In an era when consumerism is often glorified, when material success is often mistaken for person happiness, the concept of frugality may seem outdated, if not ugly. Nevertheless, frugality is not about deprivation. It does not mean denying oneself life’s pleasures or opting for a state of perpetual privation. Quite the opposite. It is about making purposeful, goal-oriented decisions that lead to sustained financial security and, ultimately, to a long and rewarding life. Frugality is thus a powerful tool at the disposal of personal-finance management. One that yields both short-term and medium- to long-term advantages that add up to a tangible improvement in the quality of one’s life. This article delves into why it is important to be a frugal person. It examines how being frugal will help improve person finance both in the short-term and in the distant future.
Understanding Frugality
Frugality is often seen through a narrow lens of mere ‘penny-pinching’ or symptomised by a general aversion, fear or reluctance to spend money – but what Iliffe calls value-based, as opposed to value-adding, decision-making is really at the heart of frugality: the art of allocating money in line with what you regard as your values. The frugal, far from being the least spenders, are likely to be the wisest spenders (not implying being a miser), being those whose money is being paid out in line with what grants them most value in life.
The Short-Term Benefits of Frugality
1. Increased Savings
Probably the most immediate payoff of having a frugal lifestyle is a sizable increase in savings. If you want to increase your savings, what you need to do is stop and think before committing to spending – be it on what brand of coffee to buy on your way to work or on the car you’d like to buy. Would splurging on lattes and a fancy car make you happy? Perhaps. Yet, realise that buying your own coffee and a sensible car would serve you well and your future self would definitely thank you for it. Some day. The accumulated savings come from those little skips here and there, like brewing your own coffee versus buying lattes from Starbucks. Or buying a home that’s one bedroom less than the mega-home you can theoretically afford.
2. Reduced Financial Stress
Stress comes from the fact that many of us live paycheck to paycheck. Frugality allows you to live on less, which is not only a great stress-reliever, but also helps you to build up a real financial cushion. Buying less stuff and saving more money can, when combined, have a snowball effect – unexpected expenses are less likely to cause panic, and in the worst-case of being laid off, you are less likely to have to resort to digging your way out of debt. Knowing that there is a cushion should you find yourself in a pickle is a source of peace.
3. Debt Reduction
For some, debt may be the biggest obstacle to being financially independent. Frugality is just one of the many ways to pay off debt or at least eliminate non-essential expenses and lower the amounts people owe. In this way, people can work towards financial independence by merely spending a little less or spending their money so that more goes toward paying off the debt. When people pay off their debts, they spend less money with the interest and thus increase their independence and financial freedom.
4. Enhanced Financial Discipline
The discipline it entails will often bleed over into other aspects of your personal finance – namely because you’ve already committed to showing yourself that you’re able to do it. Consequently, you’ll make better decisions about things such as budgeting, expense tracking and your overall financial planning – things that will be required for greater financial achievements further down the road.
5. Increased Awareness of Spending Habits
Frugality also drives us to become more aware of our money habits. Awareness is one of the basic building blocks for making better financial decisions. If we periodically add up where our money goes, we are likely to identify areas where we spend too much, and other areas where we could cut back without sacrificing what we enjoy in life. Awareness leads to more deliberate and thoughtful spending.
6. Opportunity to Focus on What Truly Matters
Once people adopt a frugal lifestyle, they discover that they begin to spend money more wisely and judiciously – putting it towards experiences and ‘stuff’ that gives them the most happiness and fulfilment. Freeing up your budget from unnecessary expenditures allows you to fund those things in life that you value most, be it travel, time with family and friends, or making investments in yourself. This can often result in a more satisfying and enjoyable life.
The Long-Term Benefits of Frugality
1. Financial Independence
The reward for lifelong frugality might be financial independence, the long-term benefit of keeping spending low and saving and investing wisely to become financially free. Financial independence gives you the opportunity to choose the life you want without having to answer to the demands of a daily paycheque and, ultimately, to reap the greatest reward of all.
2. Retirement Security
Not only will they increase their overall retirement security, but they’ll be able to give up working earlier and exit the rat race before they suffer from burnout due to long hours and job dissatisfaction. Greater saving means less time spending one’s life working, and more time to pursue the ‘good life’. If you don’t spend more than you save, you are halfway there. Another advantage that penny-pinchers have over members of spendthrift societies with their large pensions is that they will find it easier to live well on little. If frugal savers want, they will be able to enjoy the ‘good life’ even on a much reduced income they’ll have for retirement.
3. Generational Wealth
Frugality can also ensure generational wealth. Money well managed and possessions well amassed will leave descendants in a stronger financial position than their elders, giving their offspring an opportunity to create new sources of capital. Future generations will be encouraged to continue frugal habits that lay the foundations for yet more wealth.
4. Resilience During Economic Downturns
The pastry industry is booming, just ask French bakeries University students know that there are rhythms to the financial life. No matter what happens tomorrow, some form of a recession is a virtual guarantee. The shrewd thrift-saver can prepare for the bad times by keeping household spending down and bank accounts full. Cheaper ways to eat, swap and stain clothes, or avoid travel will make the difference for many people when their wages are slashed, markets convulse, and incomes disappear.
5. Ability to Pursue Passion Projects
Frugality that provides long-term financial security also frees us legally from certain constraints on our options in order to pursue passion projects or hobbies. Perhaps we want to start a non-profit organization or travel the world or devote several weeks a year to our art.
6. Sustainable Living and Environmental Impact
Frugality tends to be eco-friendly in two ways. First, frugal people often rely less on external resources, which can result in less environmental damage. Second, by consuming and using resources less, a sustainable mode of living becomes more likely since there can be fewer needs to be met and so the lifestyle is easier to maintain. A frugal ethic can also lead one to value the objects and resources they have more, reducing waste.
The Psychological Benefits of Frugality
1. Increased Sense of Control
Frugal acts help people feel firmly in control of their finances. If you make deliberate decisions about whether and how to spend, you are in charge of your financial destiny, not a victim of exogenous shocks. That feeling of control could translate into greater confidence in financial decision-making generally and greater self-esteem and empowerment overall.
2. Contentment and Gratitude
Moving into a smaller place, thriftier living, and eliminating inessential distractions can lead to greater ingratitude, and even an acceptance of scarcity. But an opposite effect can also hold true: when people cultivate a greater satisfaction, even a novel pleasure, for what they have and what they do, their gratitude can overflow into other aspects of their lives. Frugal living cultivates in some people a sense of peace with a barebones existence, a form of quietism that could be compatible with non-miserliness.
3. Reduced Materialism
Frugality forces a migration away from materialism and the tyranny of ‘things’ – acquiring the next new thing – and towards experiences, relationships and positive personal transformation, which ultimately make for a much happier life.
4. Mindful Consumption
Mindful consumption is in many ways the logical outcome of frugality. You learn that only by deciding, on an ongoing basis, what you really want, and what you do and don’t like, do you start to think meaningfully and deliberately about your life. And what you eat, where you choose to live, with whom you want to spend time on your spare days: these become part and parcel of that – delineators of your existence.
Practical Steps to Embrace Frugality
1. Create a Budget
A budget is an essential frugal tool. It helps keep track of income and expenses, therefore showing where more money can be put aside in the direction of savings and investments, and at the same time create a clear overview of what one’s financial priority are and where there is a danger of over-spending.
2. Prioritize Needs Over Wants
Impersonal, cold as an Andromedan’s heart and three times as hard, one of the cardinal virtues of parsimony is the ability to distinguish between needs and wants. Needs come first; then and only then can you splurge on a want, if, and only if, it adds appreciably greater value to your life. No fulfilment of a want can occur before you’ve taken care of the things you actually need. This is the core of financial discipline.
3. Embrace DIY Solutions
Frugality is a longer established element of the credo for many domestic cheapskates. Taking the DIY route is a great way of saving money – eating in rather than going out, fixing up basic home repairs, making home-made birthday cards and presents for friends and family, for example. Moreover, DIY ensures we master some useful skills and potentially feel more fulfilled as a result.
4. Shop Smart
Intelligent shopping such as shopping during sales, using coupons, buying things in bulk, and resisting the temptation to buy items we don’t need are examples of frugality. Paying attention to quality and durability when you do buy things is another part of this.
5. Limit Lifestyle Inflation
The down side of higher earnings is lifestyle inflation: when your income increases, it becomes more tempting to spend. Frugal people guard against this trap by sticking to their frugal life. They let their savings and investments benefit from higher earnings while keeping lifestyle inflation at
6. Cultivate Gratitude
One effective antidote to the consumer marketplace is gratitude. Just as the conscientious consumer rejects wastefulness and extravagance, the grateful individual resists the urge to overindulge and instead focuses on what is truly essential. She offers thanks for her blessings. That’s why regular meditation on ‘the counter-gifts’ – all the good and uplifting things in life that money simply cannot buy – can magnify the rewards of frugal living, and bring forth a sincere joy derived from an inner contentment with less.
Challenges of Frugality and How to Overcome Them
1. Social Pressure
The biggest social problem with frugality, in fact, is thwarting peer pressure: friends, family and, increasingly, society at large aren’t always ready to support frugal choices. So stay true to one’s own goals and values; share those with loved ones to mitigate misunderstandings.
2. Fear of Missing Out (FOMO)
FOMO {fear of missing out} can be a big barrier to being frugal. It’s easy to see other people spend on things you’re not. So, it’s always a good idea to remind yourself of the long-term benefits; think about how you’ve chosen to do something now that you’ll benefit from in the long-term. Or, find frugal ways to enjoy what people are doing. For example, if everyone’s eating out, host a potluck at your home instead and enjoy the same social activity but spend much less. Even better, go out and explore your local area — sometimes the free or low-cost activities on offer in a community are some of the most fun.
3. Initial Discomfort
There can be a short period of discomfort – particularly, I’d wager, in cases where spending habits are sharply curtailed – but this soon lessens. The rules of frugality become a part of our life, eventually feeling as comfortable and quite as our everyday patterns have been. It’s also helpful to keep in mind that future beneficiaries of these routines are watching.
4. Balancing Frugality and Enjoyment
Frugality doesn’t mean simply being deprived and miserable. You have to allow yourself to enjoy your life to some extent, which might mean letting go a little or finding less expensive ways of doing the things you love. But the spending should still serve a purpose that is in line with your values and financial goals.
Frugality is a powerful, effective and transformative approach to personal finance that delivers tangible rewards both short term and long, and creates barriers to future hard times. It empowers us to build wealth and indulge our indulgences in the knowledge that we need never work again.
Frugality makes us mindful and moral consumers who know the difference between desiring, needing and gratuitous indulgence. Frugality can make us a little discontent to the extent that, by seeking more affordable alternatives, we notice unhealthy gluttony in abundance.
But it also makes us grateful for the importance of the basics of life. In other words, frugality has the ability to make our lives richer and more sustainable. While there will be bumps along the road for those of us who shift to this mode, the financial and psychological rewards are likely to be excellent guides.
In a world where consumerism can seem ever-present and all-powerful, frugality can truly make us rich. That is rich in every sense of the word.