Why Being Frugal is Good? Part 1: The Monetary Benefits
There's a huge difference between being frugal and being cheap, and for a smart consumer, being frugal is definitely the way to go!
Living frugally doesn’t mean depriving yourself of things you need simply because you deem them too costly. Being frugal is not the same as being cheap, and here, we’ll explore why frugality is actually a smart strategy.
But before we delve into the many life-affirming advantages of being frugal, let us first make a distinction between frugal and cheap because one definitely doesn’t equate to the other in terms of intent.
For example, while both frugal and miserly, penny-pinching people obsess about saving money, 1) frugal types do not do so at the expense of the law or other beings. So, not leaving a tip is considered “cheap,” not frugal; 2) frugality concerns itself with maximizing overall value rather than just accumulating concrete cost savings, meaning frugal people recognize purchasing long-lasting quality goods at a higher price point is inherently more cost-effective than buying cheaper, low-quality items that you have to buy more often; and 3) being cheap is about spending less out of fear of being without cash-on-hand, while being frugal is all about being savvy and resourceful with your spending so that you can spend more for the things that make you happy—regardless of cost—such as travel, buying a dream home, or retirement.
Now that you know that frugal living is something to aspire to and not ridicule, we list below a few of the more discernible monetary benefits of being thrifty that may convince you to convert to the lifestyle even more, such as:
1. Significant savings.
The most obvious and consequential advantage of being frugal is the accumulation of cash savings. Unfortunately, most people use their income to live just at the limit of or even beyond their means, leaving them little to nothing at all for savings after tax, loan, credit, mortgage, utility, personal, and other payments. Frugal folks are masters at managing their expenditures so that they always have enough cash left over to set aside; and the more frugal you are, the higher your savings rate—which is the single biggest factor that determines the age at which you'll be able to retire.
2. Stop living paycheck-to-paycheck.
Spending wisely and conservatively means you’ll never have to constantly max-out your paycheck before the next payday and worry about having enough cash by your next bill’s due date because you have extra as backup.
3. Becoming more resourceful and disciplined with your purchases.
Being frugal forces you to evaluate your priorities and makes you distinguish between your actual needs and wants. Those who are frugal recognize when a particular item is unnecessary or of very limited usefulness that it is not worth the cost of purchasing so that they find creative solutions around it, such as recycling, repurposing, innovating, up-cycling, borrowing, and more.
4. Greater independence.
Skillfully managing your finances, no matter how small, allows you greater capacity to live independently with little to no financial assistance (whether from parents or a financial institution). Fiscal responsibility also has the added bonus of giving you better credit scores and a clean financial history to work with.
5. Emergency readiness.
Face it, life will throw you a curveball or two, and when that happens, you’ll want to have an emergency fund on standby that’s ideally worth 3 to 6 months of expenses. Frugal people who tend to keep their monthly expenses at a minimum will usually survive easily on a smaller emergency fund. A smaller liquid fund is not only easier and quicker to build, it also means less cash sitting around in an interest-free account, uninvested.
6. Wider investment opportunities.
Frugal people with significant amounts of money saved will have a wider range of investment options open to them such as stocks (including 401k), mutual funds, investment bonds, savings accounts, and even physical commodities. That way, your extra money isn’t idling and, instead, is compounding interest for future use, whether in an emergency or for retirement.
Forget the stereotype of frugal people being compared to misers and cheapskates; rather, if you are frugal, wear the label proudly—especially if a healthy bank account and your ability to live the life you want stress-free are proof-positive that being thrifty actually works!