Frugality. It’s a word that strikes different people in different ways. For some, it’s a refreshing way to get more value out of your money. For others, it conveys a sense of cheapness or of self-denial. For yet others, it’s just a way of living.
If you’re reading this article, you likely have some interest in the idea of frugality, so let’s start right off by clarifying exactly what we mean by “frugality.”
Frugality is usually defined as “the quality of being economical with money or food.” In other words, people who practice frugality are trying to get the most value for their money in all of the things that they do. It’s a powerful strategy for personal finance, no matter what your goals are.
Being frugal vs. being cheap
One of the biggest problems that people have about frugality is that they perceive it as cheap. It’s important to think of frugality and cheapness as two very different things.
Frugality means that you’re not ignoring your internal wants and desires, but understanding them. You’re thinking about your purchases, asking yourself what value you’re really getting out of them, and spending money when those things give you a lot of value. Cheapness means that you spend the absolute minimum amount of money necessary to maintain the basics of life and no more. There are no other values you care about.
If I have friends over for dinner, I’m going to try to make a great meal that they’ll enjoy while trying to keep the costs low. That involves thinking carefully about the meal, shopping thoughtfully for ingredients and making large batches of food at a reasonable cost. That’s frugality. If I were cheap and had friends over for dinner, I’d serve them the least expensive meal I could possibly figure out, ask them to bring their own drinks and not have any hand soap in the bathroom, because my only value is saving money.
Aim for frugal, not cheap. If something is important to you, obtain the results you care about while minimizing costs, not about how to save every penny.
3 strategies to become more frugal, not cheap
Minimize the cost of urgent and important expenses
We all have essential regular bills that we simply have to cover to maintain our basic needs. Housing, food, water, clothing, toiletries, electricity, insurance, a car and home internet to stay employed. You need those things, and it’s usually extremely clear what it is you want out of those things. When you pay your rent or mortgage or property taxes, you do it to keep a roof over your head, right?
The first big step of frugality is to ask yourself the big questions and evaluate each of those expenses really carefully to see if you can reduce them:
- With housing, is there a less expensive place that you could live, have your needs met, and be happy? If you’re frugal, you would carefully consider what you value and need in a house, instead of choosing the least expensive one.
- When it comes to your car, do you really need it, or could a less expensive car fit the bill? In this, being frugal means buying a car or using transportation methods that maximize your value of time and cost. Buying a yearly pass and taking the express train or bus every day instead of paying for a car may save you more money in the long run.
- For insurance packages, have you shopped around recently? How much of a deductible can you afford on those packages? I encourage people to shop around for insurance every two or three years by getting quotes from various insurers and then negotiating with your current insurance company. Explore bundling your various types of insurance as well, and think seriously about how much of a deductible you can afford if you actually do have to use the insurance policy.
- With food and household supplies, are you eating primarily meals you made yourself at home? Are you buying a lot of store brands? Are you doing sensible meal planning and grocery shopping? You don’t have to buy food that you don’t like or is not nutritious in order to be frugal — remember you can still enjoy meals without spending more money than what’s in your food budget.
These are all ways to retain the parts out of these essential expenses that you value while cutting out the parts that you don’t. Remember, it’s about what you really value.
[Read: Frugality Versus Time and Energy]
Reflect on the value of splurges and upgrades
What about all of the other expenses in life? The upgraded expenses, fun things, hobby expenses, takeout and travel expenses. Where do they fit in?
Because those expenses vary so much from person to person, it’s hard to give good strategies for each person. Rather, this is where a frugal mindset really pays off. Here’s how to evaluate those expenses.
- Review your last few credit card bills, bank statements, and store receipts, and ask yourself which of those expenses actually brought you lasting value in line with that expense. Just go through those credit card statements, bank statements, and receipt items line by line and ask yourself, for each one, whether you really got enough lasting value out of that expense. You can still enjoy the little things in life like good coffee and movie rentals, as long as that’s what you value.
- Aim to talk yourself out of things rather than talking yourself into things. Many of us have a bad habit of talking ourselves into purchases. We’re on the fence, but our mind tries to talk us into it because we have this short-term impulsive desire. However, if you need new work clothes, then you need new work clothes, and frugality should not get in the way of looking professional and put together.
- If you feel any doubt at all, delay the expense by 30 days. If you are thinking about buying something that you don’t strictly need and you have any doubt about the purchase at all, delay it for 30 days. Simply make a deal with yourself that you’ll revisit this in a month and if you still want it, you’ll buy it then.
- Use the pleasure of anticipation to your advantage. One of the best parts of spending your money on something that you want but don’t strictly need is the anticipation of it. It’s actually quite enjoyable to know that you’ve got something fun or enjoyable coming up on the horizon.
- If something you like has begun to feel less enjoyable because it’s become routine, give it a break. It happens to all of us. We find something we like, we do it again and again while the pleasure from that thing is a lot less than it used to be but we do it all the time just because it’s “normal.”
- Intentionally give free and low-cost things a priority, and delve into things that you want to try. If you have an abundance of options in front of you, intentionally overvalue the ones that are free and extremely low cost. If your choice is to watch a movie on a streaming service you already have or to rent a movie, then opt for watching a movie or show on the streaming service you have.
- Try to aim for the “least expensive ordinary day.” For me, perhaps the single most powerful tactic for really making frugality click was the realization that if I made my ordinary days as inexpensive as possible without making them miserable, not only would my spending be a lot lower, I’d also appreciate the special days a whole lot more and I wouldn’t have to spend nearly as much to make days special.
Put the money you save toward long-term goals
All of these frugal strategies add up to one thing: you spend a lot less money while retaining almost everything you care about in life. The challenge then is to make sure that the money you save doesn’t go into more and more urgent but not important fun things, but into important but not urgent big life goals.
Use the money you’re saving from frugality to build an emergency fund, pay off your debts, and then start saving for retirement. Think about your other big life goals as well and start actively saving for them, too. Do you want to own your own home? Do you want to travel around the world? Start savings plans for them. Those are the important but not urgent things, and they’re the true fruit of the frugality tree. When you start frugality, you are able to think more about better uses for your money, and along with it comes success in your financial goals.
Too long, didn’t read?
Remember, there’s a difference between being frugal and being cheap. Being cheap will ultimately save you money, but at the cost of happiness, convenience and even personal relationships. On the other hand, frugality will help you learn more about spending less and saving for long-term goals while still enjoying life.
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