What’s the first thing you do when finances are a little tight? You likely start pinching your pennies and practicing frugality as much as possible.
Maybe it was skipping a night out with friends. Maybe you started clipping coupons. Or maybe you decided to stop spending money on clothing.
Frugality is a tool for improved finances, but how well does it work? Does it really make sense to spend hours couponing to save a few dollars or holding off on buying something until you desperately need it? Does saving a few dollars ocassionally really matter in the long-term?
Though it doesn’t always feel worth it, frugality is an extremely helpful financial tool for the long-term. And here is why.
Frugality Is a Quick Method
When it comes down to it, frugality is saving a little money here, and a little money there. Wouldn’t it make more sense financially to focus on creating more income, investing, or paying off debt?
We all have (or should have) major financial goals that include things like making more money, saving more, or getting out of debt. Probably none of us have a goal to save $10,000 from clipping coupons in our lifetime.
Frugality may not be a goal in itself, but it a tool to help us achieve our long-term financial goals.
Saving major money and making more money is the key to financial success. But those tactics are long-term. You may want to make more money by starting a business on the side. While that is you should definitely consider doing, it can take considerable time to build a successful business. It can take years to pay off debt. It takes decades for your investment accounts to grow significantly.
But frugality means putting dollars back in your pocket right now. You have control of how much money you are able to free-up so you can instead use it to meet your long-term financial goals. You don’t have complete control over bank rates or interest rates, but you do have control on how much you can save on your regular spending.
So with all of this, frugality is a tool that allows you to free up your monetary resources to meet your financial goals much more quickly than you could without practicing frugality.
Everyone Can Benefit From Frugality (To a Degree)
No matter your income, you can benefit from frugality.
People tend to think that frugality loses worth as your income grows higher. And, actually, this is true. But that doesn’t mean it is worthless.
While the idea that frugality loses worth as an income grows higher, let’s look at it objectively.
Compare two people, one who makes $25,000 a year and one who makes $100,000 a year, respectively. They both regularly buy shampoo that is $4.99, but they used a coupon for $1.00 off. The lower income earner saved 1/25,000 of their salary, while the higher earner only saved 1/100,000 of their salary by using the coupon.
So the higher earner saved much less in proportion with their income.
Simple, right?
But just because the higher earner isn’t benefiting as much from frugality doesn’t mean they shouldn’t practice it.
Think of all the things you do (or know you could do) to practice being frugal. You could go out less. You could adjust the thermostat in the summer. You could look for a cheaper cell phone plan.
Frugality doesn’t have to mean simply penny-pinching. The actual definition of frugality from Dictionary.com is “being prudent in saving; the lack of wastefulness.”
Who wouldn’t want to be frugal with that definition?! I don’t know about you, but I care immensely about saving and I don’t want to waste my money.
Frugality has something to offer everyone, no matter your income. Because being conservative with our money now results in a more successful financial future.
Frugality Has Limits
As we’ve seen, frugality is a very strong tool to be used to improve your finances. If frugality had one downfall, it’s that you can only be so frugal.
Unfortunately, there is a limit to how much money you can save on a service or product. It gets to a point where you can’t apply any more coupons, or you keep the air off all summer so you can’t save money on that.
While it is very possible to maintain the same level of frugality, there is a point where you simply cannot save any more money.
Being frugal won’t get you rich. It is an extremely useful tool to turbo charge your financial goals, but it can only get you so far.
Frugality Forces You to Prioritize Your Spending
Finally, and perhaps most importantly, frugality forces you to prioritize and reexamine your spending, which is imperative for long-term success.
Reducing wasteful spending means pinpointing where your money is going in the first place. A commitment to frugality means a commitment to constantly keeping your budget in check and deciding what areas you can cut back.
This habit is key to lifelong financial wellness. No matter how much income you have, you will always need to be prioritizing your spending, and frugality does just that.
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So is frugality really worth it in the long-term? I definitely think so.
Frugality isn’t the the secret to financial success, but it certainly gives you the means to get there quickly. By constantly practicing some level of frugality, you will be able to get out of debt and start saving for the future faster than you could imagine.
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Frugality has become a lifestyle for me and my family. It’s supercharged our financial goals and helped us pay off debt faster. And, as you stated, it forces us to pay attention to our money and spend more intentionally. I also believe it helps me focus on the most important things – my time and the people in my life.
Love to hear that!
My wife is the key to our frugality. She is constantly looking for ways to cut our expenses and squeeze an extra dollar out of every purchase. Plus it doesn’t take that much extra work with what she is doing. Having a plan before we buy things has definitely cut down on unnecessary purchases and I believe will definitely help us reach FIRE a couple of years earlier than we probably would have.
Glad to hear. Planning ahead isn’t always easy but when I don’t plan ahead, my spending is out of control!
agree with the enitre post!
Thanks, Giulia!
Nice way of looking at this Rach! I like how you’ve mentioned it as a tool rather than the goal in itself..
It’s a different perspective and a great discipline to have :)
Great to read how others view terms that are talked about a lot in the personal finance space!
Thanks, Jef! :)
Your definition of frugality is spot-on: a prudent saving plan. Small money-saving choices can add up over time and help people meet their financial resolutions faster; whether it’s paying off debt, improving a credit score or buying a home.
Agreed! The little money moves add up, too!
“Frugality”–which, by the way, now refers to a lifestyle that was normal 50 years ago and luxurious 100+ years ago–has helped us live one income which traveling, having kids, and paying off all debt. You can’t save what you don’t earn. So it’s limit is directly tied to earnings. But I think equating frugality with “saving a few dollars” is a misnomer, as you showed. Great post!
Thanks, Kalie! And how amazing that you’re able to do all of that! What an inspiration.
I think frugality works in the long-term if you think of it as a value based lifestyle versus deprivation and sacrifice. Frugality and cheapness are often used interchangeably but I think they are very different. Being frugal to me means spending on things that actually bring value as well as being smart with my money. I live a frugal life but rarely do I feel like I’m missing out.
I love that explanation! I too live frugal, more in that I really consider and think about my purchases versus being just plain cheap. Thanks for your input, Andrew!
Speaking as a long time frugalista, it really does help long term, and for a reason that’s hard to see from the starting line. Being frugal becomes a habit. That habit not only ensures that you’re ALWAYS aware of “your means”, aka the amount of money you actually have, but also what it means to live with in them.
The other part that comes into play organically over time is that being frugal eventually morphs into a lifelong understanding of what I call MER, Minimum Effective Response. you learn what is worth spending more on because not everything is. Sure, cut crystal salt and pepper shakers would look great, but really no one actually cares about them as long as they dispense salt and pepper, on the other hand, your mattress can be a game changer.
Then maybe there comes the day when you CAN afford to buy whatever you want, and if you’re anything like me, you’ll find that decades of thoughtful frugality (not self denial, not stringent discipline 24-7-365) have left you with a very good idea of who you are and what you actually like and care about. And not EVER bothering to keep up with the Joneses can indeed make you rich over time.
Thanks for your comment, Theresa! From people I’ve talked to, they can’t see the benefit of frugality until they’ve been practicing it for awhile. It really is a lifestyle change!