Living a life of fiscal responsibility sounds so boring. Delayed gratification and a lifestyle of responsible spending aren’t exactly the things people are celebrating on magazine covers or TMZ Live. Yet living frugally is one of the oldest, most reliable and fastest paths to wealth. From tiny homes to minimalist or simple living, there is actually a burgeoning subculture that has become attractive to people hoping to build wealth outside of a traditional 9-to-5 grind.
There are many ways to live frugally through savings, wise investments, using coupons and so on; but there are some fundamental elements everyone living frugally generally accepts and puts into daily practice. According to a 2016 Time Magazine article, “6 Rules for Living Frugally,” the most important key to living frugally is understanding the difference between a want and a need. A few additional fundamentals include:
The fact is almost no one has no money, in the most literal sense. There are numerous government programs in the U.S. available to help with homes, money, food, heat and the basics of living. That being said, in terms of actual value, people will happily plunk down their money, even if they have very little to spare, for what they personally find valuable. Indeed, one of the biggest issues to the American personal debt problem is that people value a host of experiences and things without much forethought.
According to Investopedia:
“According to researchers, individuals born between 1980 and 1984 carry on average $5,689 more debt than their parents had at their age, and a staggering $8,156 more than their grandparents. Not only does this offer an insight into the reckless spending habits that distinguish the current generation of young adults, but it also suggests that a fundamental lack of financial education may have taken its toll throughout recent generations…The line between spending and investment is a fine one, especially when you consider how certain assets are likely to depreciate in value over time. As a consumer, it is important to fully understand the difference between spending and investment, and apply this to every single purchase that you make. This will enable you to make the most of your disposable income, and commit as much money as possible towards improving your quality of life and accumulating long-term wealth.”
Have you ever seen someone on the side of the road holding up a sign asking for money- while smoking a cigarette or with a dog sitting next to him or her? While most people wouldn’t spent $100 a month on nail polish or a wine club subscription, plenty would spend that much (and more) on a subscription to cable TV or gaming services. Value is determined by the buyer- and sales companies everywhere are desperate to convey a sense of value to consumers so that they’ll open their wallets.
That being said, in terms of actual value, people will happily plunk down their money, even if they have very little to spare, for what they personally find valuable.
Saturday Night Live once poked fun at Americans’ apparent confusion about how they got into debt in the first place. Watch and laugh right here. (It’s funny because it’s true.)
In 1943, American psychologist Abraham Maslow wrote in his essay, “A Theory of Human Motivation,” that people are driven by a hierarchical system of human needs. According to Maslow, the most basic of needs are sleep, food, water, breathing, sex, homeostasis and excretion; these are all physiological. As the pyramid ascends from the bottom up, the next level of need is safety; then love and belonging; self-esteem; and finally, self-actualization.
The heart of the issue is that too many people buying out of want has overshadowed buying out of need in most of the Western world. There is more to buy that feels like a need and not enough money to go around. That’s where an understanding of the value of investing is of tremendous benefit. Yet, very few people will stop spending long enough to question why they never have any money.
Most items people would be tempted to purchase that fall into the “want” category, e.g. yet another pair of shoes or a third bowling ball, are also notably recognizable as items which add to one’s self-esteem. An easy way to recognize if something is a want or a need is to ask yourself, “Does this contribute to my safety or my physiological needs in any way?” If the answer is no, then the purchase is a probably a want, and not a need.
This couple spent an entire year living a life of “extreme frugality.” Read about how it changed everything- for the better. It is possible to live happily and frugally, and to emerge with more money than when you started.
Says lifestyle blog The Balance, “Frugal living isn’t about sacrifice and deprivation; it’s about living smarter, so that you can afford to live the life that you want to live — the life that you dream of living.” So what does living frugally look like in the every day? Here’s what The Balance had to say:
Sounds easy enough, right? It’s all stuff most people aspire to, anyway. That being said, here are 63 practical, day-to-day things you can do to get started today: “Buy the Ham and Slice it”.
But, hey, what if there is something you want and need, like a new phone or car because your old one is starting to decline? In a case like that, it is best to reflect on the potential purchase by giving yourself a “cooling off” period before you act on impulse. However, if your car or phone is broken, and you need it to secure your other basic needs, then it falls into the need category as well. You’re good to go.
NerdWallet’s Catherine Hawley gave the best advice possible on the concept of living frugally saying:
“The secret to getting rich is as powerful as it is unexciting: live below your means.”
Yes, that may sound obvious or simplistic to some, but, she says:
“It’s actually much harder than it sounds. Many of the people you see with big houses and fancy cars are up to their eyeballs in debt, which means they’re violating this basic principle. They aren’t rich at all. They’re in debt. The challenge is recognizing that you can’t amass real wealth if you try to keep up with such people. Real wealth comes from spending less than you earn, again and again, month after month, year after year. It’s a slow and steady process. It isn’t particularly exciting. But it is the surest way to reach your biggest financial goals. Real freedom is the ability to make life choices that make you happy. Frugality puts money in your pocket so you can do just that.”
Alicia Purdy is the Managing Editor of Columnists at FinancialPoise.com. She holds a Master's degree in Journalism and has spent over a decade working as a freelance writer and editor in finance, politics and government and business.
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