I know that in the world of frugal-living blogs, I'm a very small fish in a pretty big pond. With just over 1,000 posts total and an average of around 2,000 page views per month, I can't compare to leading lights like Mr. Money Mustache, J.D. Roth of Get Rich Slowly, or the team of experts at Wise Bread. And that's okay. I've got my little niche, and I'm pretty content within it.
But sometimes, reading these more successful blogs, I start to feel inadequate—not about my blog's modest scale, but about my finances. These bloggers boast about how they were able to retire in their early 30s just by cutting out luxuries and investing sensibly, and I think, "Well, gee, I do all that—how come I'm 45 years old and not financially independent yet? What am I doing wrong?"
The answer, it turns out, could be that there's nothing at all wrong with how I spend my money—I'm just not making as much as they are.
This came home to me recently when I came across an article in The Guardian by Elizabeth Willard Thames of the popular Frugalwoods blog. She and her husband Nate have built their brand around their personal success story, which reads kind of like Horatio Alger meets Henry David Thoreau: they both had high-powered careers and a big house in the city, but they weren't happy with that lifestyle, so they decided to scale back, save up, and trade it all in for a cozy homestead on 66 acres in Vermont.
In her article, "Mrs. Frugalwoods" insists, "My husband, Nate, and I are not exceptional people...we’ve never
won the lottery or had investment banker salaries or been the
beneficiaries of inheritances or trust funds." She goes on to concede that they are "extraordinarily privileged" to have had parents who were well-educated and financially stable, so they could grow up "happy, warm, well-educated, [and] well-cared-for," but that just seems like rubbing it in: basically, she's implying that anyone else (like me) who had a similar upbringing could retire at age 32 and buy a farm in Vermont if they really wanted to. The fact that I'm still working for a living in my forties just proves that I'm not trying hard enough.
However, before I could get too glum about this, I happened upon a second article about the Frugalwoods that tackled their story from a completely different angle. The Outline points out that the Frugalwoods' story of achieving financial independence through "extreme frugality" leaves out one rather important fact: how much money they actually have.
The Frugalwoods are "tight-lipped about their income," the article says, but there are enough financial clues on their blog to make it clear that their rags-to-riches story doesn't exactly start with rags. For instance, they reveal that they bought a $460,000, four-bedroom house in Cambridge back in 2012, which they were later able to rent out for $4,400 per month. (That property alone brings them close to $27,000 in income, even after you deduct the cost of a property manager, taxes, and the mortgage they're still paying on it.) And in a 2014 post, Liz notes that they've both maxed out their 401(k) contributions, to the tune of $35,000 a year—a sum they don't even count when calculating their annual savings rate at just over 71 percent of their income.
Now, I think our lifestyle is pretty frugal, but our savings rate has never been anywhere close to 71 percent. We currently save a bit more than 50 percent of our take-home pay, and back when we still had a mortgage, it was less than 40 percent. So I started wondering: how do the Frugalwoods really do it? Just how low are their expenses? Are they really living on that much less than we do—in the Boston area, no less—or are they just making a lot more?
It seems impossible to say, given that the Frugalwoods refuse to disclose their income—but taking another look at that 2014 blog entry, I realized that I actually had all the information I needed to figure it out for myself. After noting that they saved 71.4% of their
income for 2014, Mrs. Frugalwoods goes on to add that "If
we include both of our 401K contributions...our savings rate is 93.07%."
And since she'd already said their 401(k)s were maxed out at $17,500 each, it was clear that this $35,000 per year represented 21.67% of their
total income. Thus, their total income for the year was $161,513.61.
Now here's where things start to look weird. If their income was $161,514, and they saved about 93 percent of it in total, that means the amount they actually lived on was 7 percent of it, or $11,305. Except, as they disclosed in their post about renting out their house, their mortgage payment and taxes on their Cambridge house come to $1,921.66 per month, or $23,060 per year. Clearly, the math on that does not work.
More likely, what they mean is that if they counted the $35,000 they saved out of their pre-tax income toward the amount they saved out of their take-home income, their savings would be 93 percent. (Actually, it wouldn't, because the taxes that also came out of that pre-tax income would also have to be counted as an expense—but we don't have enough info to figure out what the right number would be.) So I'm assuming that the $161,513.61 a year I came up with for the Frugalwoods' income is really their take-home pay, not gross. And since we know they saved 71.4 percent of that, the amount of that they actually spent was 28.6 percent of it, or $46,192.89.
Armed with this figure, I clicked over to my budget spreadsheet, where I've been tracking all our expenses since 2005, to figure out how much we spent in 2014. The answer was $281902.66—more than $17,000 less than the Frugalwoods.
However, it only took me a few minutes to figure out that this wasn't really a fair comparison. By 2014, we'd already paid off our mortgage, so our living expenses were naturally much lower than theirs. So I went back a little further and looked at our expenses for the year right before we paid off the mortgage: October 2012 through September 2013. For that period, our total living expenses came to $38,983.65—still a good seven grand below the Frugalwoods' level of "extreme frugality." Apparently, we were actually living more frugally, despite spending over 60 percent our our income, than they were while spending less than 30 percent of theirs.
Now, the point of this isn't to brag. Well, maybe just a little, but the main point of it is that if you, like me, have been reading blogs like Frugalwoods and thinking, "Oh man, I've never been able to save 71 percent of my income, I must be doing it all wrong, I'll never be able to buy my farm in Vermont"—stop. Instead, substitute this thought: "My financial situation is unique, and I can't reasonably compare my savings rate to some blogger's (especially one who's refusing to disclose his or her income). What I can do is to learn as many tricks as I can to cut my expenses so that I can close in on financial independence as fast as is reasonably possible for me."
And if that's your goal, it would appear that maybe you actually could learn a trick or two from a little-fish blog like this one that even hot shots like the Frugalwoods haven't picked up yet.