Frugality alone won’t buy your dream house

I’ve been thinking a lot about a piece I read last week by Miles Howard at The Outline (which I came across via Michael Kitces’s always-excellent Weekend Reading for Financial Planners) about a couple who, in their telling, escaped the rat race of city life to achieve “financial independence through simple living” in bucolic rural Vermont. They call themselves the Frugalwoods; my cringe upon reading that name has since settled into a sort of permanent grimace.

I hadn’t heard of this couple before, but their book has a 24-person waiting list at the local public library so clearly they’re reaching somebody. The narrative is one that’s been played out before in the New York Times/NPR/Guardian lifestyle pages circuit: A Millennial couple grows weary of the emptiness of modern working life, idealizing the virtues of simplicity in their parents’, grandparents’, and great-grandparents’ eras. They reorient their own lives around those antiquated values and lifestyles while simultaneously monetizing them in a modern way via blogs, social media, and book deals. A few years ago a Vox piece from another such latter-day pioneer inspired backlash both thoughtful and profane.

I’m not here to slag on people who are probably decent, thoughtful, and generous in real life. But does their narrative fully explain how they were able to achieve their current lifestyle? Having spent some time just outside of Cambridge, MA where they spent their pre-“retirement” years (because living in Cambridge would’ve been too expensive for my income), I wondered how much they would need to have earned to afford a house there (where the median home value is nearly $800,000and save upwards of 70% of their take-home income. With some back-of-the-envelope math based on the data in this post I calculated their take-home income at about $160,000*, and that doesn’t even appear to include their (likely substantial) mortgage payment. That kind of income gives you a lot of options for living below your means.

Frugality is a three-variable equation: you can either increase your income (x) or decrease your expenses (y) to increase the amount you have available to save (z). In mathematical terms, x – y = z. There are many reasons it’s considered impolite to talk about income in society while frugality is seen as a virtue, but the result is pieces like this that oversell a lifestyle based on only one part of the equation. It’s only natural to emphasize the parts of the story that feed your own narrative. This couple may have found some creative and photogenic ways to save money faster and accelerate their goal of “financial independence”, but it’s dishonest to tell anyone that they can do it themselves without mentioning the six-figure income that made it even possible.

A few weeks ago I wrote a post about some behavioral habits of eventual millionaires that freelancers can learn from, one of which was frugality. While it’s important for everyone to live within their means, I admit that the importance of frugality is often overemphasized and can come off as gloating or lecturing from people with the luxury of having more income than they know what to do with. There’s no shame in not having enough money saved to retire at 32 if you haven’t been living on an upper-middle class income all the while.

“Simple living” can mean different things to different people – running a 60-acre farm in the middle of nowhere while raising two babies and owning rental property hundreds of miles away actually sounds pretty complicated to me – but achieving financial independence is about more than shopping at thrift stores and painting your own cabinets. A very lucky few people will have the means to “retire” at an early age; it’s up to the rest of us to live meaningful lives in our own ways while working toward the goals we can achieve.


*Since their savings rate was 93.07% including the 401(k) and 71.4% without, the $35,000 401(k) contribution must have represented 21.67% of their take-home income. Their total income would therefore be $161,513.