How Much Is Frugal Worth?

There are only two ways to have more money.  Earn more or spend less.  Spending less may be the easier.

There are ways to live as you want at a lower price.  Sometimes convenience forces a higher amount but that is okay.  What we want to avoid is careless and its brother thoughtless.

It is a skill you can learn.


Lifestyle is spending $30,000 per year after taxes at age 23 and increasing 7% a year to 35 and then growing at 3% inflation to the end of the 40th year.  Cost of living then becomes 70% of the old number and continues for 20 more years.  Assume a tax free savings account to accumulate the savings invested at inflation plus 1%.

So, what is a 3% cost saving worth?

Quite a lot actually.

There are two ways to look at it.

  1. At year 60 there could be about $550,000 all tax paid.  Perhaps for an emergency or just more the heirs.  Today’s value before inflation about $100,000.
  2. Better, and more likely, increase retirement spending by 18%.

How hard would it be to get about 25% more pretax income for your retirement?   Probably harder than trying to find a small saving in your monthly spending.  A little hydro here.  A little cable there.  Clothing, credit card interest, negotiated mortgage interest, golf balls, a car’s fuel efficiency, magazine subscriptions and newspapers and, and,  and.  You get the idea.  It is not such a formidable task.  Extreme couponing is not required.

The 18% improvement in cost of living after retirement is from finding 3% of your unmanaged cost of living.

Higher saving gains are obviously much better.  5% saving is 30% more retirement spending, or $900,000 more security, or more for the kids.  (Right!)

Start with what you spend now.  In some detail.  Could you save 3% of it with a little effort?  Not enough to make you ruin your enjoyment of life, just enough to be money-smart.

I’m thinking you can and probably should.

I wish I had thought this through when I was 23.


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Don Shaughnessy is a retired partner in an international public accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. Contact:  

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