Freezing Your Lifestyle Helps You Reach Your Financial Goals

“No wonder Nairobi people do not invest much. There are too many things for you to spend money on” 

This is my mother’s favorite remark, whenever she visits for an extended time and gets to see the things we spend money on. In this particular instance, I had just paid entry fees for a play park, for her granddaughter to have some fun.

I was reminded of this statement this morning when my colleague and I were driving back to the office after a meeting, and we saw a billboard that was advertising a leather recliner for 248,000 shillings (or a price close to that). We had a short conversation about what would make anyone buy a seat worth that much, whose value proposition seems to be the ability to recline. Her conclusion was that some people have a lot of money and so they must find places to spend it.

This post is not about the merits and demerits of an expensive recliner. I am sure there is some value.  It is about how we decide whether we are the kind of people who hope to someday buy that recliner, or not.  

If you want to achieve financial independence, you must realize very early that everything around you is working against this goal. Every business wants you to buy the things they are selling, and to do this they invest billions in marketing and advertising – their business is to convince you that you want need, their products and cannot live without them.

These companies shape our culture. They make us believe that  you must live in your own house otherwise you are not a grown up, unless you drive a certain car you have not really made it, if you do not have a specific brand of TV or phone, you are not “with it”, if you do not use their overpriced roll-on no woman will love you, and so on and so forth.

We all have bought into this. Why do I say this? Considering that we all have different personalities, why do our “Ultimate Lifestyles” look so similar? By Ultimate Lifestyles, I mean how we imagine we will live, once we “make it” in life.  It seems to revolve around a certain kind of car, house, furnishings, phones etc.  We describe those very easily if one asks.

What is harder to realize is that our Ultimate Lifestyle also keeps evolving, and this is shaped by what marketers are selling as the thing that will bring us happiness, and these views always change towards us spending more. Think about your Ultimate Lifestyle when you didn’t have much in terms of an income. Chances are, if your income has since grown, you are living that lifestyle, or something close to it today. But today, you are also working towards another “Ultimate Lifestyle”, which involves spending more money, acquiring more expensive stuff etc.

The problem with this attitude towards life is that there always will be stuff to buy. Corporations are busy day and night coming up with stuff that is marginally better than what we have now, and then they will invest billions in convincing us that we need this stuff to achieve that Ultimate Lifestyle.

So the more money we make, the more things we will have to spend it on.  This is the first reason why many people who are/were employed for life get to retirement without having achieved financial independence, or at the very least with substantial retirement savings.

If you are realizing this with me, I want to challenge you to freeze your lifestyle.

If you are currently lacking for nothing, make a decision to not upgrade any of your possessions from now henceforth. Let your mantra be, “If it is not broken, I will not replace it”.

If it is not broken, do not replace it

Also, only replace if you cannot repair it cost-effectively. This will apply to household stuff (couches, fridges, TVs, sound systems), and the big things like your car, phone, etc.  If it is not broken, it is not getting replaced.

The principle I am applying here is one we all know instinctively. Most things we use daily are functionally satisfying, and replacing them may give us happiness in the short-term, but after a few months we get used to them and we are no different than we were before we upgraded.

Though I had not thought about it critically before this, below are a couple of ways I have frozen my lifestyle:

1. I do not plan to upgrade my car until I get to “Figure X” in terms of my net worth. Not upgrading does not mean I will keep my car forever. I have replaced my car once, and the replacement was a much better car, but I spent the same amount of money I had spent on my earlier car 7 years before. The maximum amount of money I will spend on a car right now is 1 million shillings gross (including the income from disposing of my car), and unless it has a serious mechanical issue, I drive my car for at least 5 years before replacing it.
2. The sofa I bought 10 years ago is still the sofa I have in my house. I have re-upholstered it twice and I am considering a third time to match it to the decor of my current house, but I have no plans to upgrade it. Why? It works. A sofa is for sitting on and lying on, mine serves that purpose perfectly. I haven’t yet gotten to that point where I have an acute need to recline  😀
3. My phone was a gift from a friend who was upgrading. He gave it to me 2 years ago, I haven’t felt the need to upgrade it because it works. If it fails today, I will replace it with one that works, but not a significantly better model that would cost a lot more.
4. A pay hike, no matter how significant, would not make me change the house I live in currently. It is enough house for my family, and it works. It is not in a suburb, but my Ultimate Lifestyle is not to live in a suburb while on a salary.

I hope you get the drift.

This is not a new idea. Billionaire Warren Buffet is known for his frugality. Despite his billions, he lives in the same house he bought in 1958. Mark Cuban has lived in the same house for 18 years. Because it is enough house! Here are more examples of frugal billionaires. 

What are some of the things that define the Ultimate Lifestyle for you? Are there some that have made it to that list only because they were sold to you, and not because they meet a need? What are some of the things you are done upgrading?