After years in which the term “frugal living” was little more than an oxymoron, today’s perpetually-lean economy has made living within your means fashionable once again. Frugal living isn’t just about making and adhering to a budget although that’s an important component of it.
Living within your means is a lifestyle choice that must involve all aspects of your day-to-day existence as well as your long-term plans. While it requires consistency and discipline, it doesn’t have to be characterized by relentless sacrifice or self-denial, and there’s plenty of room for spontaneity and fun in even the most frugal life plan.
Many people derive the strength to resist the temptations of consumer society and live frugally from deeply held religious or philosophical beliefs, but plenty of others restrain their spending and hold on to their money out of simple practical considerations. Ultimately, the goal of many practical misers is to set themselves and their families up for a stable, financially-secure future in which life’s necessities aren’t constantly out-competing its pleasures. This is known as “financial independence,” and it’s the endgame of practical frugality.
Digging yourself out of debt by carefully managing your spending and staying disciplined in the face of temptation feels great, but you can accomplish more by living frugally than merely improving your credit score. In fact, the easiest way to convince yourself to set about achieving financial independence is to outline a set of major goals that you won’t be able to accomplish without significantly improving your finances. These might include sending your children to college without incurring crushing debt, retiring 10 years early, purchasing a second home or leaving your current job to start your own business.
Frugal living consists of complementary activities: buying only what you need to live comfortably and maintaining your existing possessions to prolong their usable lifespans, reducing their ultimate cost of ownership and deferring costly new replacement purchases.
Since your definition of “comfortable” may vary on any given day according to your mood and your immediate priorities, “buying only what you need” is easier said than done. Spending within your means requires iron discipline, of course, but it also requires a sense of what you can do without.
You may find it helpful to remember the old graphic representations of “needs” and “wants” that your grammar-school teachers used to reinforce basic economic concepts. “Needs,” which represented items that were absolutely necessary for your survival, included things like food, shelter and clothing. “Wants,” which were important for your emotional well-being but could be done without in a pinch, included things like television, pets and toys.
While your priorities may have shifted with age, it’s important to remember just how much you can go without and remain comfortable. Of course, you’re the best judge of your own comfort. If you need nothing more than a bed, a chair and a table to keep yourself healthy and entertained, you’ll adjust well to your new frugal lifestyle. Even if you require some creature comforts to preserve your sanity, you’re still perfectly capable of living frugally.
Making the switch to frugal living requires a great deal of compromise, especially when you’re not the only member of your household. The best way to realize both of the components of frugality at once is to make a household spending plan and stick to it. This takes more effort than simply setting up a basic monthly budget.
First, you’ll need to meticulously categorize your existing possessions and future purchases as either “needs” or “wants,” also known as “necessities” and “discretionary items.” In practice, many of your possessions fall somewhere along a spectrum between clear necessities and obvious frivolities. For instance, your family may be able to survive without an automobile if you live close to school and work, but giving up your car would be difficult to do without radically altering your lifestyle.
Determine the value of each necessity and discretionary item. Items that you purchase on a recurring basis, like food and clothing, will have to be expressed as a running average. Other items, like your entertainment devices, can be described according to their original purchase prices. Still other items will require both expressions: For instance, your car and cell phone both cost something to buy and now accrue recurring costs in the form of gasoline and maintenance on the one hand and carrier charges on the other.
Reducing your recurring costs is a matter of budgetary discipline. Get in the habit of buying generic foodstuffs and off-brand clothing, which together will save you hundreds of dollars per month if done with consistency. Treat all restaurant meals, even last-minute trips to the local fast-food joint, as discretionary purchases and reduce or eliminate them as you see fit.
Reducing other recurring costs may require more discipline than simply switching to a cheaper variety of cereal. Energy costs are a prime example: While the actual unit cost of electricity and fuel is subject to market fluctuations that you can’t control, you can manage your usage to lower levels than you might imagine.
Depending on where you live, you may be able to accomplish many of your daily or weekly tasks on foot or by bike. Resolve to drive less and get behind the wheel only for long trips and in situations where time is of the essence or you need the kind of cargo space that only a trunk can provide.
Keeping your existing possessions from wearing out is just as important as controlling your recurring costs. Spending $20 for an oil change every four months will run you $600 over your car’s theoretical 10-year lifespan, which sounds like a lot until you factor in the thousands of dollars you’ll need to fork over to replace engine components destroyed by poor maintenance.
When it comes to preventive maintenance, no detail is too small. Something as simple as dusting your refrigerator coils regularly can add years to the machine’s lifespan and help it to run more efficiently, reducing your household’s electricity costs in the process.
To free up even more capital, either to sock away in a savings account or to pay for items that you really can’t live without, consider doing away with possessions that are obviously unnecessary or extravagant. This will require some tough, possibly emotional decision-making. After all, parting with something that you’ve grown used to over the years can be downright distressing.
Unless your financial situation is desperate, however, you don’t have to sell your prized possessions outright. Instead, downsize. Sell the fancy propane grill that you rarely find the time to use and buy a cheaper charcoal-fired device. Trade your family’s gas-hog SUV in for a smaller but still-roomy station wagon, or ditch your household’s second car entirely and use the thousands of dollars you’ll save each year on gasoline to augment your retirement fund.
Until recently, life was defined by scarcity rather than excess, so frugal living shouldn’t be a foreign concept. Keep an eye to the future and remember the old expression: You reap what you sow. If you maintain a long-enough time horizon, sticking to a disciplined spending plan and deferring unnecessary purchases now will pay off sooner than you think.