I read an article that contended that being frugal won’t make you rich. The author was advocating for a growth mindset and a greater focus on income and expanding wealth, essentially. And they were excellent points! But here’s the thing some anti-frugal articles are overlooking. It takes both being frugal and growth to truly achieve financial security and freedom. Too much of either is an imbalance that comes at great cost.
Power of being frugal and growth
You can make millions and spend millions. Or you can make millions and spend pennies. Or you can make millions strategically, thoughtfully spend thousands, and ultimately have conserved substantial earnings for… anything you want, anything that can be done with money that serves your core values. Ultimately, you need to have the growth mindset coupled to the frugal mindset for maximum impact. You won’t get rich from frugality alone, true. But you can live a rich life when you use frugal living to fuel an intentional life.
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Compounding effects of being frugal
Frugal living choices are about designing a life where your cost of living decreases, thereby increasing your free money. You then have more free money that is truly free. It isn’t already obligated just in supporting your baseline lifestyle. Instead, you enjoy financial freedom.
Financial freedom is the freedom to spend in ways that are meaningful to you, that free you from working to the traditional retirement age, that achieve life long dreams, that support your children’s start in life, that let you see the world, help others, really whatever it is that you are meant to do. So, you see, it’s not all about not spending.
In terms of working life and retirement timing, being frugal reduces the amount of money you need to live, thereby reducing the amount you need to work and save for retirement. Adopting a frugal lifestyle simply reduces the amount of money required before you stop working by decreasing the cost of supporting your general lifestyle, as it simultaneously frees up cash to set aside for future retirement. It’s a compounding effect!
By being frugal and sticking to planned out core financial values and goals is how progress accelerates. Loan payments snowball over top of each other, salaries increase, investments grow, and childcare expenses abate. This has tremendous power if you adopt being frugal at the same time, instead of inflating your lifestyle along with your progress. That is why both being frugal and a mindset of growth and planning ahead is the most influential combination towards financial freedom.
How to grow: time and planning
A key part of this design is to aim to decrease your expenses over time. Young families contend with entry level salaries, along with paying off student loans, paying for childcare, likely carrying car loans and other debt, and with no assets like home equity built up yet. It’s tough!
Eventually things ease up. But then what? The norm is lifestyle creep: bigger house, nicer cars, more conveniences, etc. Those things are all well and good if they are truly your goals and values. But the problem with automatic lifestyle creep is that you spend money unintentionally into a lifestyle that will be more and more expensive to maintain. And then, there you are never feeling ahead, working, working, working forever just to keep up.
In contrast, you can plan how you want to repurpose your freed up cash in advance before that money automatically goes in and out of your bank account. To further attack your cost of living, eliminating debt, including the cost of your home financing is valuable pursuit.
For example, after we snowballed all our non-mortgage debt, I finally set my sights on our home’s mortgage. Living in a high cost of living area I previously avoided ever looking at the details on the mortgage statement. So. Much. Interest.
But until our other expenses came down, I just couldn’t do much about it. It took a step by step approach, always thinking one step ahead. By the time all our other debts were paid, we had also passed the peak of childcare expenses, and suddenly there was money free to easily refinance into a 15 year loan, shaving off over $5,000 each year spent on interest and 10 years off the length of our mortgage commitment. While it seems far away, I imagine the day we aren’t paying for childcare and our mortgage is gone- and then owning an appreciating asset. Indeed, having the non-mortgage debt paid off used to seem foreeeeever away at one time too. But step by step, here we are.
Check out my post about how to plot out your finances using pie charts, a little pie chart for now and for each of those stepping stones ahead. This helps you visualize and plan just how each financial change will fuel the next. Maybe now your pie graph includes a car payment, but once that is paid off, how will you strategically repurpose that $300-500 a month? Throw it at the next debt, or begin an investment? That’s the key- free up money and then make it work for you.
What being frugal means to us
- Choosing quality over quantity, longevity over disposability
- Weighing the time spent at work to pay for a particular choice (time = money)
- Balancing living in the present with planning for the future
- Value learning self-sufficiency skills, like DIY, gardening, sewing, etc.
- Remembering we have very few true needs, everything else is wants- spend intentionally!
What being frugal doesn’t mean to us
- Buying cheap things
- Cutting corners on important spending (e.g. home improvement, gifts)
- Matching our spending choices to anyone else (e.g. no couponing here!)
- Never splurging or “wasting” money (again, intentional spending!)
Key takeaways
Being frugal alone will help you live on less money. But combining a frugal mindset with a growth mindset towards using that freed up capital strategically is the secret combo. By adopting both mindsets, you will truly treat money as a tool, and not an obstacle, to accelerate elimination of costly debt, invest and save, and live your best life on your own terms.
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