This is the third of ten posts describing the key pillars of building a strong financial foundation. Read the introduction here. Check back each Monday for the next post in the series.
If my closest friends had to describe me in a few words, frugal definitely be would be one of them. Strangely enough, I can still remember the first time I heard the word. Charles Barkley was on a talk show commenting about the salaries of professional athletes and mentioned that he was frugal. “I like that word” I thought to myself.
It pretty much summed up my view on money at the time. I only spent money on what I wanted. Frugal is defined as being “economical in use or expenditure; prudently saving or sparing; not wasteful”. To me, frugality is the cornerstone of being successful in personal finance.
Being Frugal vs. Being Cheap
Many people view frugality as being cheap, but I beg to differ. My favorite quote about the argument between frugality and being a cheapskate comes from April Dykman in a guest post at Get Rich Slowly.
"Frugal and cheap are two different things. Cheap people only care about the price tag. Frugal people care about value and are willing to spend where it matters."
When I go shopping I look for value. If a more expensive item will add more value to my life, make someone else happier or make the world better I will consider purchasing it over something that costs less. I won’t buy the brand name food if it has the same ingredients and taste as the generic or store brand food. For example, I’ll buy the generic brand for milk, cheese, canned vegetables and other groceries, but I am a stickler when it comes to orange juice (I mainly buy Simply Orange).
The same goes for buying used goods. I have purchased used books, furniture, video games, movies, appliances and more, but I wouldn’t purchase used bedding or linens (mainly for sanitation reasons). When I buy something used or that is the store brand I don’t feel as though I am being cheap, I am instead saving money for other parts of my life.
Be Frugal in Everything
Some people will be extremely frugal in parts of their life but not in others. They may eat a peanut butter and jelly sandwich every single day for lunch to save money, but not research a major purchase or go into debt to buy a new car. It is important to not just be frugal in some areas of your life, but all of them. You can be frugal with the activities and hobbies you enjoy the most too.
One of my hobbies is movies, but there a few ways I am able to be frugal with them. One way is by using only gift cards I get to purchase movies. I also swap my movies (and books) using the website SwapADVD.com. I attend movies using gift cards and free passes that I get through work and my apartment complex. Lastly, I use the library and Netflix to get the latest or classic movies at a lower rental cost.
Don’t Worry about How it Looks
One aspect of frugality that keeps people from practicing it is what other people will think of them. I used to worry about having the latest video games and systems that my friends had so that I wouldn’t feel left out. I wanted them to see that I was playing the latest games and wanted to fit in with them. In reality, none of that mattered. I could just have easily gone without any of those games and I would most likely be better off financially and mentally!
Being Frugal Can Give You More Time
Possessions possess your time, so the less things you have to maintain, the more time you have to spend on parts of your life that you enjoy. If you buy more house than you need, you have all this extra space to fill with furniture you don’t need, more rooms to clean and a bigger yard to maintain. If you are just as happy living in a smaller space, you can have more time for yourself or to spend with others.
Being Frugal = More Savings
A way to see how frugal you are being is by taking the money you save by either not buying something or by buying a less expensive version and setting it aside. You could put it in a piggy bank, envelope or a savings account to help pay off debt or build an emergency fund. Did you put back that junk food at the store? Put the savings in your account. Did you say no to going out for lunch and stick with your PB&J sandwich today? Put the money you would have spent out at lunch aside. Over time you will begin to see how much money you can save by being frugal day in and day out.
Look at your recent purchases. Could any of those been avoided if you would have thought about being frugal? Feel free to let me know below in a comment.
Financial Foundations Series