Frugality = Freedom
Being frugal gets a bad rap
What does being frugal have to do with living a happy life? Isn’t a frugal life a life full of limitations and sacrifice? After all, isn’t success and happiness about getting everything we want, buying the dream car, buying a big house in a really nice neighbourhood?
However being frugal doesn’t mean being cheap or not spending any money. It’s about being conscious of what you’re spending so that it can be focused towards generating the greatest amount of happiness. For some this might mean buying a plane ticket to see friends, making a donation to a worthy cause or leaving a big tip. Being frugal often means there is money left over which can be invested to provide greater freedom and happiness over time.
What does it mean to be frugal?
According to Vicki Robin, in her book, Your Money or Your Life, being frugal means having a high joy to stuff ratio. She goes on to explain that it would be a waste to have stuff lying around that you cannot enjoy because that would represent wasted life energy.
I was recently shocked by the number of sneakers that I actually owned. I’m not sure what possessed me to make those purchases in the past. Perhaps it was self-imposed social pressure to try and keep up and fit in at the office, but there’s at least 5 sneakers sitting around collecting dust. In retrospect, I really didn’t need these extra sneakers, not only did I waste life energy bringing them into the house, they are now taking up valuable space.
How do millionaires spend their money?
You might be thinking… but aren’t all the rich people (or at least the people around us who look rich) out spending money and buying nice things? Why shouldn’t I? Fortunately The Millionaire Next Door debuffs some of these myths and exposes some of the real habits of wealthy people.
The book discusses the major distinction between millionaires and those who display a high consumption lifestyle. Millionaires were more likely to get more pleasure from owning appreciable assets than from displaying a high consumption lifestyle with no investments or assets.
Wealthy people are likely to have gone to a local college, are frugal in spending and therefore don’t drive fancy cars or wear expensive watches or buy expensive clothes. They are likely to own small businesses, in industries that may not seem very exciting (Wealth doesn’t have to be the sole domain of tech founders) - what a relief! Even normal people can become wealthy if we consistently watch our spending and buy appreciable assets.
Frugality leads to wealth and freedom
The first step to financial independence is to live below your means by spending less that you make. If you’re able to take this first step, you’re well on your way. Once there is money left over each month, it can be invested in assets that appreciate over time like stocks or real estate. It may seem like a long way away, but with the magic of compounding, one day the money will work for you rather than the other way around. (see Felix’s post)
Being Frugal
The most comprehensive and practical approach I’ve seen is to follow the steps in Your Money or Your Life and convert all your spending into the life energy (time) you’ve invested into each expenditure and once a month review whether or not the expenditure resulted in happiness. If the answer is no, then it’s time to stop spending on those items.
Besides removing yourself from triggers that would naturally result in spending (like browsing online shopping sites, gadget review blogs or shopping in real life), it’s important to surround yourself with like minded people. I’ve found that my circle of friends are generally on the frugal side and we’ve been able to support each other on this journey. We’ve found great joy in activities that don’t cost much like going for a walk in nature, playing tennis on public courts, or camping in the summer.
What’s next?
On the other end of the spectrum, being too frugal can also have negative implications. Some of the most amazing experiences in life require money. For instance, I’m glad that I was convinced when I was younger to travel around Asia on a shoestring as it would be much harder to do so when you’re older.
Life is to be enjoyed and spending is part of the equation, just remember to evaluate the happiness that results from the expenditure. The remaining money can then be invested towards achieving financial freedom.
Inspiration
“Money is a Great servant but a bad master” - Francis Bacon
Nassim Nicholas Taleb — 'The three most harmful addictions are heroin, carbohydrates, and a monthly salary. “
Thomas J. Stanley Ph.D, The Millionaire Next Door
Vicki Robin, Your Money or Your Life
Vicki Robin, YouTube - Nine Steps to Transforming Your Relationship with Money