The word frugality used to elicit a negative emotion in me. If someone was frugal, I would think, that must mean they are selfish. They are tightly wound. They can’t seem enjoy the finer things in life. But after an unexpected life detour and some major soul searching of my own, I see frugality so differently today.
I now understand that frugality is not only a lost art in today’s “spend now” world, but that it is also a superpower. A master key to financial freedom that everyone has access to.
Frugality is simply choosing to spend money on things that provide value to your life and cutting out wasteful consumption. When I lost my job a few years ago, I had no choice but to become frugal. I was in survival mode. I had to bring my spending way down and make responsible choices with my money in order to match my modest unemployment checks.
At first, I felt defeated. I stopped going out to eat all together. I had to stop myself from keeping my bar tabs open. I stopped taking ubers and started walking everywhere, in all weather conditions. I broke up with Comcast and went on solo dates to the library instead. I started cooking. My freezer and I got to know each other after decades of neglect. I embraced leftovers.
After a few weeks of this new lifestyle, a funny thing started to happen. I began to realize I didn’t miss my old life at all. I felt so much healthier, more creative, more free, more self-reliant, less in a hurry, and with less clutter in my mind. I felt happier.
And living this simpler lifestyle didn’t cost much money at all. All I was doing was removing things I didn’t really need in the first place.
The Decision That Changed Everything
This frugal way of life lasted about 6 months while I searched for my next job. Once I landed the job I wanted, my salary was higher than when I was last working. Great, but even with the massive jump from unemployment checks to a solid income, I didn’t feel the slightest urge to inflate my spending again.
I just chose to continue living my simple life and thought nothing of it. I didn’t buy anything new, I walked to work, I brought my lunch every day and drank the coffee at the office.
And like magic, my savings rate went from zero to over 65% of my take-home pay, virtually overnight.
If I hadn’t committed to this new lifestyle, it would have been easy to go down a very different route. What do the majority of people tend to do when they receive additional income in the form of a new job, promotion, raise, tax refund or inheritance? Celebrate! Buy new things, buy bigger things, buy yourself treats, take those all-inclusive vacations! You can afford it now, hotshot!
Here’s the thing though. Once you decide to spend your new influx of cash, one of two things will happen. That money is either now gone forever, with no potential to grow to astronomical heights in the future through investing and compound interest OR you increase the amount of money you must pay each month in the form of new debt.
There are very few things I am certain of in this world, but one thing I can guarantee you is I would not be nearly as happy as I am today if I took my new income and increased my spending to match it. Maybe it would have felt good for the first couple months, but I know without a doubt I would be much worse off now.
I am so much more in control of my life today while my net worth continues to climb higher each week, each month, each year. I know the decision not to inflate my lifestyle was the right choice for maximizing my future well-being.
The Millionaire Next Door
Now you might be surprised to hear that I am not the first one to discover this phenomenon of using frugality as a superpower. There is a book called The Millionaire Next Door which explains the habits, traits and philosophies of America’s wealthy.
When authors Thomas Stanley and William Denko first set out to research and understand the inner workings of America’s millionaires, they quickly discovered something odd. Most people living in large homes, with expensive cars, living in affluent neighborhoods were not rich at all. They actually had very little money saved.
They were in fact, in debt.
And they discovered that most wealthy individuals did not live in these types of neighborhoods. The majority of America’s millionaires lived in their same modest homes for decades and drove used cars. They owned a few suits, at most. Yet these people were wealthy, and happier.
Warren Buffett’s net worth is north of $80 billion, yet he has lived in the same house since the 1950’s and eats McDonald’s every day for breakfast. How can all this be explained?
In a word, frugality.
Wealthy individuals are not tempted to give into lifestyle inflation. They do not feel any need to keep up with the Joneses and in fact feel sorry for them.
So what do they spend their money on? Only what they truly value in life. They happily live well below their means because they understand that the best thing money can buy, bar none, is financial freedom.
They focus on building their net worth so that they are no longer dependent on employment income. Acquiring material things is not nearly as important as financial security for themselves and their families.
Wealthy individuals are also much more likely to donate to charity. Why? Because when you live a life of surplus and abundance, you tend to naturally focus on others.
I am frugal.
There, I said it. And dammit I’m proud of it.
I know that walking 45 minutes to and from work, cooking the majority of my meals, getting my books from the library and switching to Sling TV does not negatively impact my life but very positively impacts my savings rate.
At the same time, I’m still having fun. I’m in my twenties and of course, I spend money. I love brunch, I go out for drinks, experience concerts and take trips. I just balance my daily spending against my higher life goals like financial independence.
Our society seems to discourage frugality because it is so easy to spend our paychecks, and thus its what the majority of people do. But if you want some real freedom in your life like most of wealthy America, maybe it makes sense to start embracing the f-word instead.
The Personal Finance Playbook 