Your lifestyle or your freedom

"Money can can buy many things, but nothing more valuable than your freedom."

The above observation, made by J.L. Collins in The Simple Path to Wealth, best encapsulates my motivation in recent years to pursue financial freedom.

Clarity begets action. When I realized that the relevant question was, "What is my freedom worth?" My answer was immediate and unwavering: "Whatever it takes to achieve it."

Financial freedom unlocks some impressive advantages in life, such as:

• Not having a company/job dictate where I'll be and what I'll be doing for the majority of my waking hours (this is the most important - I really like to have control over what I do with my time)
• The option to essentially live anywhere in the world that my family prefers
• Not missing any of my daughter's (and family's) important life moments due to some work obligation
• Truly having the power to decide who to let into my life, without needing to consider no-longer-relevant factors such as "advancing my career" or "making my sales target" or "expanding my network"
• The freedom to work on anything I want, without needing to consider whether it's financially feasible - or just don't work on anything at all until inspiration strikes

Note that the above does not include "an extravagant lifestyle." The reason is that such a lifestyle is diametrically opposed to the attainment and maintenance of financial freedom. The more expensive your lifestyle (as a proportion of your take-home income), the longer it will take to be free from having to work for an income in the first place.

Hence the title of this post: your lifestyle or your freedom?

My choice is clear. Nowadays, my wife and I have a relatively frugal lifestyle, allowing us to save over 80% of our family's income. Checking the "retirement math" (see here), even if we set our savings/assets to zero, our current savings rate and lifestyle would let us retire in about five years - if we want to.

However, it wasn't always like this. In fact, I spent my 20's and early 30's as a financially irresponsible mess.

A tale of two Jimmys

About 13 years ago, after teaching abroad in Japan for a year, I returned home to Vancouver with two suitcases in hand and about one month's salary in cash. I didn't know it at the time, but I wouldn't have a positive networth again for the next 5-6 years.

Believe me when I say I was the opposite of frugal in my 20's. Below is a list of some foolish money decisions that I still remember making from 10-13 years ago:

• Shortly after landing my first "real" job at an insurance company, I bought my "work uniform" - a Hugo Boss suit, Hugo Boss shoes, and several Brooks Brothers shirts. I also bought a pair of cuff links that I think cost $50
• I spent over one-third of my income on rent
• I drove everywhere, and in one of my more delusional moments, I almost leased a BMW (thankfully I had the sense to ditch the idea when they asked for a guarantor)
• I ate at restaurants for lunch nearly every day (and sometimes for dinner as well)
• I got my haircuts at a designer salon
• I financed my entire MBA education with a bank loan
• I kept a maxed out credit card balance for nearly a year (even though I knew how ridiculously stupid that was)

Today, 10 years later, my spending habits are quite different:

• My wardrobe consists mostly of items from Uniqlo and H&M (with occasional extravagant pieces from Lululemon and Under Armour)
• My wife and I live with my mother-in-law (we don't pay rent, though we do pay for all other household expenses)
• I don't drive (my wife has a car that she drives about twice a month)
• I give myself a buzz cut every 2-3 weeks
• I don't have a credit card (the last time I used one was when I borrowed my dad's to pay for an annual subscription at Ghost.org and to register an account at Amazon Web Services)
• Unfortunately, I still haven't shaken the habit of eating out for lunch

My extravagant weekday lunches notwithstanding, I can quite safely say that the cost of my lifestyle today is substantially less than the cost of my lifestyle from 10 years ago. Conversely, my income today is about 4-5 times higher than my income from 10 years ago. (To keep the comparison simple, I'm not counting my wife's income or family-related expenses.) Therefore, rather than just barely keeping my head above water like I was 10 years ago, I am now able to save 80%+ of my income.

Lifestyle reduction is like weight loss (i.e. very difficult)

I follow quite a few blogs that focus on financial independence and early retirement ("FIRE"), and I feel that one important aspect their authors don't talk about enough is the mental struggle that comes with lifestyle reduction. Unlike many of these financial bloggers, who by their own admission are naturally predisposed towards frugality, I speak from experience. It really hasn't been easy for me to cut back on costly lifestyle habits. The key word is "habits" - because good or bad, they're extremely hard to break.

To give one example, subscription-based services are some of the most insidious habit-forming constructs. I don't regularly check which services am I subscribed to (though I should), and this occasionally lands me in trouble. It took me over a year to realize that I had accidentally purchased some recurring mobile phone service add-ons and was paying twice what I should each month. Last year, I signed up for a Scribd trial using my PayPal account, forgot to cancel, and was charged $10 every month for seven months before I discovered my mistake.

Services that I willingly signed up for, but should probably cancel due to lack of usage, include Tencent Video, iQiyi Video, QQ Music, and The Economist. Note that I specifically made this statement - publicly, in this blog post - and yet nevertheless I will not cancel these services. Or I will cancel, and then resubscribe the next time I want to consume content from these platforms, thereby renewing the cycle.

In recognition of this specific issue, I'm currently working on understanding and exercising more control over my habits. To this end, I recently began reading Atomic Habits by James Clear (highly recommended so far; I'll write a review later).

More generally, I believe that trying to cut back on lifestyle expenses is like trying to lose weight. Few would argue their merits, but they're both tough mental challenges that require strong commitment, a change in mindset, and the formation of good habits to overcome.

Reflecting on this point reminds me of an old story about the mindset of weight loss. An overweight person is outside on a run for the first time, sees a very fit person who's also out on a run, and asks that person: "Why are you running? You certainly don't need it." The lesson here, of course, is the difference in mindset. That person is very fit because they run regularly.

Similarly, a financially insecure person might ask a wealthy person, "Why don't you buy that luxury item? You can certainly afford it." The difference here is again in mindset. That person is wealthy because they don't buy luxury items.

The value of a supportive partner

Everyone is different, so perhaps the specifics of my lifestyle reduction journey may not work for you. However, I think there is at least one universal truth: to reach financial freedom, your spouse/partner must (also) be responsible with money.

I can say without hesitation that my wife, who's naturally good with money, has had by far the biggest influence on improving my money habits. Below are some recent examples of her frugal ways:

• When the latest iPhone came out, I bought her one to replace her three-year-old phone; she later went to the Apple Store and returned it
• In the early days of COVID-19, she bought a hair clipper and offered to cut my hair so that I wouldn't have to visit hair salons; now I'm in the habit of just giving myself haircuts (saving both time and money)
• When we found out early last year that we had a baby on the way, she convinced me to move out of an apartment in Shanghai's French Concession area to live with her mom in the suburbs, explaining that her mom would take care of her and our newborn
• She insists that we go over our finances at the end of each month

I must stress that even while married to a fiscally responsible partner, it still wasn't easy. I remember actually getting angry at my wife for returning the iPhone because I couldn't understand why she would ever refuse a gift from me, much less such a useful one. Just a few days ago, when we had an argument, I expressed for the n'th time my misgivings about not living in a place of our own.

The above shows just how challenging it can be to change the thought processes that underpin our lifestyle and spending choices. I like to think that I'm a logical person with reasonable self-control, and yet I still mentally protest every lifestyle reduction before it becomes a habit.

Parting advice

From experience, I know the process can be painful at times, but the overall journey itself has been a deeply fulfilling one. Rather than a feeling of dread, which I've learned is common in those who are financially insecure, I feel a sense of calm whenever my family reviews our finances or when I discuss money-related issues with others.

To reach financial freedom, educate yourself on what it takes by following the experiences of those who have successfully achieved it. Understand and learn to have control over your habits. And above all, choose your life partner wisely!