How Living Frugally Creates a Richer Life

Living a life of fiscal responsibility sounds so boring. Delayed gratification and responsible spending aren’t exactly glamorous ideas.

But why aren’t they? Should they be?

Living frugally is one of the oldest, fastest, and most reliable paths to building wealth. Currently, this practice is experiencing a resurgence in popularity. Beyond obvious financial concerns, people increasingly view lavish lifestyles as wasteful from a social and environmental perspective. From tiny homes and minimalist lifestyles to apps that invest the change from your morning coffee order, frugal living has never been more fashionable.

None of this is to say that living frugally is always simple, but understanding its principles can make it more manageable and rewarding. By learning what frugality means, why it matters, and what it could look like for you, you may find that maintaining such a lifestyle is easier than you think.

Defining Frugal Living

If the word ‘frugal’ brings to mind negative connotations, you’re not alone. Often associated with characteristics like rigidity and deprivation, the term’s perception is decidedly unsexy. However, that interpretation is not only unfair but inaccurate. Merriam-Webster defines frugal as “characterized by or reflecting economy in the use of resources.” Living frugally means making efficient, productive choices regarding consumption habits and finances.

While it might be tempting to reduce frugality to pinching pennies, having a frugal approach to living has a lot more to do with value assessments than it does with numbers on a spreadsheet. Sometimes, value is measured in dollars, but often it’s more qualitative.

Let’s say you’re in the market for an air fryer. Quantitatively, you might be looking at pricing relative to customer reviews to determine your best option. However, some forms of value can’t be calculated using an equation. If you don’t have a lot of counter space, for instance, spending more on a combination air fryer and toaster oven may generate more value for you personally.

In other words, frugal living is about getting the most bang for your buck and maximizing the value of your resources, whatever form that value may take.

Maslow, Money, and Priorities

Determining value requires an understanding of your priorities. That understanding is rooted in the distinction between wants and needs.

Generally, a need is something essentially for survival, while a want is desirable but not necessary. Whether something is a need or want depends on the individual. For instance, good walking shoes might be desirable to most people, but for a mail carrier with back pain, quality shoes could be critical.

It’s not always that clear-cut, though. In 1943, American psychologist Abraham Maslow posited that people are driven by tiered needs, ranging from basic necessities like food and shelter to higher aspirations of self-actualization. This hierarchy is often viewed as a pyramid. If the needs at the bottom are satisfied, then a person is better positioned to address needs further up.

Maslow’s “Hierarchy of Needs” illustrates that frugal living is relative. Since everyone’s wants and needs vary at different points in their lives, frugal living will look different for each person.

Putting Frugal Living into Practice

If you’re interested in frugal living and feel like you have a good grip on your priorities, the next step is to consider human behavior in two realms: planning and practice.

Financial planning is the process of assessing one’s financial state, defining long- and short-term priorities, and identifying steps to move you closer to your goals. Financial planning is about designing a framework for living. It can include everything from budgeting to establishing milestones to track your progress.

If financial planning is about rules, then the financial practice portion of frugal living is about cultivating financially healthy habits. This may mean limiting discretionary spending to a small amount of cash on hand or consistently opting for generic brands over name brands. While planning gives you a roadmap, consistent practice and cultivating healthy financial habits make it easier to stay the course.

One without the other is of little use. An expertly crafted approach to managing your finances won’t do you much good if your day-to-day choices aren’t grounded in common sense. Without building those habits, your ability to follow through on your financial plans will be hamstrung. True frugal living requires balance.

The Benefits of Frugal Living

You Reap What You Sow

Rules? Limits? Self-restraint? None of that sounds like much fun, but if you’re willing to put the time and effort into developing a frugal lifestyle, the benefits are many.

A Better Retirement, Sooner

More than half of Americans feel behind the curve in preparing for retirement, and some surveys indicate that most will retire broke. This is why the tenets of frugal living must be preached; it promotes realistic saving that puts your money to work for you.

Greater Financial Resilience

Life happens. Part of that often involves unpredictable expenses. Car trouble? Health crisis? Legal fees? Whatever the case might be, living frugally means you have the money on hand to resolve any problems that arise without compromising your financial security and well-being.

Long-Term Savings

Ever heard the expression, “Being poor is expensive”? It might seem like an oxymoron, but it’s absolutely true. When you don’t have a lot of cash on hand, you often wind up stuck making choices that work with your short-term finances but cost more in the long run. It might, for instance, cost more upfront to buy in bulk at a warehouse store like Costco. The cost per unit, however, is likely lower. When you’re not living frugally, you’re not empowered to make those choices. The higher-rated winter coat might cost more initially, but you could also save yourself money because of its longevity.

Better Credit and Opportunities

Living frugally means living within your means, if not below them. This approach means you are less likely to accumulate unmanageable amounts of personal debt. Your credit score will thank you, and your ability to pursue larger investments like a house will be improved.

Improved Physical and Mental Health

Studies show that those living frugally experience improved physical and mental health. Lifestyle choices like avoiding fast food, for instance, can cut back on unnecessary expenses while avoiding excessive weight gain and improving your nutritional profile. Saving efficiently may also increase consumers’ likelihood of seeking preventative health treatment, enhancing longevity.

Fun! Fun! Fun!

Life is meant to be lived – not just endured. Frugal living empowers full living. If you have a clear understanding of your priorities and current financial health, you can budget for the things that matter most to you outside of those basic wants and needs.

Are the Maldives calling your name? Do you get a thrill from adding to your comic book collection? Wish you could go to the movies more often? The things that add joy to our lives – big and small – are within reach if you’re putting yourself in a position to treat yourself responsibly. It’s a function of mental blocks as much as financial ones. After all, if you end up beating yourself up over expenditures yourself, it’s not going to give you the kind of enjoyment you’re seeking.

The Best Way to Start is to Begin

Living frugally takes effort. It requires critical thinking, honesty with oneself, and, quite frankly, a certain amount of courage.

Making frugal lifestyle changes can be a daunting challenge. It almost necessitates a rewiring of your brain. It can be tough to implement those changes in the very beginning.

But the most crucial step is to start. However uncomfortable things might be initially, the end result is worth it. Working with a financial advisor can help you get moving if you’re struggling.

Begin today. Thank us tomorrow.

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[Editors’ Note: To learn more about this and related topics, you may want to attend the following on-demand webinars (which you can listen to at your leisure, and each includes a comprehensive customer PowerPoint about the topic):

1. Affordable Housing/Community Improvement Investments
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3. Understanding Risk Management Basics for Business Owners

This is an updated version of an article originally published in 2017 and updated on March 1, 2023.]

©2024. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.