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Finances Freedom

The Value of Living Modestly

When I started Crash Dad, I knew that one of the posts I wanted to do was talking about the value of living modestly. Today I saw a thread on this Dad Blogger Facebook group I recently joined that felt like the perfect prompt to write about this subject.

During college, I took an accounting class with the incomparable Norm Nemrow (more on his story in future posts). The class was almost all video recordings except for 8 in person classes. In just a few of those classes, Norm had more impact on me and my future life (financial and otherwise) than pretty much any other professor ever.

One of the principles he taught me in these few in person classes was the value of living modestly. Since we were college students, he framed it in a really interesting way. He told us that as college students we had something incredibly valuable: we could live on nothing! He then suggested that when we graduated from college and got our first job with a real paycheck that we not go crazy and grow our spending to meet what we were making. Sure, we didn’t have to keep eating Ramen noodles every day, but we shouldn’t change our lifestyle to meet our new salary.

The key concept he was teaching us was to live modestly!

The concept of living modestly has literally transformed my life in so many good ways. The value of living modestly is great in at least two key ways. First, when you live modestly, you are able to save your excess earnings. There’s an amazing security that comes with having a chunk of change in the bank. At first, those savings will be there for you when emergencies arise (car breaks down, A/C breaks, water heater dies, visits to the doctor, etc). Those unexpected expenses come, but over time you can build up a savings that handles those emergencies while still saving for the future.

The second benefit to living modestly is you don’t need as much money to live. I would have never been able to quit my job if our lifestyle had grown to match our salary. We would have had no savings, and my blogs would not have been making enough income for me to quit my day job without a drastic reduction in how we lived. Instead, because we lived modestly, my blogs covered 75% of what we needed to live. Our savings covered the other 25% we needed to live which meant we had ~15 months for me to grow the blogs to cover 100% of what we needed to live. I’ll do a future post that dives into these numbers more, but I would not be a full time blogger if we didn’t choose to live modestly. At least not without drastically changing our lifestyle. Instead, we were able to quit my day job and become a full time blogger with really no change to our lifestyle.

The freedom of job flexibility is something that can’t be understated. I’m not saying you have to quit your job and become an entrepreneur like me. However, living modestly might mean that you could change from a job that pays well but sucks to one that pays enough but is great. Options like this make life so much better.

Unfortunately, the opposite is far too common. Instead of living modestly, most people are living beyond their means. The impact of living beyond your means is the exact opposite of living modestly. Don’t get sucked into the trap. I know it’s tempting, but it’s a choice you can make that will change your life for good or bad.

If you can’t tell, I’m really passionate about this topic. You can be sure I’ll be writing about the benefits of living modestly a lot more in the future. I have a lot more examples of how it’s changed our lives.

What do you think of the concept of living modestly?

By John

My name is John and I'm a working dad with 4 beautiful children. I'm a full time blogger and entrepreneur. These are my musings. I hope you enjoy.

7 replies on “The Value of Living Modestly”

I think way too often living modestly is confused with living in poverty. It doesn’t mean you can’t have a nice home and car and do fun things. What it does mean is you don’t need a 10,000 square foot home and a Ferrari to be happy. Most people will tell you that it is people and memories that have brought them the most joy but seem to forget that when they go out and blow their money on stuff they don’t need but want.

It’s like the U2 song says “You can never get enough of what you don’t really need.”

That’s funny. I just created a draft blog post about modestly isn’t about living like a cheapskate, but poverty might be better.

I’m also reminded of Dave Ramsey’s famous phrase, “Live now like no one else so that later you can live like no one else.” Sometimes sacrifice is good for you.

I think the discussion of finding joy in life is an even larger discussion and is related but somewhat different. Money definitely can help a lot of things. There’s a definite balance to it all.

I love this idea – I think I’ve always been taught to “live with my means”, but this puts it in a different perspective. My husband and I always talk about how we don’t really feel like we need a ton of money to be comfortable – and as our income grows, I’m finding it more tempting to be a little less frugal. However, I have recently started putting all our extra from the month before into savings, and just keeping what we need that month for the basics (and a little fun) in our checking account. I’ve found this to be really helpful, and I enjoy watching my savings account grow by a good amount each month.

Katie,
Glad you liked the new perspective. What you consider “living modestly” definitely grows over time, but you can do that while still keeping a big chunk of change for savings. Plus, your savings can be used for bigger things that are like “spoiling” yourself as well. As your savings grows, you’ll be able to do more big things that you would have never thought even possible when you were just living within your means.

I think you have a good plan. I have a future post that talks about being too frugal and its costs. Not to mention what living modestly meant when we went to buy a house, a minivan and a new car all in the same year.

Excellent post, John. Another approach to personal finances that I strive to adopt is evaluating the return on investment. It’s difficult to justify buying a $80K sports car with this mindset. On the other hand, an education may pay a huge return despite being an expensive investment. Bad financial decisions are often made when emotion is too big a part of the equation.

Dustin,
I like that idea as well, but most people aren’t good at calculating the ROI. Plus, there are some things in life that you should buy that don’t have an ROI. Although, with big investments it can make sense.

Plus, to use your example, I have a friend who bought a Lamborghini and he said it was the best investment he made because of the deals he was able to close using it. So, there’s always that calculation as well.

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