“Won’t you regret being frugal when you’re young? You might die soon and never get to enjoy your money!”

Common question put to Financial Independence Campaigners

I get why you’d ask this. We live in a society where every possible human experience is being monetised. Worse, the adverts for every product that could possibly exist occupy prime spots in every public venue and invade your inbox. However, it’s nonsense.

Why?

The statement confuses amount of money spent with doing stuff that makes you happy.

Psychology suggests that these just aren’t correlated.

It ain’t what you spend, it’s how you use it

There’s a great summary paper on the various studies of spending and happiness that summarised the position up to 2012. The headline principles in the paper for spending yourself happy were:

  • Buy experiences instead of things
  • Help others instead of yourself
  • Buy many small pleasures instead of a few big ones
  • Buy less insurance [No, really, that’s one – hooray!]
  • Pay now and consume later
  • Think about what you’re not thinking about – e.g. the associated burdens on your time
  • Beware comparison shopping
  • Follow the herd instead of your head

A later paper – also summarised in that link – introduced this extra principle:

  • Spend money in ways that match your personality

I’ll do a whistle stop tour of these points then get to the main point I’m making.

Buy experiences instead of things

The theory goes that anticipation of an event, having the experience and sharing it with other people, then remembering it later gives us a lot of value. Comparitively, buying a new table is basically the same forever: you had no table, now you have a table, great.

Can change if you buy a thing to have experiences with it, but the quality of the thing doesn’t make much difference. Similarly, the amount of focus you have on the experience matters, not the cost of it. This means that going to a bowling alley for £12 with your friends is probably as enjoyable as paying £100 to go go-karting, unless you do it all the time and the novelty wears off.

Help others instead of yourself

We’re social animals. Well, generally. For the most part, apparently we prefer spending money on other people. Maybe stack this with the one below and look at subscriptions?

Buy many small pleasures instead of a few big ones

The expense isn’t the deciding factor in purchases. Adaptation to the high of buying something is pretty level. Put it this way: you’d get more out of buying a novelty coffee or tea from a different cafe each morning than you would buying a Ferrari once. One will set you back maybe £1,600 a year if you really did it every day but the other will cost you £300k just for the machine.

Buy less insurance

Turns out we’re generally hardier than we think and it’s the fear that we won’t take a loss well that insurers use against us. Ouch, that’s uncomfortable. However, happy to spend less on insurance.

Pay now and consume later

Commit and get the bad bit up front. Enjoy over time. Things like a learning course, which changes every week because each lesson will be different, are great for this.

Think about what you’re not thinking about

Sounds cool to buy a massive house versus a small one. However, you’re not thinking necessarily about running costs, and you’re almost certainly not thinking about maintenance jobs. Puts a bit of a downer on that McMansion you had in mind, eh?

I’m actually in a position to do this with my move to the Channel Islands, and this is the kind of discussion we have in the SierraWhiskyMike household all the time.

Beware comparison shopping

I didn’t know this before I researched this post. Comparison shopping apparently makes us put weight on things that weren’t important to us before, which means we’re inclined to buy upgraded versions that we may not actually need. This means we’re buying more than would make us happy.

Note “beware”. Sometimes it’s good to shop around, just don’t get distracted.

Follow the herd instead of your head

We’re more likely to enjoy things that other people think we will enjoy – whether that’s like-minded randomers on the internet or friends and family who pick stuff out with you in mind.

Sounds obvious, but the other way to read this is that we’re bad at judging ourselves and what we think we’d like. Other people know us better than we do.

Spend money in ways that match your personality

This is interesting! In one study, participants were given $10 to spend either on a book or in a bar. Introverts got more out of the book, but extraverts (for reasons I didn’t quite follow) were happy with either. In another paper, people whose bank statements appeared to be skewed in favour of things they valued reported more happiness than people who didn’t.

No-one gives a damn about your work trousers: save the cash. Spend it on something good.

Great, but wouldn’t more money mean I’d be able to enjoy more with these principles?

No.

That first paper reviewed the studies on wealth and happiness. Yes, there’s a baseline amount of wealth that makes you happy. But, being super-wealthy just stops you from savouring simple things, rather than actually boosting your happiness. Furthermore, more money does bring satisfaction, but only when we think about it.

Which means it ain’t about the money, it’s about the potential opportunity.

You know what else is potential opportunity?

  • Time.
  • Health.
  • Fitness.
  • Trying something new.
  • Meeting new people.

Given the principles of spending shown, we can get most of these on the cheap!

So why won’t you regret being frugal?

I call it “intentional spending”. I wrote a whole post about what that means to me if you’re interested.

While I’m young(ish), still have my health, can keep working on my fitness and can try new things and meet new people, I can be frugal and still find joy. If I died tomorrow, I would still have lived a fulfilling life.

Spending intentionally and exercising frugality simply do not equal unhappiness.

Note that this is different from being in financial crisis, where debts are piling up and/or you’re making a choice between eating today or staying warm. That really is unhappiness. However, keeping costs modest and enjoying cheap thrills is a long way from it.

My whole point of financial independence is to gain freedom. To do the boat plan effectively, I want the option to not have to work, even if I ultimately do choose to do a bit of freelancing or side hustling on top.

So, no, I won’t regret being frugal today and investing a significant chunk of my money. Even if I died tomorrow, I can’t complain about the life I lead and the pennies I’ve saved by choosing cheaper options for entertainment and optimising my budgets.