In Part One, we looked at the simple relationship between income-producing investments and annual spending, and my rule of thumb that investments must be 40 times annual spending if work is to remainly truly voluntary for me.
Now we move to a vital part of becoming a Voluntary Worker – frugality, or the art of living on a little.
If you think back to the basic equation, non-work income must exceed annual spending. As I said in the earlier post, I think the most important place to get started is reducing spending. If you’re bleeding money every month, you won’t have anything to invest, or at least nowhere near as much as you should.
Imagine trying to fill a big bucket so that the overflow can fill your cup. You can keep filling the bucket (earning income) as fast as you like to no avail if the holes in the bucket (spending) are too big. You need to focus first on fixing the holes, and THEN your bucket will fill quickly.
There are hundreds of articles out there on frugality, and it’s well worth reading lots of them. I’d recommend starting with Early Retirement Extreme and Mr Money Mustache, and it’s worth looking at the Tightwad Gazette to see what some people do in order to save money. It’s up to you to figure out just how frugal you want to be. The important part for now is to commit to learning how to spend less money, so that you can take it to the extent that fits your income, desired lifestyle and desired date to become a Voluntary Worker. Read, read, read – and put into practice those frugality tips that make sense to you. The big ticket items are usually housing, heating, transportation, groceries and sometimes dining out.
Again, your goal is to learn how to save money and then get stuck into doing it in the ways that are palatable to you. You’ll be amazed at how much your spending can be trimmed without having a significant impact on your quality of life. Just getting conscious about spending reaps big rewards.
Some examples of savings that we make in order to live way below our means:
- We drive a very economical car and combine trips where we can.
- We shop at the cheapest supermarket in town, and we stock up when items we use are deeply discounted.
- We borrow if we can; buy used if we can’t borrow; and buy wholesale if we can’t get it used. New from Ebay is next on the list, and retail is a last resort!
- We live in a modest but charming home of about 1000 square feet.
- We use CFL bulbs, no heating (we live in a temperate climate) and we’re pretty good at switching things off at the wall when they’re not in use.
- We use cloth nappies and wipes (mostly).
- We very rarely buy clothing new.
There are dozens of other areas in which we save, and maybe later I’ll put more of them into an article. For now, you just need to know that you need to get out there and learn how to get maximum value from every dollar, and to prune, prune, prune your spending.