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Living a frugal lifestyle can have numerous benefits, and there are advantages and drawbacks that come with it. Frugality involves being mindful of your spending, making your dollars stretch as far as possible, and living below your means.
In this article, we’ll discuss the advantages and disadvantages of a frugal lifestyle, answer typical questions about what it means to be frugal, and provide a few quick tips to get you started.
What is a Frugal Lifestyle?
Before we delve into the benefits and drawbacks of living a frugal lifestyle, let’s define what it means to live frugally. Simply put, frugality is the act of being careful with money and not spending it unnecessarily. Living frugally involves making intentional choices to cut back on expenses and live within your means.
People who live frugally are much less likely to spend money on things they don’t need. Instead, they shop for discounts and sales, avoid consumer debt, and enjoy experiences over possessions.
Some frugal people may live a minimalist lifestyle, only owning what they absolutely need to have while instead spending money on experiences that bring them joy.
Is Frugality Worth It?
Avoiding debt and making wise financial decisions that benefit you in the long run are some of the most significant benefits of being frugal. Here are some quick advantages of frugality:
- Frugal people tend to be savvier at budgeting and sticking to their budgets.
- They spend less money on unnecessary things and are content with what they have.
- They invest more money and live below their means, leading to a more comfortable life and the potential to retire earlier.
- They are better prepared for financial emergencies, which can reduce financial stress when an emergency does occur.
When combined with ways to increase your income, being frugal can improve your financial situation and help you achieve your financial goals more easily. While frugality alone may not make you rich, it can certainly help you maintain your wealth as you build it.
What is the Difference Between Being Cheap and Being Frugal?
It’s essential to understand the difference between being cheap and being frugal. Although they may seem similar, there are significant differences.
A cheap person will go out of their way to avoid spending money, even on others, such as tipping minimally at a restaurant.
In contrast, a frugal person knows how to stretch their dollars and carefully considers what is worth spending their hard-earned cash on. Frugal people will still buy high-quality goods when necessary, and they believe in being generous with others.
Can Frugality Make You Rich?
Frugality alone may not make you rich, but it can certainly help you maintain your wealth as you build it. When you live frugally and combine it with ways to increase your income, you’re more likely to become and remain wealthy.
Many wealthy people live frugally and were especially frugal as they amassed their wealth.
In 2004, Tom Corley started a 5-year “Rich Habits” study and found, in part, that wealthy people are highly frugal. However, he also notes that being frugal alone won’t make you wealthy but that it is part of a bigger picture where spending less means saving more.
One way to look at it is that it matters very little about how much money you take home each month. Instead, what truly matters is how much you have left over at the end of each month.
Advantages of Frugality
Let’s discuss nine advantages of living a frugal lifestyle.
It’s Easier to Handle Financial Emergencies
Living frugally means there is less chance that a sudden expense will put you in debt. In addition, by prioritizing saving money and not spending much on things you don’t need, your bank account is generally buffed up with cash for the unexpected. This way, you won’t have to worry about how you’ll pay for something you’re not ready for.
For example, if you’re regularly saving money, and a power failure causes all of your groceries to go bad in the refrigerator and freezer, you’ll have money aside to buy more food.
A more expensive emergency could be if your laptop fails and you need to buy a new one, or if you break your phone and don’t have mobile insurance.
It Helps Prevent You From Living Paycheck to Paycheck
Frugal people 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. Instead, frugal people prioritize their spending and focus on buying things they really need, making it easier to save more money.
People who live paycheck to paycheck either don’t make enough money, spend too much money, or both. Living frugally makes it much easier to have extra money left over each month because you’re intentional about every dollar you spend and save.
You Have The Ability to Work a Job You Enjoy
Living frugally means 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 might start your own business where you’re doing something that doesn’t even feel like work.
An example of this may be that you would rather earn $3,000 per month working for yourself than $6,000 per month working at a job. This can work for any two numbers, where in this case, you could get a full-time job for higher pay or have the freedom to work for yourself for less money but enjoy being your own boss and working when you want.
It Helps You Become and Stay Debt-Free
Adopting a frugal lifestyle can help you manage your expenses better by making you more mindful of your spending habits. In addition, with this approach, you will find yourself using your credit card less frequently, which means you won’t accumulate high balances that can be difficult to pay off each month.
Additionally, you will tend to make more affordable large purchases, such as the cars you buy or a house you live in.
As another example, instead of financing a new computer or a fancy mattress, you’ll save up the money and buy it outright, and as you live frugally, you’ll wait for the right moment to buy, such as a flash sale.
You Learn to Take Better Care of Things Yourself
When people have the income to do so, they may hire people to do things for them, such as mowing the lawn, shoveling snow, or cleaning the house. However, when you embrace a frugal lifestyle, you’ll learn to do things yourself instead of paying someone else to do it for you.
For example, you might change your car’s oil or tackle DIY projects around the house. Although there is a downside to being frugal in this regard, as you may spend more time doing things on your own, it’s crucial to find a balance between saving money and getting help.
Sometimes, hiring someone to handle a task for you makes sense so that you can focus on other things or make more money.
You Have More Money to Invest
Living frugally can provide you with extra money to invest, boosting your net worth and monthly income. By reducing your expenses, you will have more money to invest each month. And by investing your leftover money wisely, you can generate even more income, creating a powerful formula for building and maintaining wealth.
Assume you can invest $1,000 each month into stocks with an average dividend yield of 4%.
For every $1,000 you invest, or each month you invest, you effectively gain $40 per year in passive income. Your investments will change in value over time, and investing smartly or enlisting the help of an advisor means your money will grow over many years while you collect passive income in the form of dividends.
You Can Retire Earlier
Living a frugal lifestyle can help you retire earlier, just as finding a job you love can give you the option of working longer. By prioritizing saving and investing money, paying off debt, and avoiding unnecessary expenses, you’ll build a retirement nest egg faster.
With a substantial retirement fund, you can retire earlier and have more time to pursue your passions. Additionally, you can use your frugal mindset to scale back and work fewer hours if you enjoy your current job, freeing up more time to focus on other things you love.
You’ll Reduce Waste by Reusing Items
Living frugally often involves finding ways to reuse items to reduce waste. Here are a few examples of items that can be reused:
- Laundry detergent bottles can be refilled with homemade detergent.
- Newspapers can be repurposed to protect furniture during painting or used for art projects.
- Empty milk jugs can be turned into water jugs for emergency use during power outages.
- Soup cans can be used as budget-friendly planters for starting a garden.
By reusing items instead of throwing them away, you not only save money but also reduce your impact on the environment.
You’ll Have Opportunities to Be More Generous
One of the genuine benefits of living frugally is having more opportunities to be generous with others. By saving money through frugal habits, you have extra funds to help loved ones, give gifts, donate to charitable causes, or tip more generously at restaurants, salons, hotels, and other service providers.
Being able to share your money and time with others can bring a sense of fulfillment and satisfaction, as well as strengthen your relationships with those around you.
Drawbacks of Being Frugal
While being frugal can have many benefits, there are some drawbacks to be aware of.
You May Have Difficulty Relating to Others’ Spending Habits, and Vice Versa
Living frugally can sometimes make it hard to relate to others with different spending habits. You may find that some people view you as cheap or boring because you’re not spending money on the same things they are. However, it’s important to remember that your financial choices are your own and shouldn’t be influenced by others’ opinions.
The saying “Don’t keep up with the Joneses” comes to mind, meaning while others are all trying to look better than everyone else by buying extravagant things, you’re quietly growing your wealth, knowing you don’t need to spend money frivolously to impress others.
You May Have Difficulty Spending Money Once You’re Financially Secure
Once you’ve been living frugally for a while and have built up a solid financial foundation, it can be hard to let yourself spend money on things you used to consider frivolous. While this can be good for your finances, it can also make it difficult to enjoy your hard-earned money and treat yourself occasionally.
You may have become so trained to be frugal that when you want to treat yourself, you could experience some guilt or doubts.
You Could Risk Depriving Yourself of Needed Items
One potential downside to frugality is the risk of depriving yourself of things you actually need. So while saving money and being mindful of your spending is important, it’s equally important to take care of yourself and invest in high-quality products that will last a long time. It’s all about finding a balance that works for you.
For example, self-care is an essential aspect of daily life. You may consider spending some money on yourself to occasionally treat yourself to something nice. Even people living frugal lifestyles need to unwind. For some, that may mean spending something on something they enjoy.
5 Quick Tips for Starting a Frugal Lifestyle
If you’re interested in starting a frugal lifestyle, here are five quick tips to get you started:
- Set a budget: Before you start living frugally, it’s essential to understand your current spending habits. Create a budget to track your expenses and identify areas where you can cut back.
- Make a meal plan: One of the easiest ways to save money is by cooking at home. Plan your meals for the week, make a grocery list, and stick to it. Cooking in bulk and freezing leftovers can also save you time and money. Minimize eating out or eat out only on special occasion
- Shop smart: When you do need to buy something, look for deals and discounts. Shop around for the best prices and consider buying used or refurbished items.
- Cut unnecessary expenses: Take a look at your regular expenses and see where you can make cuts. Cancel subscriptions or memberships you’re not using, cut back on dining out or entertainment expenses, and consider downsizing your living space.
- Practice mindful spending: Before making a purchase, ask yourself if it’s something you really need or if it will add value to your life. Avoid impulse buys and give yourself time to think about whether or not the purchase is worth it.
Wrapping It Up
Frugal living can have many benefits, but it’s important to be aware of potential drawbacks as well. By finding a balance between saving money and taking care of yourself, you can enjoy the financial freedom that comes with a frugal lifestyle.
Dave is a Certified Educator in Personal Finance (CEPF®) and is passionate about spreading financial literacy. He founded Clean Cut Finance in 2021 and has been featured on websites like Yahoo! Finance, MoneyGeeks, and GoBankingRates. In his spare time, Dave enjoys experimenting in the kitchen, racing simulation, and reading.