How do you react when you hear the word frugality? Does it have a negative connotation? Do you equate it with being cheap or having a scarcity mindset? My guest this week explains what frugality is all about and shows us how we can develop an abundance mindset. Aaron Nannini, founded the website, Cash Uncomplicated, and is the author of the book by the same name. Through his blog and his book, he helps people achieve financial harmony while maintaining their lifestyle and happiness.

Welcome to the Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. Our sponsor, Wealthsimple, believes that financial independence should be available to anyone. That’s why they have no account minimums, meaning you can get started investing for as little as one dollar. Don’t delay any longer. Invest online by visiting maplemoney.com/wealthsimple today. Now, let’s chat with Aaron…

Tom: Hi, Aaron. Welcome to the Maple Money Show.

Aaron: Hey, thanks for having me, Tom.

Tom: Thanks for being on. You have a new book out called, Cash Uncomplicated. One of the interesting things I took from it was this challenge to what spending really is. I hear a lot of times being in personal finance, podcasts, blogs and everything, the topic of frugality comes across as restricting everything where you’re putting all your money away for retirement. And that’s not really the case, is it?

Aaron: I don’t think it is. I really look at frugality as making choices. You’re looking at choices of what you value in your life. For example, I value going on vacations and taking trips so that’s one of the things that I’m willing to spend money on. And that’s really a non-negotiable for me. I’m not going to penny-pinch on that just to save a few bucks. Then I think there’s a misnomer that frugality means that you’re cheap and you’re not going to do anything. When in reality, frugality means really deeply assessing your values and what you care about and then spending on those things. That’s what that means to me.

Tom: One of the things I struggle with sometimes—and I think a lot of other people might get wrong too, is how to assess your values in a meaningful way towards your spending? It kind of comes down to this idea of what’s a need, what’s a want and how much do you really want it? If you were just setting goals on what you’re willing to spend on, you could say, “I really want a mansion and to travel twice a month every year.” How do you decide what your values are and set goals that are realistic?

Aaron: I think that’s a little bit of a challenging question because life kind of gets in the way too, right? We get busy with work. We get busy with our kids, with our social lives. And the next thing you know, a few years have gone by and you’re left wondering what you’ve spent your money on. I really think it challenges us to take a pause and to think deeply about what we really do value. I ask people to write down four or five things that you really do value. I think a lot of people first write down family experiences, being in good health. And a lot of times buying a brand new car with a $600 or $700 car payment doesn’t really align with that. The second part of your question, I think, is what’s realistic? I mean value buying a $95 million mansion but right now that’s not really in the cards. I think part of that assessment is realistically looking at what you can’t have. I hate to get into like a scarcity mindset because I really look at that abundance to mindset. If you really do value having a very expensive home in the two, three or four million dollar range, find a way to achieve that. It’s something maybe not everyone can do but I think when you get into that $90 million plus of this mega mansion, that’s where you have to kind of look deeper and say, “Right now I make $15 an hour. Am I really going to be able to do that? And if so, how?”

Tom: I want to get back to abundance mindset too. But thinking of these values and how it might change how you look at your spending, I think another nice step in this is writing down those four to five things. When you review that after, you can kind of start to look at what’s not in there. Like you said, the expensive car, etc. Maybe you have some of these things or considered some as a need or important enough want, but you didn’t put it down on your values. How do you see people using that information?

Aaron: I think that happens a lot. People are kind of surprised when they write down what their values are. They’ll see that top five (like you mentioned) of family, friends and experiences. Then they look at what their actual behavior is. They’re working until 6:00 or 7:00 o’clock at night so they can afford that large car payment. They’re getting take-out five, six nights a week, which is costing them $40 or $50 a pop. They look back and think, “My behavior doesn’t really align with my values.” I think that’s where it’s time to make some changes and kind of look deeply at those values and say, “How can I change my behavior to fit what I really do value?” That may mean cutting down on work a little bit. It could mean selling that car and getting something a little more affordable where you don’t have the stress of those payments. Because I don’t think many people say I value having stress with money. That’s just not something people do. But then we go out and we buy a bunch of stuff and put that stress upon us.

Tom: What you just said reminds me a lot of when I was in a regular corporate environment. There was this kind of vicious cycle of working really hard, working extra—and on salary so it’s not even overtime. You’re working extra to impress your boss or whatever it is and then you’re treating yourself with happy hours. And if you’re into something more on the salesy side, then there’s fancy office clothes and fancy cars to go with that. It just seems like a nasty cycle of working just to be impressive at work. You’re not really getting anywhere.

Aaron: Right. It’s terrible to just tread water. We spend so much time working and that doesn’t include just our work. It includes getting up in the morning, getting ready, getting to our car, driving to work. And if you think about it, that commute oftentimes is at least an hour plus, round trip. So we’re putting all this time in and spending time away from our families. Then at the end of the month, if we’re not coming out ahead, we’re kind of disrespecting ourselves. If you’re putting all that time in and taking away time from some of the things you really like to do—time with family and friends, you really should have something to show for it financially in addition to the intrinsic motivation you’re getting from work and some of those rewards as well. You should have a financial win every month as well.

Tom: If someone looks at these numbers and realizes they are just spinning their wheels and kind of going paycheck-to-paycheck, what would your advice be? One of the things I’m thinking is sometimes maybe that highest salary doesn’t matter if you’re putting in those extra hours and really not getting ahead anyways.

Aaron: I did the same thing for a long time, especially throughout my 20s and early 30s. I was that classic paycheck-to-paycheck story. I was just putting in the hours, working hard, doing well in my job, but I wasn’t really coming out ahead financially. You get into that mode where you’re busy and (as you said) you’re going to happy hour. It just kind of repeats. You’re doing the same thing over and over. The next thing you know, a year or two goes by, five years go by and you see you’ve only saved $5,000 or less than that. That’s where I think it just kind of helps to press that pause button. That’s what I’m hoping the takeaway from my book is, that pause button. It’s where people can look back and say, “Wait a minute, what am I doing? Why am I spending all this money? How can I start to bank a little bit more?”

Tom: I had that moment too. I’m surprised anyone liked me at work because when people were going out for lunch, I was bringing my lunch. I was bringing in a little thermos of coffee instead of paying for the coffee they sold in the office building. I was skipping a lot of the happy hours—not all of them, but I wasn’t going as regularly as everyone else. It seems hard in an office kind of world. There is a “keeping up with the Joneses” mentality but you just seem to get nowhere. With the same people doing all these things, I would also hear the same excuses, “I have no money to save, to invest for retirement. I must not be making enough.” But it’s really not just how much you make, it’s also how you spend it.

Aaron: Exactly. I think you’re right. You make such a good point about that peer pressure because when we’re in a peer group of 10 or more people who are all doing the same thing, it’s kind of hard to be that outliner. People are wondering, “What’s this guy doing bringing his lunch every day,” or, “How come he’s not going out for coffee? He brings his own thermos.” I think it is kind of hard to do that. One thing I do to help combat that is I got started a little bit in real estate investing. I would tell them I was saving up for a down payment for my next property. And all of a sudden it became a little cooler to do that because they would see the methodology behind saving that money. Whereas, if you’re just seen as someone who’s not fun and not spending that money without reason they may wonder, “What’s this guy up to?”

Tom: And I guess that goes back to my opening point too, where if it looks like you’re not spending on anything, people do think, he’s not having any fun. Obviously, you can’t enjoy yourself without spending money. I make fun of it, but to some degree that’s true. Everybody must have something they would like to spend money on, even if it’s experiences and travel and such. There is always some use to that money other than just saving for retirement.

Aaron: Oh, for sure. Yeah, I agree. I think that’s where it kind of goes back to that value-based spending. For me, travel is a huge thing so I set aside money every year to specifically travel. That’s something I insist on doing and I would never want that money to roll over into my retirement because I think that’s where you transition to not living your life to the fullest. I really believe you can do both. You can save but also have fun and live for the moment, too.

Tom: Yes, we’ve touched on it, but just to make sure everybody understands, can you explain what value-based spending is?

Aaron: Sure. To me, that means to deeply assess what you really value. For me, value based spending is a process where the first thing you do is think about it—what do I value in my life? And then, write it down. That’s where I think a lot of people will really learn about themselves because they write down things that are not concurrent with their current behavior. Once you see it on paper, it’s really powerful and you might say, “Oh, my gosh, I wrote down these things but I don’t really live by any of these values right now.” Once you see it on paper and written it down, you’ve done the work. That’s where you can go back and make some of those behavioral changes. To me, that’s really what value-based spending is and why it’s so powerful. Rather than just someone like a financial advisor telling you, “Hey, you need to save 10 percent or 15 percent…” there is no huge, why, behind it. It’s just someone telling you what to do so you’re not likely to do it. But when you see what your “why” is and that you’ve created that, it’s a lot more powerful.

Tom: The other side of that, the wakeup call I think I had in my early 30s was actually tracking your spending and matching that up with your values. People have probably heard of the latte factor, this idea that that all these $5 coffees are going to ruin you… Maybe not. Again, it depends on what you value. Maybe you really like that fancy coffee, but if the cost of that coffee is so much per year, and its nowhere in your top 10 values. It’s something you’ve got to start to weigh and consider. Maybe one of your top values was making sure you had one decent vacation a year and you don’t even have a plan to save up for that. It’s the idea of looking at the facts of numbers and matching them up with those values.

Aaron: It’s funny you brought that up because I think a lot of people do value the coffee. I think they value the coffee, not necessarily the $5 coffee. People get into this habit of, going to go to the drive through for coffee because they did it yesterday and the day before. It just kind of becomes a routine and a habit. That’s where I think tracking your spending is so powerful because you see how much you’ve spent over the month on coffee.

Tom: I’m guilty of that too. A lot of people see these small transactions that don’t seem like a lot so you have to look at it monthly, annually, your lifetime—whatever makes it a big enough number to make you pause. How much of your retirement do you want to spend on coffee up until it? If you want to take that further, you could start looking at what you’d have if you started investing $5 a day. It will make you rethink those coffees pretty quick, I would think.

Aaron: For sure. And to me, it’s not even about the retirement. It’s more about that daily financial security of being out of the paycheck-to-paycheck and knowing you have a cushion. And if there’s a situation where you didn’t want to go to work anymore or couldn’t, you’ve got some financial runway. It’s not just that super tight money where you’ve got $100 left over every month or something less like that.

Tom: And to make it not all about retirement, too. If your top value is travel, that coffee might even equal the travel in a year. For anyone that really wants that coffee, I’m not saying they can’t because that’s the point of this whole value-based spending. You have to decide.

Aaron: You mentioned that latte factor. I know David Bach has written several books about that. One thing I’ve heard him say on podcasts too is, it’s not necessarily the coffee or the latte. Everyone has a latte or something equivalent. So for you, it might be a burger or lunch or something like that. And for other people, it might be getting a snack in the afternoon from the vending machine. But everyone’s got something that they probably don’t value that much. If you do that with coffee, get it. That’s no problem. But everyone’s kind of got that latte equivalent.

Tom: Exactly. Especially when it’s those small little transactions that you’re just not noticing.

Aaron: Exactly.

Tom: Now, I did want to get into the abundance mindset. I think I’ve mentioned on the podcast before, it’s something I still struggle with a bit. Sometimes it sounds too much like, The Secret, the book that came out where if you just will it, it will happen. Is it like that? Or does it set something in motion? What is abundance mindset and how does it work?

Aaron: Yeah, it’s funny you mention that because that’s something I’ve struggled with for a long time too. I heard that term and thought, “So what, if I think that I’ve got $1 million or that I can get it means I’m making that abundance,” I’m almost turned off by it. But the more I’ve read and heard from successful people, the more I’m starting to buy into it. With the abundance mindset, you’re giving your brain instructions of what you want. It is amazing how your mind will help you achieve that. As an example, if you say you wanted to be a real estate investor and own, say, 10 properties. Once you start telling that to people and putting it out into the world, you’re going to try to figure that out because it doesn’t feel good inside to not be reaching your goals, especially when you’ve told people. And so to me, that’s kind of what the abundance mindset goes to. If you’re putting this out into the world, then you’re going to find a way to get it. Just like you, that’s something I definitely struggled with for a long time. And but the more I read about it and the more successful people I heard say the same thing, I was thinking, “You know what? I’m not smarter than these people. They must know something that I don’t. And they’re all saying a similar thing. There’s probably something to this.”

Tom: What’s the other side of that? I heard you say scarcity mindset. What is that and how does it affect you?

Aaron: I think scarcity mindset is something I’ve definitely had before, too. That’s thinking that money is something that’s really hard to get. It’s something you just can’t go and earn. There’s only a limited amount. It’s something that’s not easily achievable. Also, with the scarcity mindset, I think it goes back to a lot of people saying those who have money have ripped people off in some way or stolen from somebody or taken from someone. To me, that goes to scarcity mindset too. The reality is, with abundance mindset money really is an infinite thing. You can earn as much as you can and you can only save a certain amount. They play off each other in that sense. The more I learn about it, the more I go towards that abundance side.

Tom: Speaking of the scarcity mindset, it reminds me of all these people I know in a corporate environment where it was very much, “This is what I make and this is what I’m stuck with.” I was there, too. Before I had my blog as a business, I didn’t see this idea of having something extra going on. There weren’t as many side gigs a decade ago. There weren’t Uber’s and everything else. I hope it’s more common now and people are seeing it now. But back then people would say, “What are you doing? And why are you doing it? Why don’t you watch TV in the evenings?” I guess that probably falls under that scarcity mindset where you just think one job is the only thing you do and there’s nowhere else to gain extra money from.

Aaron: That’s a great example. If you look at your online business, there’s so many different avenues of that of that blog with affiliate marketing, podcasting and with different networking events you can go to. Really, the opportunities for you are abundant and almost never ending. Whereas I think you’re right, someone with a scarcity mindset says, “I’ve got this W-2 job and it’s really the only skill I have. I really don’t want to lose it so I’m going to hold on as long as I can because that’s all I can do.”

Tom: Yeah, I try to encourage people as much as possible to do something else. There’s always something extra you can be doing around things you’re interested in, hopefully. Just get yourself out of that trap of having a single income and believing there is no other way to improve yourself. There’s no other way to feel a little more secure. Maybe I was following the abundance mindset without fully believing in it.

Aaron: I think you’re right. It’s so hard because a lot of us are raised in a way where you think, “I’m going to go to school, get a job and that’s pretty much it. I may try to save a little bit of money…” Whereas, like you were saying with your business, you’re able to branch out in so many different ways. With your skills, you can make money in more than one way. You’re not just limited to one thing. I think that definitely does go to that abundance versus scarcity.

Tom: Another thing you covered in your book was the idea of a spending assessment. Can you explain what that is and we’ll dive into it from there. I’ll let you explain what it is first.

Aaron: I have a spending assessment model which is basically a way to kind of break the momentum of the spending. We all have things that we want to buy so it kind of hits you at that moment when you get these rushes of dopamine thinking about a purchase. Without a spending assessment model, I really challenge people to kind of break that momentum. So go ahead, let that dopamine hit. You’re going to feel good for a minute. And at that point, take a pause. Don’t just immediately buy something. Try to let that wave go by. For some people, that might mean you’re going to wait 24 hours to make a purchase. For other people that might be 12 hours or. And again, for someone else it can be a week. I’ve heard a lot of different ways to do it but it’s basically just letting the momentum pass, getting a clear head and then reengaging in what you want to do. One thing I find really powerful is when you’re at a physical store. If you leave the store and decide to go back hours later to go purchase it, you probably really do want it and it’s something you really do value. It’s hard to go home, then get back in your car, go to the store and make the effort to go get it again. At that point, I think a lot of people just stay home because they didn’t want to purchase it that much.

Tom: That reminds me of one of my biggest weaknesses, Costco. To go into that store and see something that’s an amazing deal, it’s going to make me feel like I want it more than maybe I do. But at the same time, it’s not something I’m necessarily going to wait a week to decide because it might be gone by then. One thing I find myself doing on a smaller scale is, sometimes items go in the cart and by the time I worked my way through Costco—sometimes I buy it and sometimes I don’t. I will decide by the end of that trip. Is this something I actually want? Are we good here? There are smaller ways you can do it. Even in any physical store, I value my time too much. I like to be efficient. I think I would have trouble going home and then coming back.

Aaron: For me, I think it’s really just about breaking the momentum. Some people can just be in the store and put things back. But for others, who really have major impulse issues, they really do need that intervention of coming back to the store later or waiting a day or a week or something like that. Everyone knows who they are, what their strengths and weaknesses are. You can kind of cater that to yourself. As long as you’re finding a way to break that momentum, I think you’re good.

Tom: Another weakness of mine (beyond Costco) is Amazon. But I find it goes the other way there. I can actually do the spending assessment and truly wait days, weeks. Most things I find on Amazon, I just add to a wish list. Then it’s just sitting there. If I have a birthday coming up, great. I have some ideas for people. And if I decide I actually want the item and I’ve had it in the wish list a month ago and now I’m at the “need it” point, I find I’m buying from that wish list instead of all these direct purchases—this immediate satisfaction of, “I want it so I’m going to order it right now.”

Aaron: Interestingly, I haven’t heard that before but I think it’s a great idea. Do you find that the things you’re going back on the wish list are things you’re glad you purchased or they’re something you really do need?

Tom: Yeah. Truly, if I’m purchasing it, it’s probably something I need or at the very least I’ve decided I really want. I can recognize it’s a want, whether it’s for a hobby or something, it’s something I want to have. I can recognize it if it’s a need or a want. But if it’s a little bit more of a frivolous want, at least it’s in the list. I always get in trouble around birthdays and Christmases because I’m one of those guys that doesn’t want a whole lot. At least by having a few items that are at least halfway important in the list, then I’ve got some options for people.

Aaron: Well, everyone’s got their thing, right? That’s why I think value-based spending is so important. You can go back on your wish list and even though you know it’s a “want” there’s nothing wrong with that. We should get “wants” but it’s when you talk about those frivolous ones where you’re regretting it a couple of months later, I think that’s what you really want to avoid.

Tom: That’s where I was back in the late ‘90s, even early 2000s. Everything seemed immediate. I had to have the latest CD, VHS or DVD. I ended up with this huge media collections that I’m now trying to get rid of. So, yeah, I’ve been there where everything was immediate. With launch days for video games and stuff, there was there is no waiting for anything.

Aaron: Yeah, for sure.

Tom: Is there anything else we haven’t touched on that you think is important in relation to keeping your spending under control and knowing what you’re doing—knowing what you want to spend and need to spend on and doing the value-based spending?

Aaron: I think one thing I really recommend for everyone is the concept of paying yourself first because that really helps. If you’re able to allocate a certain amount of money, whether it be 10, 20, 30 percent or even 50 plus, if you’re being intentional with that by allocating money for your investments first, you have a little bit of wiggle room there to make some mistakes financially after that because you’ve already won the game up to that point. So, if you make a frivolous purchase or two it’s okay. It happens. But if you’re still saving 40 percent of your income (or whatever it may be) I think that’s a huge piece of it. To me, I almost look at that as “reverse budgeting” because you’re paying yourself first. You’re getting that win already in the month so whatever happens after that, as long as you’re not racking up debt, you’re still doing okay. That’s a big thing for me.

Tom: That’s great. And thanks for being on the show. I hope this makes people feel a little more comfortable that they can make purchases. It doesn’t have to be some baron spending where all you buy is groceries and pay bills. I hope people feel a bit of permission there. I like the idea of abundance mindset. I’m going to have to keep considering it and looking into it. Can you let people know about your book and where they can find you online for sure?

Aaron: Yeah, my book is called, Cash Uncomplicated. You can buy it anywhere books are sold—Amazon, Barnes Noble, and other major retailers as well. I have a website too, where I blog as well. It’s called, cashuncomplicated.com. From there you can email me. Reach out to me because I love talking personal finance with people. If you’ve got any comments and feedback or questions, please reach out to me. From the website you can also buy the book and do some other cool things. So, yeah, that’s the best way.

Tom: Sounds great. Thanks for being on the show.

Aaron: Yeah, I really appreciate it, Tom. I had a good time.

Thank you, Aaron, for explaining how the abundance mindset works and for sharing tips on how to shift towards a healthier mindset. You can find the show notes for this episode at maplemoney.com/143. Did you know you can watch videos from past episodes on our YouTube channel? If you’re interested, you can check them out at maplemoney.com/youtube. Make sure to hit the subscribe button while you’re there. As always, thank you for listening and be sure to come back next week when Chris Bellchambers joins us to discuss how people mentally get in their own way when it comes to investing. See you next week.