Living A Frugal Life - Rupert Abaday*
This week we have a Money Story full of hot takes and contrarian ideas. Rupert Abaday* talks about living an extremely frugal life but why he spends on healthy food. He also tells us why he thinks an MBA from Wharton is a waste of money.
Occupation: Senior Product Manager
Salary Range: $150K - $200K
Location: New York City
Student Loans/Debt: N/A (grad school loans paid off)
Monthly Expenses: $500-$1,000 on food, transportation, living expenses excluding rent
Kavya: Tell me a little bit about yourself? Where did you go to college and when did you graduate?
Rupert: I was a first-generation college student. My parents weren't poor but they were super frugal. On their dates, they would go to the donut shop in the afternoon when they had a 50% off deal. So they instilled that frugality in me at an early age and I honestly became even more frugal than them.
My parents were self-made millionaires with no college degrees so they thought I didn't need to go either. However, I wanted to know what college was like so I went on college confidential and self-taught myself everything I needed to know about college. I ended up getting into Dartmouth but the tuition was way too expensive so I ended up going to Indiana University as it was in-state and saved a lot of money.
To get an idea of how frugal I am, during my first year of college we were required to get a meal plan. That plan ended up lasting me 2 full years since I took advantage of every free food opportunity on campus. After college, I joined the workforce for a few years and then a couple of years later got an MBA from Wharton.
Kavya: What was the transition like for you from undergrad to post-grad life?
The big thing that hits everyone is lifestyle creep. Instead of getting a taco at Taco Bell you level up and get the Chalupa. I realized early on that if I follow this past of lifestyle creep, I’m never going to be happy. Ultimately happiness is an emotion that you 100% control, and I chose to be content and happy with what I had in life.
Even today, despite having earned a ton of money, I still choose to live a very frugal life. I refuse to eat at McDonald’s unless I can use a coupon on my order.
Over the years, I’ve learned that my health is the #1 thing that matters. So now my largest expenses after basic living expenses are on my nutrition and my health. Spending money on high-quality food and ingredients is worth it to me.
Postgrad I learned, what's the point of working extremely hard and saving money if you are just killing your health by not taking care of your body. Later on, you'll just have to spend all that money you've saved up to fix your health.
Avoiding lifestyle creep is one of the best things I have done for myself.
Kavya: There’s a natural tendency to look at your peers and spend just like they are. Most people do tend to fall victim to lifestyle creep, how did you stay away?
Rupert: For me, it comes down to self-awareness and self-control.
Self-awareness comes from a deep understanding of price as a business major. I know that drinks are a total waste of money since they have a 90% profit margin. As I started cooking more, I realized that the steak at a restaurant is not that different from a steak you can make at home. At least for me the difference there doesn’t correlate with the difference in price.
Part B of self-awareness comes from an unconventional first-generation experience due to my dad being a degenerate gambler. Vegas loves you when you are a gambler so I’ve had $1,000 meals and flown on private jets when I was really young. Those life experiences showed me that those things were cool but also not as cool as I thought they were. I saw that happen again in life as well with my Wharton MBA experience. I worshipped the program and after getting in I realized it was just a label to some extent.
Essentially I learned that this normalization occurs when you enter a lifestyle. The lifestyle itself, no matter how much I leveled up, wasn’t the source of my happiness. These two buckets of experience in my life impacted my take on lifestyle creep.
Kavya: How did you figure out your own personal finances post-grad? How did you know what to do when it came to making the most of your salary and your benefits at work?
Rupert: I was a pro-Googler. Like most things in my life, I learned about the subject by diving deep into it and through experience.
If Graham Stephan existed when I was first learning, I would recommend people watching his YouTube videos. Not just the real estate videos, but the ones where he dives into personal finance concepts because what he tells you doesn't rely on a prestigious college degree or depend on luck. The principles of personal finance are astoundingly repeatable.
I am a very frugal person but having a budget when I was starting out to track my expenses and see where I was spending helped with scaling back my expenses even more.
Kavya: Why did you decide to go to grad school? Was that purely a career decision or a financial decision as well? Did you consider the financial ramifications of grad school, especially an MBA which can be a $200K investment?
Rupert: Honestly speaking, I knew it was a pretty stupid financial investing going in. It was more of an emotional decision related to my career. I knew that going to Wharton would give me a big safety net but not necessarily guarantee a higher salary.
Because I have Wharton on my resume, I don’t have to worry about getting an interview for a job I’m interested in. However, I also have classmates who ended up choosing their highest paying job offer simply to justify going to such an expensive grad school. I also know of people who dropped out in the middle of grad school to start a company they were passionate about.
For me though, it was purely emotional. As a first-generation student, I not only wanted to go to college but also go to grad school.
Kavya: How did you handle paying for grad school? Did you have to take out loans?
Rupert: I did a few things to pay for school. I ended up buying a house for $50K that was about an hour outside of Wharton 3 years before I went to Wharton. I lived in the basement of the house and rented out the two bedrooms upstairs. So essentially for the 5 years, I was in that house I paid no rent which saved me a ton of money. Of course, there were some pretty big tradeoffs that I had to make there. Not only is there compound interest but your decisions also compound. I ended up selling that house last year for $80K.
The profits I’ve made from the stock market allowed me to pay for my tuition and grad school expenses. I did take out student loans but the exit for the startup I built, allowed me to pay off my remaining student loans in one fell swoop.
I hate to give advice that is not replicable, as most of this is my personal experience where luck played a huge role. Something you can take away from this is making tough decisions that saved me money.
I did not go on any school trips during my MBA. Some of my friends will completely disagree with me by saying these trips were THE way they developed close bonds with their classmates. I strongly disagree with this statement as I was able to form close bonds with my classmates in many other ways (organizations, clubs, projects, etc.) The burden of carrying more in student loans was not worth it as these trips cost thousands of dollars.
Kavya: What does your current financial system look like? What recommendations do you have for those building their own systems?
Rupert: All my money flows into my checking account and then goes elsewhere. For people reading this, I would recommend siphoning money into an HYSA, retirement accounts, and diversify as much as possible. Automate everything you possibly can, take advantage of an employer match for a 401K, and use your HSA.
Personally, most of my money goes into my stock portfolio. Currently, I’m extremely bullish on Tesla and SpaceX and other stocks. I would NOT recommend anyone reading this to copy my strategy of putting most of their money into certain stocks. Here’s why:
For me investing is a passion. I spend a ton of my time diving into their intellectual property fillings, I talk to people who understand their business from the bottom up and I even have data on how many Tesla’s are being shipped out of their manufacturing centers each day. It’s insane how deep I go into this, but like I said it’s a passion, almost obsession of mine to dive deep into the companies I want to invest in.
I’m generally afraid of get-rich-quick schemes. In 2008 it was flipping homes after the recession, then it was MLMs, and now it’s hopping onto Robinhood and making quick trades to make as much as you can with little understanding of how things work.
You should have confidence in these strategies if you do want to take part in them. Confidence means a deep understanding of what you are getting into. If not, stick to diversifying your portfolio with target-date funds, using robo-advisors, or investing in ETFs and mutual funds.
If you are confident in your decisions when it comes to building your financial system you will be less upset when you lose money. You will make less emotional and reactive decisions and treat losses as a learning experience.
Kavya: How would you say your relationship with money has changed from college to now?
Rupert: I’ve learned that I can technically retire anytime I want. Yes, the number in my bank account informs this to some extent, but a big part of that is also an awareness of our extremely globalized world.
My parents are currently building a fully-decked out beachfront property in the Philippines for $200,000 whereas the same property would cost millions of dollars in the US. In the US, you could get a huge property on the outskirts of midwestern cities that would cost you millions of dollars in coastal cities.
A $200 Argentinian meal in NYC would only cost you a few dollars in Argentina so if you visited, you would be able to have the same meal a few times over.
Retirement technically is being able to live on less money than you are bringing in each month. You’d be surprised how low this number can be based on simple lifestyle changes you make.
Also recognizing that you can quite easily never be happy with what you have if you keep comparing yourself with those around you. Sounds cliche but it’s extremely true that you can’t put a price on some of the best things in life such as a healthy, loving relationship.
Kavya: What are some mistakes you’ve made when managing your money?
Rupert: There have been moments where I’ve been really arrogant about my understanding of stocks and have taken some really expensive bets. I surely am my father’s son in this way.
Not spending money on healthy food and eating crap during college and for a few years after was a very expensive mistake. I became overweight and I’ll probably be paying for the ramifications of that later down the line.
What credit cards do you own and why did you get those ones?
Costco Credit Card because I’m a Costco addict. I also get 3% cashback from eating out at restaurants when I use that card.
Southwest Credit Card for travel expenses and to get free flights from those rewards.
I am getting married soon so I got the Hilton Aspire card to use the bonus points to pay for my honeymoon.
How much of your income do you save annually? Can you break it down amongst different financial vehicles?
5-8% of my income goes to rent
3-4% goes to food
6% to hit the match for my 401K
(70-80%) goes to general invests and savings - I’m on the extreme end here, I go all in for my investments
remaining for general expenses & sits in my bank account
What tools/apps/services do you use to manage your money?
Charles Schwab, Reddit & Seeking Alpha
Reddit is where I go to deep dive into stocks. I don’t read what financial analysts say. Instead, if I want to invest in a solar panel company, I go and read the forums where these solar panel installers are talking about their issues and what they like/dislike about different solar panels.
I assume I’m an idiot about these companies and their products, so I dive into their customer’s opinions. Your financial models are only going to be as good as your inputs so I make sure to have the best inputs as possible before going in on a stock.
*name changed for privacy
Most personal finance blogs only share stories of the people who have it all under control, save 50% of their income, and retire early. While that is impressive, some of us want a career and some of us just need our almond matcha latte every morning. However, we all still face the same woes when it comes to managing our personal finances. MoneyStories is a series of interviews with young professionals and recent graduates sharing their stories on how they have and are navigating their personal finances.
Disclaimer: Views, thoughts, and opinions expressed in the text belong solely to the interviewee, not the author, and not necessarily to the author’s employer, organization, committee, or any other group or individual.