How Much Is Frugal Worth?

If you have enough money frugal doesn’t matter much. The question is how much capital does it take to support a given amount of spending. When you know that, it is sometimes easier to motivate the idea of getting more value for the same money.

An example

Suppose you create a Registered Retirement Income Fund (RRIF) for retirement spending. The variables are inflation, rate of return, income tax rate, time you need the money. In this case assume 6% yield, 30% tax, and spending from 65 to 90, (25 years)

Suppose your total after tax spending in retirement is $6,000 a month. Suppose further you could find $500.00 a month in savings.

How much RRIF would that replace?

About $165,000

Things to think about that might make that RRIF unrequired.

  1. Could you economize on vehicle ownership. I know someone who owns two not new, not expensive, cars. They are for in town and trips of less than 25 miles from home. When they want to go farther they rent a luxury car. They saving estimate is more than $200 a month.
  2. Rethink the need for two cars. Having two might be convenient when you are 65, probably less so at 80.
  3. Shopping for things you need. One key to this saving is having a place for inventory. The idea is to not “have to buy” something. When it’s on sale buy several. All you need is the space and the attention to prices. It’s hard to know the saving but I cannot think it would work out to less than $50 a month.
  4. Timely shopping. If you buy Christmas decorations and wrapping paper on December 28th, you’ll pay less. Probably half. Be aware of things relating to days and seasons. Again it is an inventory problem.
  5. Don’t pay interest on credit cards. If you owe $3,000 you could easily pay $60 a month for the privilege.
  6. Understand quality. Things that are durable cost a little more. Appliances, ballpoint pens, clothing and bedding come to mind quickly. A recent event thing. Buy well twice instead of cheap four times saves. Cheap is expensive.
  7. Assess preauthorized charges. Some of them are no longer required or wanted. It is like a sunset law. Reauthorize the purchase every year or two. Shop for bank charges.
  8. All the things your parents told you. Turn off the lights, don’t use the dryer during the day. Set the air-conditioning a little higher. Adjust the thermostat if you are going out. Take care of your things, (clothing, supplies, electronics)

The key

What’s the price of convenience?┬áIf you are willing to, and can, pay the price, all is well for you, for now.

If you have the time, and you will once you retire, you can be very highly paid for your trouble.

If you already have the $165,000 and find the saving you need, what would be wrong with spending all the money on better vacations for the next 20 years.

Worth a little thought.

I help people have more retirement income and larger, more liquid estates.

Call in Canada 705-927-4770, or email

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