol.  Yep, the same stuff that mixes with your vehicle gas.  I was stunned to find out that both the NIH and WHO have labeled alcohol as a known carcinogen as well.  They also never mention that alcohol is one of the most addictive drugs in the world.  You won’t find that on any label. One of my hobbies is bicycling and I am always amazed at how craft beer and bicycling have become synonymous.  I’m not sure drinking beer and hopping on your bike is necessarily the best situation but many biking events are now sponsored by breweries.  From a healthy living standpoint these two don’t seem to fit together. 

Personal finance, alcohol, and food are all marketed in a similar fashion, often times with scenic backgrounds such as people sitting on a beach enjoying whatever “the good life” is. Their idea of the good life involves spending money along with eating and drinking in an unhealthy way.  The irony is that what I find to be “the good life” is generally the exact opposite of what they try to make us believe is important. 

The financial, food and alcohol industries operate pretty much the same way in that they have hidden fees, hidden ingredients, obfuscate the truth, make things complicated and undersell you on the risk of their products.  As my youngest daughter said to me after discussing this, “I feel we’ve been lied to all of our lives.”  I’m not sure we’ve been lied to, but one certainly needs to question most things before accepting them as truth.  Particularly, the most important things in your life.

Bottom line, it takes work to decipher the important things in life and not just accept things at face value.  You may be thinking who has time to figure all of this stuff out?  This is where simple living can help.  Eliminate all of the unnecessary things in life and focus only on the most important.  By living simply, it allows you the time to live a healthy lifestyle, nurture your relationships and build financial security. In my view these are the best and most important things in life and will bring one the most contentment.

My post titled Health, Relationships and then Finance has more information on this topic.  If you have any questions or comments please let me know.  If you’re interested in any of the topics above, check out my website and recommended resources section. dy Tex

You Can’t Have It All

I used to think that you could have it all but after many years I started to realize that I was more content and happier leading a less busy life. In a recent post titled Health, Relationships, then Finance, I stated that these were the most important things in my life and were my first priority.  This led me to think about how much time we each have in a day.  After exercising, completing your day at work and all the things associated with those activities such as commuting, personal hygiene, etc., you probably have used up over 10 hours of a 24- hour day.  If you sleep the recommended 7 – 9 hours each night, that leaves you with 5 – 6 hours.  One then needs to take care of food preparation or eating out, both of which take additional time.  Plus, one may have other personal care errands, finances, etc. to do.  That leaves about 4 hours and you’re more than likely tired.  And I haven’t even begun to address if you have children and their activities, caring for others, social activities, planning for future events in your life along with so many other activities depending on your situation.   It seems obvious why so many of us are tired and stressed.

At this point if you are lucky, you have addressed making a living, hopefully exercised and taken care of your daily to do list.  That doesn’t take into account the time in maintaining relationships with family and friends.  One literally has very little extra time for extracurricular activities and yet most of us still try to add more activities and things into our lives.  In my opinion, it’s not a recipe for contentment.  

Peter Drucker is a well-known business management expert who wrote: “Everything in life is a trade-off.”  This really resonated with me.  Every decision we make is a trade-off.  Do we have time to exercise, develop healthy habits, spend time on relationships, and relax or do we spend our time chasing society’s idea of what is important?   I found that the more things I added to my life, the more difficult it became to make good decisions and to have the time for the most important.

A good starting point may be to use the 80/20 principle: only about 20% of your actions are productive while 80% generally aren’t. The key is to figure out what 20% is important to you.  I personally have narrowed down my extracurricular activities to hike, bike, read, write and occasional travel.  These are all easy to do no matter where I am or what my schedule is.  It doesn’t require expensive equipment or on-going fees and it is easy to take with me when I travel.  When I travel with my wife, it is generally by car with a flexible schedule.  We bring some food along so we can eat healthy along with cutting costs.  We find biking and hiking trails, visit parks, sight-see in cities with very little expense.  By narrowing down my commitments it has helped me become more proficient at each activity and enjoy them more.  I try to avoid adding the next new trend or activity unless I have given it quite a bit of thought about the time and commitment it will require.

I found when I focused on health, relationships, and finance first I felt much better about myself and the direction of my life.  I realized that for me, most aspects of my life were tradeoffs I didn’t want to make anymore.  In fact, I didn’t want it all.

Investing and Simple Living

What does simple living have to do with personal finance?  I started to make the connection years ago because I had made my life and personal finances far more complicated than they needed to be.  What really struck me though after reading the Millionaire Next Door multiple times was that the typical millionaire led a very simple life.  These people were wealthy but didn’t seem to overcomplicate things.  I would say that having wealth and living simply are not mutually exclusive.

The millionaires that are profiled in The Millionaire Next Door book seem to have the best human qualities.  They typically have good character, stay married, are frugal, humble, live far below their means, raise responsible children and contribute to society with high quality businesses and services.  They are not what people think.  They practice incredible thrift and frugality.  They typically enjoy their work and family.  They are not into material objects such as large homes, expensive cars, or other consumer goods.  They are excellent investors with their own money.  They believe financial freedom is more important than consumer purchases. They believe having financial freedom gives you choices in your vocation, your time and your life.  This to me is the ultimate in simple living.  Any preconceived notions that you have about wealth in America will probably be changed if you read this book.

I had spent most of my life on autopilot just going from one thing to another and mostly enjoyed what I did.  Whether it was career or personal I just did what I thought everyone else did.  Many years ago something changed and I started to read some books on simple living, minimalism and consumerism.  These books really struck a chord with me.  I started to think about always being busy, being tired, and being stressed.  The constant purchases, home remodeling, repairs, autos, etc. that everyone else thought of as normal.  I started to question the conventional wisdom of society.

My wife and I became fairly successful from an economic standpoint as our lives progressed.  I was very ambitious and have always enjoyed my business career.  One day while working on our personal finance and investing I realized that we had enough money for our current lifestyle.  What was more interesting to me at the time was that I realized I didn’t want anything more than I already had.  This is when it clicked for me.  I had spent many years working for things I really didn’t care about.  I am a simple guy.  Fortunately for me, my wife has agreed with me (for the most part) regarding my epiphany on simple living.

We both have made career changes that have freed up our time and made our work life simpler.  She moved out of a management position and cut back her hours and I have sold my small business.  We have been constantly selling things, giving things away and evaluating what is truly important to us since then.  Stuff isn’t.  Personal freedom is.