Stealth Frugality

June 16, 2021

We all heard about stealth wealth, i.e., being wealthy without being flashy! Live below your means! There are blog posts about it (Physician on FIRE, Retirement Manifesto, and many more). A large part of The Millionaire Next Door book is about Stealth Wealth. We certainly have been practicing that principle while accumulating wealth, and especially now that we live our comfortable life in early retirement.

But we never overdid the stealth wealth either. In other words, when I announced my retirement in 2018, not a single relative, friend, or colleague blurted out “Yeah, you’re such a cheapskate, no wonder you accumulated seven figures!” Quite the opposite, people wondered how we were able to save and accumulate so much without looking cheap to the outside world. Very simple, we were frugal, but we were able to hide that frugality very well. In other words, we were practicing…

Stealth Frugality = frugality without looking and acting like a miser!

And Stealth Frugality doesn’t rule out Stealth Wealth. It’s more of an extension, a less extreme form of stealth wealth. Being a math wonk, let me make the point with the diagram below. If we plot on the x-axis the perception of wealth and on the y-axis the reality, then really everything above the 45-degree line, i.e., reality > perception, is stealth wealth of sorts. But the trick is to move out of that top-left corner (act poor, big bank account) and a little bit more to the right. Without dropping too close to the x-axis and certainly not all the way to the lower right corner (=Keeping-up-with-the-Joneses, drowning in debt). In other words, Stealth Frugality involves spending wisely without breaking the bank, i.e., try to find some spending categories to splurge on that follow a flatter path than the Minus-45-degree line!

So, why and how did we practice Stealth Frugality? Let’s take a look…

First, the “Why” of Stealth Frugality:

  1. Our plan to retire early was a secret for a long time. To the folks around us, we liked to exude an image of normalcy. We didn’t like to hear people asking us about an overly frugal lifestyle. Or even worse, talking behind our backs: What’s up with the ERN family? Do they have money problems? Working in finance, asset management of all places, you don’t want to look like you got money trouble. I certainly didn’t want to look like I’m planning an early exit from the industry. Just like I was “invested” in my company – literally and figuratively, I wanted my company to invest in me. And they would have done less of it had they known my 2018 exit date!
  2. I wanted to signal to my employer that I depend on my paycheck! Specifically, every year I wanted to signal to my employer that I needed a pay raise. And a bonus. And if I didn’t get it I’d be out of there and move to our competition, literally two blocks down the street. I didn’t want my employer to realize that I can indeed survive (and survive really well!) on about half of my paycheck and that I used the other half to build up a massive stash of F-you money. Of course, I didn’t want my employer to think that I am completely irresponsible with money either. Moderation is key! I don’t want to look too flashy and I don’t want to look too frugal either! 
  3. Corporations are in the business of consumerism! Let’s face it, many of us work(ed) for large corporations. Our employers are in the business of selling stuff, so how can I be a credible representative of Corporate America if I have sworn off the “benefits” of conspicuous consumption? Maybe in the public sector and certainly in academia one could get away with living and looking frugal. But my personal situation asked for at least some participation in the consumerism racket! Related to that issue brings us to item 4…
  4. Extreme frugality is a job market liability. I’m reminded of the Seattle lawyer who eats only brown bananas and “borrows” Netflix account logins from friends. Forget about the weirdo label due to the bananas. If someone is oblivious to the civil and potentially criminal issues involved when “borrowing” account logins, that’s an attitude a bit too nonchalant for a lawyer. I wouldn’t hire her to represent me against a speeding ticket, much less anything really important. Not just in the legal profession but in many other fields including Medicine, Finance, and Engineering we simply can’t afford people cutting corners like that. Think about what kind of signal your frugal antics will send to your employer and your current and prospective clients!
  5. I am not a preacher. Well, OK, I am preaching about the dangers of the 4% Rule (it’s too aggressive for some and too conservative for others) and occasionally I am catching myself getting into heated discussions on personal finance topics. But that’s my blogger persona. I never had much of an urge to convince people around me that they needed to change their ways about money. When I see folks flashing their new toys on Facebook and Instagram, I would certainly say to myself “I hope you made matching contributions to your retirement savings and your kid’s college savings account!” But I’m too polite to actually say or write that and spoil the party. Likewise, being overly frugal sometimes insinuates that you’re trying to convert others to the cause. I never had that urge.
  6. It didn’t delay my FIRE journey much, but it certainly made it more fun!  Could I have retired a little bit earlier if I had pushed my savings rate to 70%+ or 80%+? Sure, but the journey would have been dull. It reminds me of that slightly macabre joke where the Doctor tells a patient that he has only three months to live. The patient asks “what can I do now?” and the Doctor replies: “No alcohol, no cigarettes, no sex, no TV, no internet!” The patient asks “will I live longer then?” and the doctor replies, “No, but the three months will seem longer!” So, in other words, being a cheapskate I probably could have retired after 5 or 6 years instead of 10 years at BNY Mellon. But what good does it do if the 5 years would have felt like 15 years? Not worth it! I had a nice run while working in San Francisco and I enjoyed all 10 years of it!

How to practice Stealth Frugality

Again, just to make sure, Stealth Frugality does not preclude Stealth Wealth. Quite the opposite, we are still stealth-wealthy. We merely just picked our battles: cut the most frivolous and inefficient spending but we left some token luxury items for people to notice so they didn’t think we were weirdos. It’s a similar philosophy to Tanja Hester’s “selectively hardcore” and everybody will pick different priorities on where to save, e.g., wear an extra sweater in the winter and lower the thermostat, and where to splurge.

Here are a few areas where we splurged without breaking the bank – all the while preempting any rumors about being overly frugal:

  1. Apparel: look well-dressed without spending much: Fancy fashion minimalism! Depending on who I’d be meeting at work I had to look my part. A union-run pension fund? Look professional but not too sharp! Private Wealth clients? I will look as sharp as I can: a custom-made suit, fitted shirt, Hermes or Ferragamo tie, Ferragamo or Cole-Hahn shoes. You basically want to look as well dressed or maybe one notch better dressed than your counterpart. If you don’t your boss will notice. And in a corporate environment, if you look like a weirdo wearing clothes not appropriate for the situation your career prospects might suffer. Every dollar you save on clothes will cost you 10x in foregone promotions and bonuses. And again, it doesn’t mean that my entire wardrobe was Ferragamo and Hermes, but I had (and still have) a few token items that I deployed when necessary. 80% of the time when I didn’t have to meet clients and prospects, I was wearing jeans or khakis and the Costco Non-Iron dress shirts. For writing Matlab code that’s all I needed. Matlab doesn’t judge you for what you wear!
  2. Generosity without breaking the bank. Generosity doesn’t even have to cost much. You can get away with a whole lot of frugality if you are generous with your time, your advice, your friendship, and your hospitality. Instead of buying drinks for friends at fancy bars, which can quickly run into the hundreds of dollars in San Francisco, we normally invited friends over for dinner for a fraction of the cost. Blaming that on having a toddler also helps as a cover story! There is no more generous gesture than inviting folks to your home. And we still do this today. Here in Washington State we frequently host potluck lunches and dinners with friends and our house is again one of the favorite “party pads” in our circle of friends.
  3. Don’t sweat the work lunches and the Starbucks Coffee. OK, let me correct that; we were coffee snobs in San Francisco, so we went mostly to Peet’s Coffee and Philz Coffee, but you get the idea. And I should stress that balance is key here. If you live in San Francisco or NYC and make $50k a year, you may not want to “waste” $2k-$3k a year on work lunches and another $600-$1k on coffee. But mid-career, highly-compensated professionals might consider the social and networking benefits of hanging out with the office crowd for lunch and coffee. I always enjoyed our lunch/coffee discussions because people were open to chatting about the things they are working on, interesting research they came across, investing ideas, both for personal portfolios and our professional applications. And let’s not forget: the newest office gossip. Sure, in a perfect world I could have just accomplished the same interaction by knocking on people’s doors, but people are always more amenable to small-talk in a lunch and coffee break setting. I consider the lunch and coffee money a form of tuition. Skimping here strikes me “penny-wise and pound-foolish”!
  4. Overspend on housing? Worked out OK for us! One of the central tenets in the frugal community: spend less on housing. Homeownership is likely an OK investment. But going overboard with your home will hamper your asset accumulation. So, buying a 2 bedroom plus den, 2 bathroom condo in San Francisco in 2008 while still single, was certainly pushing the limit a little bit. But then I got married and we had our daughter, so we “grew into” the place eventually. And it made a great party pad, see item #2 above. Owning that condo gave me some cover without hampering my fugal plan too much. Could I have achieved FIRE faster? Of course! I could have lived in a studio apartment in the SF Tenderloin district, as an actual former colleague did (and probably still does). But nothing screams “cheapskate” or “weirdo” more than living in one of the worst neighborhoods in the city with almost nightly muggings and shootings just to save a few hundred dollars each month. Not understanding risk management looks bad for a finance professional!
  5. Drive a car that looks like a million dollars without spending that much. Yeah, sure, my first car – right out of graduate school – was a 2001 Honda Accord and we currently drive a 2018 Honda CR-V. All totally stealth-wealth-approved rides. But I have a confession to make: Between 2005 and 2018, I also owned two not-so frugal rides: In 2005 I bought a used 2001 Jaguar XJ8 for $21k. I sold it for $15k when I moved to San Francisco in 2008. And in 2009 I got a good deal on a used 2006 Jaguar XJ8L. I got it at just under 20,000 miles and for $29k (=$26k plus taxes and fees), i.e., it cost about as much as a brand-new Honda Accord or Toyota Camry at that time. Could I have squeezed out maybe $2,000 or $3,000 in additional savings and investments every year by driving a less-flashy car? Sure, but saving for FIRE was a lot more fun driving around on California’s Highway 1 in style with 8 cylinders, 300hp, and 19-inch chrome wheels! It was even in British Racing Green, the quintessential Jaguar color! It didn’t break the bank but I was sending the signal to everyone around me that I’m keeping up with the consumption rat race. All the while saving 50% of my net income. Mark another win for Stealth Frugality! And I hope I don’t get any hate mail about the gas guzzlers! Especially while living in San Francisco, we really only drove about 6,000 miles per year. I walked to work every day and we used the Jaguar mostly on the weekends!
A much younger-looking ERN with Kittycat 1.0 (2005-2008)
XJ8L Road Trip
Kittycat 2.0: 2009-2018. On a road trip to Lake Tahoe.

Conclusions

The lesson from today’s post: be frugal all you want, but most people also benefit from splurging a little bit and leaving at least a few strategic “breadcrumbs” to the outside world to signal a degree of “normalcy.” We certainly did that successfully and I presented some ideas here. Might not work for everybody, but maybe you’ll find some of them useful!

Do/did you practice Stealth Frugality? Looking forward to your comments and suggestions!

73 thoughts on “Stealth Frugality

  1. I really enjoyed this post despite it not being about options or SWR haha.

    It’s interesting timing this post came out just as my mindset has changed from extreme stealth wealth to stealth frugality.

    I relate most about having presentable clothes to signal to employers and clients. If anything, at least it gives one confidence which is picked up on by those around.

  2. Hallo Carsten, what a great post feels like you put a mirror in my own face besides the British green Jaguar driving a 911 S glacier blue air cooled Porsche:

    Stealth Frugality = frugality without looking and acting like a miser!

    Got here a super nice description for my own approach of a fat FIRE type retirement by flying below the radar and within my own means. Moved into a Sabbatical @ 50 two years ago and have no plans to go back into the corporate world.

    Luftgekühlte Grüße Grizzly

    1. Nice! Two European classics! That 911 S and maybe some other Southern German rides are also on my to-do/wishlist later in retirement! 🙂

      “Viel Glueck und viel Spass” with your extended/premanent sabbatical! 🙂

      1. Danke dir auch 😉 Extended Sabbatical hit the nail on the head and avoids a ton of other questions …
        Cherry on the cake still getting a salary and therefore really don’t mind if it last still for a while!

        In summary:
        I’m on an extended paid Sabbatical leave enjoying a frugality stealth livestile 😎

  3. Oh I needed this post right now, so thank you! We spent the last 7 years being somewhat extreme on the stealth wealth scale–including driving a 20-year-old VW Golf with no A/C–and put a ton of money away in the process. But we just moved to Germany with the military and bought a new BMW X1, and we’re struggling with how out of character that is for us. But it was legitimately the best option we had (which weren’t many, at least not if we want to ship a car back to the States later!) in light of our anticipated needs in the coming years. Whenever family visits, we plan to say we’re borrowing from a friend though, because it would create a perception for them that we don’t want. Our concern is having family members expecting handouts or friends expecting us to be down with overpriced restaurants and activities. In other words, we’re trying to be super-stealth-wealth in some circles while just stealth-frugal in others.

    1. It took me a while to get comfortable driving around our Mercedes E350 Wagon and not feeling like everyone is looking at me… But in the end, it’s a choice that we feel is good for us (see my reply below), and that’s what matters. And TBH, these days, an E350 does not really stand out as a truly “luxury” vehicle. I’m amazed (in Houston) at how many people drive luxury vehicles, or Platinum F150 or F250s that cost more than a new E350! Also, you’re in Germany, and I can attest that it is much nicer driving a BMW/Mercedes around than a cheap Renault, VW, etc. ; )

      1. Exactly! Buying a new BMW (or even worse: leasing) when people just finish college is irresponsible. A little bit later in life, with a higher salary, it’s a smart choice to get a fancier ride when buying used.
        Not that I dislike our Honda, but we might upgrade again to a car from Southern Germany when Kati goes off to college in 2032 and gets the Honda. 🙂

    2. Welcome to Germany. I hope you enjoy your time here. BMW X1 won’t make you appear too wealthy here , so don’t worry ;-).

    3. Thanks! Yes, it’s OK to splurge a little bit. One excuse could be that the X1 is probably a bit more affordable when you buy it directly in Germany. So that might work as a cover story when folks visit and notice the shiny new wheels! 🙂
      We never felt that the V8 Jaguar implied we have to pick up expensive restaurant tabs for visitors. And: even with the Jag we would often bring packed lunches!

    1. Yeah, it’s in the back of my mind. I will talk to Brad and Jonathan (ChooseFI) about economics, including inflation tomorrow. I hope I get so say everything I need to. Maybe I will still write a supplemental blog post about inflation. We will see! 🙂

  4. I’ve never thought of things this way. In that 4-quadrant diagram, I’ve been trying so hard my whole life to avoid that right side.

    I clearly have some work to do. A lot of the clothes I wear are ill-fitting hand-me-downs. Also, had to learn the “frugality is a job market liability” the hard way myself, albeit not in the same way. But I took my last job right when we had our first child, and it went against our plan for my wife to work while I watched the kids, so I negotiated hard for a 30-hour work week.

    I was proud of that, but it did hamper my career, and it didn’t help that as I got raises, I worked to cut my work responsibilities to the point where a colleague commented that my labor supply curve bent backwards — whenever I got a raise, I worked *fewer* hours to spend with the family.

    I was actually proud of that for a while as well, but when a position opened up that I thought was perfect for me, I was passed over for it, and in hindsight it is very obvious why. I wasn’t stealth about my intentions at all.

    Great post. Wish I’d read it years ago.

    1. Yeah, those are the corporate realities. Anything that looks odd can hurt your job and promotion prospects. Not the end of the world when you plan to FIRE anyway, but still a constraint!
      Thanks for sharing!

  5. Love the Jaguar! That is one iconic car that I would love to own. Jazz and I have a 2014 Mercedes E350 Wagon 4Matic. Bought for $35k used ($29k after trade-in) and it’s the safest, sportiest, practical, comfortable, fun car to drive I’ve ever had. A bit more $ on the upkeep vs a Toyota Camry, but nothing that would affect our plans. I would love to own an 80’s or early 90’s Jaguar, BMW, or Mercedes, but I worry about the safety. They were the safest cars when they came out, but I doubt they would stand up to a jacked-up F250 t-boning them… And with the kids, can’t bring myself to make that trade-off…

  6. I like this because it’s how I view my FI journey now which is to be okay with spending money to enjoy things. We splurge on travel and the house. I haven’t decided if I want to spend $200k on a renovation but our house is super outdated and one reason we got it is because it has a lot of potential. Also if I’m going to be here for 15 years while the kids grow up, it would suck to have to make all the updates before selling and then not even get to enjoy them. Because it’s very likely we will not get a higher offer than we could if we didn’t update some critical things like the master bath and kitchen, they are just super outdated and the master bath in particular has a raised tub with rusty faucets. It looks terrible lol.

    But in other areas we save, like on furnishings, toys, clothes, cars, etc. I spent about $10k last year on home projects another $20k on a used minivan and we still hit 50% savings rate. That makes me feel okay with splurging on DIY projects and remodeling.

  7. Love this concept. While some of our value areas are different, this is pretty aligned with our spending philosophy has been… just trying to look normal. Not rich, not poor. We’ve tried to keep it classy enough to continue progressing professionally, while not falling into lifestyle inflation. But also spending in the areas we value along the journey to financial independence so that we can actually enjoy it. Life is short. Great post.

  8. Thanks for yet another great post!

    I found myself chuckling about the “ego” elements people get caught up in (or don’t) on their way to FI. For the record I have had many. Set aside being weird and think about how much of what we purchase is based on projection? If you didn’t feel the need (desert island mode living) to present to anyone an image what would you actually spend on? My guess is that many of our very important purchases would seem a tad silly. Once my wife and I recognized that much of what we were getting caught up in from a purchasing stand point was made up by local societal norms fabricated in large part by a massive marketing machine, well lets just say it got interesting. The part of our personal story I find very ironic is that we are now the wealthy ones and could legitimately consume at a very high level but don’t. In short don’t be weird, stay humble, stay stealthy, forget about the silly messaging trying to get into our wallets, it will ultimately rob us of our freedom.

    PS As mentioned above I would love to hear the ERN take on the inflation question. Transitory or here to stay?

    1. Thanks for sharing! Yes, a lot of spending is conspicuous consumption. Pushed by the marketing machine.
      Part of stealth frugality is then to “hack” the conspicuous consumption part and do it in a way that doesn’t bust the budget. But part of it we genuinely enjoyed, i.e., taking the car for rides on the weekend. It would have been enjoyable for its own sake even if nobody saw us. 🙂

  9. I do live in Germany. My path to fi(re) started from trying to live a more sustainable life to preserve the world for my kids. So spending less (on things not really needed) turned out to be a win win situation. So whenever discussion comes to why we have only on car, why we do not have the latest Iphones or do not travel around the world, i just say it is because we want to live a more sustainable life and this is true (and fun of course).

    1. That’s a good point. And I made that same suggestion if the question ever came up (it didn’t come up very often). People always knew me as an “outdoorsy” person and I could make that point credibly!

  10. I drive E350 2008 4 matic – Awesome beast!! I an in line with Karsten train of thought. I did have also 2003 Honda Accord. So many similarities – very cool.

  11. Stealth Frugality – a great new phrase in the community! I love your chart, too! Thanks for the shoutout on my Stealth Wealth post, though I would agree with you that we were more along the lines of “Stealth Frugality” (gees, why didn’t I think of that phrase?). Great post, and a great reminder that it’s important to enjoy life as you live it.

    1. Yeah, strange nobody else had used the phrase. This post had been sitting in my “draft” folder for a while and I was always afraid someone would beat me to it!
      Thanks for stopping by, buddy! 🙂

  12. When you are running a billion dollar company in a small town there is no stealth anything. Literally everyone knows your name. Your face is constantly in the paper and sometimes on television. When everyone assumes you are rich then you actually can be frugal and nobody notices. The company provided my cars and most people never saw my modest house out in the country. They knew I was successful and if my bass boat was not as nice as their’s they just chalked it up to my being eccentric. All my relatives were financially well off so they weren’t interested in our money. My job provided more than enough status so I never felt any pressure to impress anyone with my spending.

  13. Inflation cannot be predicted, almost exactly the same way the S&P500 cannot be predicted.

    But you can predict pitfalls, and avoid those first.

    Is inversion a good approach? Is it a good approach to ask: what would I do if I wanted to maximize the destruction of purchasing power?

    Put $100,000 of cash in a plastic bag.
    Put $100,000 of cash in a wet plastic bag.

    Put $100,000 of cash into 30-year Treasuries.

  14. Dude, I can so relate to this post. Spent most of my career with a big name investment bank then a hedge fund but lived with the “prudently frugal, selectively extravagant” mentality long before we ever heard that term. Just our style, and we were confident in it.

  15. I hope your Tenderloin friend is doing ok. That hood has gone from bad to worse and now other parts of SF are slowly becoming the new Tenderloin.

    Glad you are enjoying your new home. And Stealth Frugality for the win!

  16. Just out of curiosity I googled Ferragamo since I never heard of the brand and $480 for a shirt? $200 for a tie? Even the fashion models in their website look sad !
    No wonder people want to FIRE asap. All this BS in the corporate world is something I wouldn’t do for a million dollar bonus, period.

    1. That’s the trick! Don’t wear a Ferragamo shirt. Wear a plain white non-brand shirt plus a Ferragamo tie. Equally (or even more) recognizable. But much cheaper. I remember $120-$150 for a tie back then.

  17. Does this post mean the top is in for the stock market and we’ll soon be back to talking about the need for 3.25%WRs and ? 🙂

    In all seriousness though, there are some people like Jacob Lund Fisher who say cut all spending beyond the point where it hurts so you can lean FIRE on $500k in 5 years and preserve the best years of your life for your own hopefully inexpensive purposes, and then there are those who live fairly normal American lifestyles full of waste and overconsumption – each such decision delivering only the most marginal of benefits – who will retire in their 60’s as multimillionaires due to a layoff.

    Who’s right or where’s the ideal middle ground? It probably depends a lot on the particulars of one’s job. If I were consulting a sanitation worker or a construction worker, I’d definitely advise a fast-FIRE upper-left quadrant lifestyle, because every day on the job means more exposure to toxins and more risk of a disabling or deadly injury. Likewise, if a young knowledge worker who loves their job and has an insane salary and high employability wants to live like an aristocrat and retire in their late 50s instead of their 30s, then I suppose that’s fine for them, although I am suspicious of a value set that trades time for fancier manufactured objects.

    Penny wise and pound foolish may also vary. A developer working from home would be wasting money on fancy clothes or cars, but a realtor or financial sales person would not. Similarly, a tradesman had better invest in quality tools.

    1. Yes, all good points. For the white collar office workers, you can have a more relaxed accumulation schedule.
      And who knows, maybe the future of finance is now all Zoom meetings and you don’t have to look that sharp. Maybe put on a nice tie. But save $$$ on the fancy shoes! 🙂

  18. Can I get away continuing to drive my 2002 BMW 530i? She’s an older girl but she is still in pretty good shape. I got a new six-figure job where I am “the boss” so wondering if I should be driving something perhaps 3-5 years old to not look too frugal.

    1. Yes!!! It’s a classic. If it’s well maintained it might even add to the mystique and show how refined you are. Though, a 2002 Jag XJ8 or Porsche 911 would likely work slightly better. 🙂

  19. This is an interesting concept! I’ve heard of “Stealth Wealth,” but if you’re in a customer-facing role in a white-collar profession, “Stealth Frugality” makes more sense for that circumstance.

    Very thought-provoking piece!

  20. I of course love your highly technical content that challenges my left brain, but these more personal entries with simple, practical tips and anecdotes are also a joy to read. And who doesn’t love a pic of Big Ern rocking his Jags? Thanks so much for your years of hard work in providing all this content to the FI community. It was my pleasure to nominate you for some PLUTUS awards – and I just opened my M1 account with you link. The absolute least I could do to show you some appreciation and gratitude!

  21. Good article, Big ERN.

    >Corporations are in the business of consumerism!

    That is true, Particularly on the marketing side ,
    On the finance side :
    I noticed spending control, budgets and cost reduction is common business practice, I understand why your employer want you
    to be depending on the paycheck,
    That should not distract us from noticing how they enforce budget limits and set cost cutting measures to know that when it comes to the bottom line it is about higher profit.

  22. I also prefer Stealth Frugality.. but I decided on a nice home in a private area vs a nice car.. but then again, no one ever saw my car.
    Also, Stealth Frugality is way better than Stealth Wealth, for Stealth Wealth sometimes leads to being Scrooge !!!

    1. Nice! Depends on preferences. Between the two, I certainly also prefer a nicer house over a fancy car. But we did have a nice place in SF. Walking distance to work and 1150 sqft, which is a large apartment in SF!

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