Florian Wagner assumes that he will be a millionaire at the age of 38. At 40, he wants to retire. All that with a normal job and average income – how is that supposed to work? The 33-year-old relies on frugalism, a relatively young movement from the USA. In a very simplified way, the principle works like this: cut back on expenses, save as much of your income as possible, build up wealth and retire early. The plan stipulates that you can live on your investment income alone and have time for other things than a rigid 40-hour week.
Florian Wagner has been a frugalist for five years. At the time he was working in his first job after graduation and had just moved to Stuttgart. As a project manager in the automotive industry, he made good money straight away, more than 3,000 euros net. In the beginning he enjoyed having more money available. “I’ve often spent my money without thinking about it,” says Wagner. A lot went into eating, drinking and free time: “A coffee to go here, an after-work beer there, going out to party on the weekend or expensive short trips.” Nevertheless, he only spent just under half of his income.
Frugalism is said to be possible with an average income
While researching investment opportunities, he first read about frugalism and came across the Canadian blogger “Mr. Money Mustache ”, the guru of many frugalists. Wagner too was quickly hooked on the movement and its basic principles.
On the one hand, there were people who were financially independent in their early 40s. They had built up enough wealth that they no longer had to rely on a labor income. That should be possible without any real restrictions and with an average income, it was read again and again.
Increasing the quality of life is the top priority
In addition, early retirement was not their top priority: “Frugalists want to get the best out of their lives and finances,” Wagner describes it. They tried to use their money in such a way that it would bring them as much quality of life as possible – in the long term. A dumbbell in the garden or a yoga mat are cheaper than a membership in the gym. Nevertheless, you may benefit from it more and longer.
With this attitude, frugalists probably achieve their high savings rates: They put their entire life to the test and question whether it makes them happy, how they work, spend their free time, live or go on vacation. In the best case scenario, something can be changed and saved. For example, many frugalists live in shared flats because they like company and save rent on the side. Or you have traveled a long way before, but actually like to go hiking in the Eifel.
Wagner defends himself against the curmudgeon image
In the past, therefore, frugalists were often portrayed as stingy. Wagner defends himself against the negative image: No frugalist he knows would forbid anything. What is definitely true is that frugalists keep a close eye on their finances, question their spending and set their priorities in the long term. Many other movements and trends that have little to do with finances can also be found in frugalism: sustainability, minimalism, mindfulness, do-it-yourself, upcycling, sharing and dropping out. Instead of buying things new, they build, repair, rent or buy them used.
Florian Wagner also changed his habits. Instead of driving his car, he now cycled to work. So he did something for his condition on the side, because at the time he was training for his first marathon. He sold unused items and doesn’t buy new ones so quickly these days, he pays attention to longevity when it comes to clothing. “I think about larger acquisitions for a long time and sometimes it’s done by then,” says the frugalist. He no longer needs long-haul flights: on vacation he goes hiking with friends in the mountains, the last e-mails reached us from a bike tour through Switzerland.
Parties and after-work beer are canceled for the frugalist
A lot has happened in particular with his favorite spending traps: Eating, drinking and free time. Alcohol is difficult to reconcile with a frugalist attitude. There are no parties or beer after work, but Wagner goes jogging in the park, goes on bike tours and plays beach volleyball with friends. Frugalist hobbies are easy to implement: exploring the area, spending time with friends, doing sports, music, learning something new. “There are instructions for everything on YouTube,” says Wagner. “When you’ve learned something new, the end result is a sense of achievement.”
For example when cooking. One of his biggest pitfalls used to be after work. After a long day he didn’t feel like cooking anymore. “Even when I was training for the marathon, there was still pizza and kebab,” says Wagner. Today he cooks himself more often and tries to eat healthier. If he goes shopping now, it’s for the whole week, with lots of vegetables and little organic meat going into the cart. He saves a lot by taking food with him to work. “I still eat with my colleagues,” says Wagner. The contact with friends and colleagues is important to him. Wagner’s environment is also not critical of frugalism. “It is more likely that colleagues ask me for investment tips,” says Wagner. The image of the miser doesn’t seem to fit either. “Because I’ve already saved so much, I can also invite my friends to dinner in a chic style.” Nothing is forbidden in frugalism.
Spending reduced to 1,300 euros per month
Due to his new way of life, Wagner’s expenses had fallen to 1,300 euros a month. He was able to save 60 percent of his salary without any problems. He invested all of his savings in global ETFs: index funds that many financial experts have been recommending for years for long-term wealth accumulation. That reduces costs and risk.
His fortune cracked the 250,000 euro mark in the course of the research. He will probably reach his goal of retiring at 40 sooner. Early retirement is also feasible with a family, explains Wagner. Only the time would probably be postponed, because that depends on the savings rate. Wagner calculates that if you can save half your net salary every month, you need around 17 years to retire.
Even low and normal wage earners can save
For low to normal earners, whose running costs are already much higher, an early retirement is therefore unrealistic. For them, the frugalist has at least tips on how to build up wealth: in ETFs, for example, you can invest in a savings plan with low monthly payments, usually from 25 or 50 euros per month. Wagner advises that it can be useful for people on low incomes to identify unnecessary expenses.
Two years ago he quit his job and started his own business. As an SEO consultant, he helps companies to land among the top hits on Google. He currently works 30 hours a week in the job, but his income has increased nonetheless. As a self-employed person, he no longer invests in ETFs, but in his equipment and his own projects. Since 2017 he has also been running the blog “money mustache“This is where he reveals his finances month after month. Last year his book about “Retirement at 40” was published. Today he spends about the same amount of time on blogs and projects as he does in his consulting work, so that in the end a decent 60-hour week comes out. That doesn’t bother him. “A job you’re happy with doesn’t feel like work,” he says.
Financial independence should bring more time for family or friends
When he is “retired”, according to current calculations, Florian Wagner has 5,000 euros a month to live on, “passively, only through investment income and company investments.” Nevertheless, he wants to continue working – as long as he enjoys it, even 60 hours. “I will never just lie around, I will always do something that gives me pleasure.” Because frugalists are not primarily concerned with early retirement, but with a fulfilled life. To do this, they also question their own goals. “Does it have to be your own home, a big car, and the long-distance journey?” Asks Wagner. Then the 40-hour week is currently hardly avoidable.
Alternative working models such as the 4-day week or home office would be beneficial to frugalism, explains Wagner. “It’s more about questioning the current models and looking for yourself how you want to work.” Frugalists expect more time from financial independence for what makes them really happy: good social relationships with family and friends , a fulfilling job, whether at work or through a hobby.