Her goal is to retire at 40 and live financially independent. In return, frugalists save up to 70 percent of their income.
The German software developer Oliver Noelting lives on 870 euros a month. The rest of his monthly income is saved. His goal is to gain financial freedom as early as possible. The 32-year-old is one of the most famous frugalists in Germany and also blogs about it.
The term “frugalism” comes from Latin and means something like “simple” or “frugal”. The trend towards a frugal and modest life began in 2008 at the time of the financial crisis in the USA.
There is now a large following in German-speaking countries. On the platform “frugaslisten.de”, people from the scene exchange ideas about saving tips and their life concepts. Essentially, it's about saving enough money so that you can retire as early as possible.
But the alternative concept of life should not represent a restriction, the frugalists are much more concerned with values such as independence, happiness and turning away from materialism. They are convinced that a happy life is possible with simple means.
Noelting either does not feel that he has to do without anything. He saves 60 percent of his income, as he revealed to the “Business Insider”. He lives with his girlfriend and their daughter in a 46 square meter two-room apartment. When things break, he fixes them.
“Material consumption doesn't make me happy. Other things make me happy: time with friends and family, sports, expanding my comfort zone,” the software developer explained to the “Standard”.
Noelting keeps a budget book and enters its income and expenses every month in an Excel spreadsheet. In his opinion, you can save a lot of money even with small steps, for example by changing the electricity provider or bringing lunch to the office yourself.
But how does the concept of frugalism actually work? Basically, it is about taking in as much as possible, spending as little as possible and investing profitably in addition.
Many people follow the four percent rule: if you only have to use up four percent of your savings annually, you can live on your wealth for at least 30 years – thanks to interest you don't need any income at all.
Another rule of thumb is that it takes about 25 times your annual spending to achieve financial independence. The prerequisite: the financial lifestyle does not change in the following years. As an example: if you can get by on 1,000 euros a month (12,000 a year), you would have to save and invest 300,000 euros (12,000 x 25).
This type of calculation comes from the Canadian Peter Adeney. He is considered a pioneer of the movement and caused a sensation as a blogger under the pseudonym “Mr. Money Mustache”. By the time he was 30, he had done enough to quit his job as a software engineer.
Frugalists use different investment strategies to achieve their goal. Because the level of the return plays an essential role. Many invest in real estate or stocks, while others prefer ETFs, i.e. funds that replicate a stock market index. Knowledge and knowledge of financial products are a prerequisite for this.
