Frugality is a way of life with merit not just as a tool for achieving financial independence, but as a means of supporting minimalism through anti-consumerist habits. As such, the art of frugality is a skill worth learning. (And no, you don’t have to eat ramen every day.)
To begin, imagine what you would do if every year you had an extra $1000. Would you travel more? Be more charitable? Beef up that retirement plan? Now consider the following. On your way to work you stop and get a cup of your favorite brew for $4. (Sure, it’s a cliché but so many people do it’s almost too easy.) Over the course of a work week, these coffees cost you $20 ($80/month and $960/year). This is for coffee that you could have brewed at home (or picked up at work) for a fraction of the cost.
Don’t drink coffee? Look at other aspects of your life. Maybe you dine out a lot when you could cook more. Or spend too much for convenience when the slightest increase in effort could save you. The point is, every dollar spent here-and-there adds up.
Signs that you could be more frugal include:
- Buying cheap items that must be replaced constantly.
- Trashing leftovers.
- Giving in to peer pressure and letting others spend your money.
- Not comparison shopping.
- Overpaying for convenience.
There’s a great article with more information on this over at Wallet Hacks.
Frugal vs. Cheap
With that groundwork laid it’s time to set the record straight. I’ve heard that being frugal is comparable to being cheap. When I think of someone being cheap, I think of someone who goes out of their way to avoid paying for things. Someone who borrows money without ever repaying the lender. This is not frugality. Frugality is simply about getting a good deal on quality purchases; whether they’re hotels, flights, clothing, food, etc.
The core tenets of frugality are:
- Don’t overspend on things or experiences by researching the best quality to price ratio.
- The more money saved means more options available in the future.
- Everything has an alternate use besides its billed purpose.
- Weigh the opportunity costs of time and money.
- Embrace the challenge and thrill of a good deal.
Stop overspending and do your homework. Always search for the best quality to price ratio you can find. By saving on each purchase, you keep funds free to do more, save more, and invest more. The more you can do this, the closer it will bring you to financial independence.
Enjoy the savings. If you live well below your means then you have the freedom to cut your income if need be.
Everything has an alternate use. Before you buy something, see if you can make something you already own work for your purposes. Be creative and crafty. You’ll be surprised how many uses everyday objects have.
Weigh the opportunity costs of time and money. Every dollar spent is that much more time you’ll be stuck at your job to compensate. Think about whether it’s worth the time to recoup the cost.
Embrace the challenge and thrill of a good deal. What drew me to rock climbing was the challenge, thrill, and puzzle of figuring out the routes. Frugality is this way as well. The achievement of knowing you got a good deal is a great feeling.
The road less traveled
There is so much to do and see without needing to spend exorbitantly. As with minimalism, frugality helps us appreciate quieter moments. A walk through the park. That beautiful beach sunset. The conversation with the stranger on the bench next to you. Many of these moments stay with me far longer than ones I spend money on. You can experience them too by keeping an eye out and traveling that road few have the courage to follow.
Playing devil’s advocate
With all of this being said, if you can afford it, some things are worth spending more on. This is a personal decision based on how you value your time and money, but some people choose to pay for housekeepers, gardeners, etc. instead of doing the work themselves. If it brings more value to your life than the alternative then maybe it’s worth it. If you can afford that cup of coffee and you derive a lot of value from the experience of picking it up then go for it! Life is too short to always be pinching pennies.