Financial Poise
A hand cuts coupons as part of a frugal living strategy.

How Living Frugally Creates a Richer Life

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

Or are they?

Living frugally is one of the oldest, most reliable, and fastest paths to building wealth. It’s also 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 to minimalist lifestyles, apps that facilitate saving, and more, frugal living has become more fashionable than ever. 

That doesn’t mean living frugally is always simple. But by better understanding what it means, why it matters, and what it could look like for you, attaining stylish savvy becomes easier than you might 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.

That interpretation is not only unfair but inaccurate. Merriam-Webster defines frugal as “characterized by or reflecting economy in the use of resources.” To this end, living frugally means making efficient, productive choices regarding consumption habits and finances.

While it might be tempting to distill that understanding into the notion of pinching pennies, having a frugal approach to living has a lot more to do with value assessments than it does numbers in a spreadsheet. Sometimes that value is measured with dollar signs, but sometimes the measuring stick is 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. But some forms of value can’t be calculated with 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 means living your life in a way that gives you the most bang for your buck, whatever shape that bang might take.

Maslow, Money, and Priorities

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

Generally speaking, a need is something considered necessary for survival. A want is something desirable but not essential. Whether something is a need or want depends on the person in question. For example, a pair of good walking shoes is likely desirable to most people. For a mail carrier with back pain, however, quality shoes might be considered 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 basics like food and shelter to more lofty 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, an anchor in planning to live frugally, is represented in pyramid form.

Maslow’s Hierarchy of Needs teaches us that frugal living is relative. If everyone’s wants and needs are different at different points in their lives, then frugal living is going to look different for each person.

Putting Frugal Living into Practice

If you can get past the idea that frugal living is about being cheap and get your arms around the concept of weighing value relative to your current circumstances, you’re further along in living a frugal lifestyle than most. That doesn’t mean you’re ready to put rubber to the road.

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. Sometimes this includes concrete, singular steps that need to be taken. More often, 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, the practice portion of frugal living is about cultivating financially healthy habits. This may include anything from limiting discretionary spending to a small amount of cash on hand to opting for generic brands over name brands when shopping. While planning gives you a roadmap, practice cultivation makes it easier to follow those roads.

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.

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. Frugal living puts you in a position to set aside more money for your later years and get it working on your behalf today.

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 are more likely to have the money on hand required 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 durability.

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. Between having a firm grip on the state of your finances and improving your financial literacy, frugal living may also help address anxiety

Caveat: obsessing over frugal living can exacerbate anxiety struggles. As with all things, balance is key.

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 responsibly treat yourself. It’s a function of mental blocks as much as financial ones. After all, if you end up beating yourself up over expenditures on 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. 

But the right time to begin? It’s today. Maybe yesterday. 

As actor Christopher Parker is attributed as saying, “Procrastination is like a credit card. It’s a lot of fun until you get the bill.”

Pay today. Thank us tomorrow.

Did you enjoy this article? Want to learn more about investments that may complement your frugal living? You may find the following on-demand webinars interesting:

For more information about our on-demand webinar series, click here.

This is an updated version of an article initially published in 2017. ©2023. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.

Share this page:

About The Financial Poise Editors

Financial Poise helps trusted advisors (accountants, attorneys, business brokers, consultants, financial advisors, investment bankers, etc.) by providing a meritocracy-based platform on which to demonstrate their thought leadership. The thought leadership of these advisors is expressed in the form of educational articles, so we can provide our readers high-quality, unbiased education about investing, owning a business…

Read Full Bio »   •   View all articles by The Financial Poise Editors »

follow me on:

Article Comments