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There are many benefits to being frugal, though you probably won't get rich by being frugal. That said, millionaires who earn their wealth understand what it means to be frugal, according to the book The Millionaire Next Door.
Being frugal is a lifestyle choice that benefits your life in many ways, though some might find that adopting the lifestyle can be a challenge at first. However, those who live frugal lifestyles are generally able to get out of and stay out of debt easier and are less likely to get caught up in keeping up with the Joneses. Instead, they are able to focus on living more simply.
In this article, we'll go over the benefits of frugal living, common questions about frugal living, and some of the drawbacks that you might encounter.
Let's jump right in.
Table of Contents
Is It Worth Being Frugal?
Frugal people can often avoid debt and make smart financial decisions that benefit them in the long run. They create and stick to budgets, spend less money, invest more, and live below their means.
This makes being frugal worth it, as it improves your financial situation. When combining a frugal lifestyle with increasing your income, you will further better your financial situation and reach your financial goals with greater ease.
What is the Difference Between Being Cheap and Being Frugal?
The difference between being cheap and being frugal is that a cheap person will go out of their way to not spend money, even on other people, such as not tipping generously to a server at a restaurant. A frugal person knows how to stretch their dollars and carefully considers what is worth spending their hard-earned cash. Frugal people will still buy high-quality goods where deemed necessary, and they believe in being generous with others.
Can Being Frugal Make You Rich?
Being frugal will most likely not make you rich by itself, but it will certainly help you keep your wealth as you build it. When you combine frugality with finding ways to increase your income, you're more likely to become and remain wealthy.
Benefits of Being Frugal
While being frugal alone won't make you rich, being frugal does come with distinct advantages that can help many aspects of your life.
Reduced Financial Stress
When you live a frugal life, you will have less stress when it comes to your finances. Having fewer financial burdens can put you at ease and allow you to enjoy life without the added stress that often accompanies debt or being underprepared financially.
For example, you'll spend less money on frivolous purchases, which means you'll have an easier time saving money and staying out of credit card debt. In addition, by saving more money, you'll be more prepared for when something goes wrong, and because you have the money to cover life's curveballs, you'll feel less overwhelmed day-to-day, not having to wonder how you'll pay for something you're not ready for.
Easier to Handle Financial Emergencies
Less than 4 in 10 Americans can cover a $1,000 emergency, which is the typical cost of replacing an appliance, paying the deductible from a car accident, or covering the cost of a trip to the emergency room.
When you live frugally, there is less chance that a sudden expense will put you in debt. Because you prioritize saving money and not spending much on things you don't need, your bank account is generally buffed up with cash for the unexpected.
Helps Prevent You From Living Paycheck to Paycheck
There are two main reasons that people live paycheck to paycheck. One is that they don't make enough money to cover their expenses, and the other is that they spend too much. While the former can be treated by increasing your income, the latter will always be an issue until a person gets their spending habits under control.
Folks who live frugally don't spend a lot of money, and when they do, it's because the money spent was budgeted for. Having smart money habits like this allows frugal people to be more likely to avoid the trap of living paycheck to paycheck.
The frugal worker who brings their own lunch to work while all of their colleagues spend $10 on food and drink is the same person who spends $200 per month on their used car payment while their coworkers spend over $500 per month on their new car payments. The frugal worker buys a $250 phone every 4 years while the colleagues drop $1000 on a phone every 2-3 years.
All of these habits add up, and the frugal worker is less likely to live paycheck to paycheck.
Ability to Work a Job You Enjoy
When you live frugally, your living expenses are much lower, meaning you need less income to get by. When less income is required, you can work a lower-paying job that may be more enjoyable to you.
For example, you might work fewer hours or do something less strenuous. Or you simply might start your own business where you're doing something that doesn't even feel like work.
These options are open to you when you have a frugal mindset, which is a great benefit of being frugal.
Helps You Become and Stay Debt-Free
Adopting a frugal lifestyle means swiping that credit card less because you're more conscientious of your spending. Because you're using your credit card less, you won't be wracking up a high balance, which will make it easier to have your credit card paid off each month.
You'll also buy more affordable cars, live in homes that cost less, and not buy things that you can't afford to pay for immediately. For example, instead of financing a new computer or a fancy mattress, you'll save up the money and buy in full; plus, since you live frugally, you'll wait for the right moment to buy, such as a flash sale.
Learn to Take Care of Things Yourself
It's common to hire people to do things for you. For example, you might hire someone to mow your lawn, shovel your snow, clean your house, or fix things that break.
When you live frugally, you'll learn to do things yourself because you don't want to spend money on having someone else do it for you. For example, you might change your car's oil or do DIY projects around your house.
One drawback to being frugal in this regard is that you may spend a lot of time doing things on your own versus hiring someone else so that you have time to do other things.
Sometimes it makes sense to hire someone to spend an hour mowing your lawn so that you can spend an hour making more money or focusing on something else that you wouldn't have time to do otherwise.
That said, it's helpful to find a happy balance between spending money on help and saving money by doing it yourself.
More Money to Invest
You'll have more money to invest when you live frugally, which increases your net worth and your monthly income. Because you spend less money, you end up having more of it each month. By investing your leftover money, you create even more money.
This combination of being frugal and investing to make more money is a great formula to building and maintaining wealth.
Similar to when you have the option to working a job you enjoy more, you can also retire earlier when you live frugally. This benefit of a frugal lifestyle is one that many aspire for.
When you're prioritizing saving and investing money, paying off debt and staying out of debt, and not spending money on things you don't need, you build a retirement nest egg much faster. With your retirement fund built faster, you can retire at a younger age and spend more time doing things you enjoy.
Of course, if you enjoy what you do for a living, you can use your frugal mindset to scale back if you want to work fewer hours to give yourself more time to pursue other things.
Reuse Things to Create Less Waste
Oftentimes, frugal people reuse things to create less waste. For example, here are some things that can be reused:
- Laundry detergent bottles, such as when you make your own detergent.
- Newspaper, which can be used to protect furniture when you paint, or can be sculpted into art.
- Empty milk jugs can be reused as water jugs. Having emergency water on hand is useful if you lose power for several days and can't go elsewhere.
- Soup cans can be used to start a garden on a budget.
These are just four items of dozens that can be reused to save money. You'll also be helping the environment by making less garbage.
More Opportunity To Be Generous
Perhaps one of the more genuine benefits of living frugally is having more opportunities to be generous with others. Since you're saving money by not being frivolous, you have more money to help loved ones out, give for gifts, donate, or tip more generously at restaurants, salons, hotels, etc.
Drawbacks of Being Frugal
We've discussed many benefits of being frugal, but being frugal also has some drawbacks.
Others May Not Relate To Your Lifestyle
It's common in America to spend money on nice things, not save regularly, and go out and enjoy one's money. As you'll be saving your money and going out of your way to not constantly spend, others may not relate to you.
They may feel that you are cheap or not interested in having a good time. They may think that you're broke since you're not spending money.
It's important to understand that other people's opinions don't have to affect you in the slightest. Wealthy people are often mistaken as being poor because they don't flaunt their money and because they live conservatively.
Tough Lifestyle To Break Once it Becomes Normal
Once you start living frugally, it can be tough to go back. This isn't always a bad thing, but you may begin to feel uncomfortable splurging on yourself or others once in a while.
You may have invested for many years and brought in several steady sources of passive income, and now that you're in a much better financial situation, it may be challenging to allow yourself to make frivolous purchases with the extra income.
May Not Buy Things You Really Need
Because you're frugal, there may be things you actually do need, but you choose not to buy them on the account of saving money. This can be detrimental since you're depriving yourself of things that would make your life easier, such as high-quality products that will last you a long time.
While frugality is beneficial in the long term to create financial freedom, it can be detrimental if you deprive yourself of things you need or simply don't treat yourself to something fun periodically.
Wrapping It Up
In this article, we discussed the benefits and drawbacks to frugal living, as well as some common questions asked about what it means to be frugal. Living frugally is a lifestyle choice that can lead to great things, such as financial independence.
What are some ways you live frugally?