This post is to explain to the reader what I mean when I have used the term frugal. I think the reader may be surprised by some of my slightly alternative opinions on the matter:

Frugality and the key to success

I feel that in many of my recent posts I have referred to the idea that we can save money by being frugal. It has only recently occurred to me that I have not once stopped to explain the idea of frugality and have just assumed knowledge. In the classic phrase: "better late than never" and so now I shall try to convey my ideas on the subject.

Puzzle piece

I first referred to frugality in my Get Rich Plan, writing:
"Frugality - this does not mean living off beans on toast for the next 30 years and then living off "turtle-duck soup served with a golden spoon" for the rest of my life. Everything in moderation, including moderation! There's nothing wrong with enjoying yourself from time to time but keep a record of everything you're spending. Open a 'note' on your phone and every time you spend write it down under a self-made category that you will understand. For example, money spent on eating food or drink out, I categorise as 'restaurant'. Make sure you update an excel spreadsheet every so often with your monthly income and outgoings. Furthermore frugality requires seeking the best deals on comparison websites for all kinds of goods and services, considering second hand and even changing things like your bank (regularly) to get the best current accounts."
This was the first point in my get rich plan because the first thing to do to reach financial freedom is to reduce your spending. Frugality is a key piece in the puzzle that is the game of life if you want to be successful. As I wrote previously, this does not require you to live on very little, only that you don't over-indulge often. To put the idea as simply as possible, buy needs not wants.

Frugality: A not so simple definition

Wikipedia defines frugality as:
"the quality of being frugal, sparing, thrifty, prudent or economical in the use of consumable resources such as food, time or money, and avoiding waste, lavishness or extravagance" (Wikipedia, Frugality)
To this I would add two points:

  1. I believe that frugality also should be included in the consumption of services such as haircuts and insurance etc
  2. Frugality should not interfere with comfort. EVER. If you are uncomfortable in any way (physical or mental) and it is by consumption choices that you make, then you are not being frugal, you are being stupid (sorry). You have one life to live. Enjoy it. This does not mean that you should be unhappy for the first half of it and live in luxary for the second half. Much like how a diet should be frugality is a life decision, and should not be something to be switched on or off.

Frugal implementation

Living in a frugal way is quite easy. All you need to do is ask yourself three questions. The first two are:

  1. Do I need to pay this price?
  2. Do I need this now?
If the answer to either of these questions is no then you do not need to buy the good or service now. However you must also ask yourself a third question:
     3. Would it cost too much time to wait to buy the good or service at a later date or to shop around?

Saving two pence (or cents) on a can of beans will not make a massive difference so going on a 20 mile car journey to find the cheapest beans in the country would be madness. If the answer to this question is yes then you might as well buy the good or service now so long as it is NEEDED and not wanted. NB. Measure the cost of time in terms of what else you could be doing with your time, e.g. your wage per hour.

Fitting in the Plan

Frugality fits into the plan in a particular combination with other things:

  • Frugality + increasing salary = increase savings,
  • increasing savings + paying off debt = increase cashflow,
  • Increase cashflow + Investments = Financial Freedom
I'm interested to hear people's ideas about how to be frugal. I have many of my own that I intend to share of the next few posts  but please feel free to comment any of your own below.

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Rob said...

It's about getting at least £1's worth of value for every £1 you spend.

It occurred to me that you may like this book: (free to read and seems right up you street). Best book I've ever read on why it makes you happier to get more value from your money.

Mr. Moneybanks said...

Rob you are totally right. Great way of putting it. It's about all about getting value for your money and time.
Going to have to check out that book.

Taline said...

I've read the book Rob recommended and it is one of my favorites!

I would have add an additional book that is a must read. It is called "Think and Grow Rich" by Napoleon Hill.

Great post about what frugality means. I, like you, assume all my readers know the term ;) Good point to actually define it in case they do not.

Mr. Moneybanks said...

I've heard of it before and it's already on my reading list. Thanks Taline, always appreciate your comments.

Barb Friedberg said...

I think everyone has to decide for themselves what they want to splurge on and where they want to cut back! AFter all, don't forget money is only currency and living is what life is all about!

Money Infant said...

Great post explaining frugality, but I'm not sure you can say it shouldn't interfere with comfort ever. I think sometimes you need to sacrifice some comfort for the sake of frugality. For example, I would definitely be more comfortable in first class when I fly from the US to Thailand and vice versa. For frugalities sake though I would never pay the insane 1st class prices. Am I uncomfortable flying 20 hours in coach? You bet I am, but the tradeoff in $ versus comfort just isn't worth it.

Mr. Moneybanks said...

Exactly Barb, everything in moderation, including moderation!

Money Infant, I feel that I should be more clear about what I meant by comfort. I didn't mean first class, champagne and fois gras. By comfort I meant a basic level of comfort. So for example I would not reduce my family to cheap frozen ready meals for the sake of frugality. Instead I was advocating a basic level of needs and by comfort I meant a decent standard of living, not an embellished one. Hope that cleared it up, thanks for the comment.