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My Problem with Being Frugal

Warning, extreme frugality may cause the following problems:

  • Boring conversations at dinner parties or on dates
  • Being considered a cheapskate by your spouse and friends
  • Bouts of insomnia, while thinking of ways to save money
  • Funky smell from that homemade soap or deodorant
  • Missing invitations to events where they split the bill

Stepping Off the Frugal Path

Don't become a Cheese Ball.Many of the posts from Personal Finance bloggers are about climbing out of debt, strict budgeting and living a frugal existence.   This appeals to a very small percentage of the population, most of whom are PF bloggers.  I’m taking a stand against this.  I’m calling B.S. on the lifestyle police and giving frugalistas the finger.

I don’t want to clip coupons or shop in thrift stores.  And, I don’t want to have to count my dimes or create a monthly budget.  I don’t want to dwell on my bills or my expenses.  Most of all, I don’t want you to waste your time on this either.

I have a much better plan.  I want my finances to be fun.  I want to check my investments and dream of where they will be in twenty years.  I want to see my income steadily rising.  I want a bigger budget for fun and entertainment.  I want to invest more of my income and pay less in interest.  I want to enjoy the money I have worked so hard to earn.  Most of all, I want you to have this lifestyle too.

Why Being Frugal Doesn’t Always Pay

I understand there are people of limited means who must be frugal in order to survive financially.  Twenty years ago, I was one of them and I knew every frugal trick in the book.  The reason I wrote this post is because I spent years of my life scraping by just to make ends meet.  I firmly believed I was doing the right thing at the time by limiting my expenses and I was very proud of my frugal accomplishments.  But, now I know I was definitely on the wrong track.

I should have been working much harder to increase my income.  Instead, I was expending most of my energy working long hours for low wages.  And, I was squandering my mental talents on creative ways to save on every expense.  This approach cost me a lot of time and money during my 20s and 30s.  I still live a pretty frugal lifestyle for my tax bracket, which allows me to invest 20% of my net pay.  But, I am way happier now that I have sufficient income to enjoy my life.  My family is much happier as well.

Reasons to Increase Your Income Instead

Savings are finite, while income is virtually unlimited.

    It’s not possible to cut 100% of your expenses, unless you mooch off others or live in a homeless shelter.  It would be difficult for most people to even cut 10% of their expenses.  But, it’s very possible to raise your income by 10%, 100% or even more.  In fact, I have more than quadrupled my income in the past twenty years.  And, I don’t work any harder than I used to.  I just get paid a lot more for my efforts.  In a way I am very lucky.  But, I made a conscious effort to boost my salary and it worked.  I wish I had thought of it sooner.

There are economies of scale with a bigger income.

    You will pay higher taxes, but your budget allotments will increase as well.  For example, I always pay myself first by putting away a percentage of my net income.  Obviously, the amount of money I was able to save grew a lot as my income increased.  So did my allotments for food, clothing, travel, transportation and entertainment.  As the pie gets bigger, so do the slices.

Many of your biggest monthly costs are fixed.

    Unless you inflate your lifestyle, your fixed expenses will become a smaller percentage of your income.  For example, my mortgage payment is the same as it was 13 years ago (actually it went down), while my income has more than doubled.  This allows me to comfortably pay extra each month on the loan.  Insurance, property taxes, utilities and other fixed costs are also much more affordable on a higher income.

Savings are incremental, while raises are exponential.

    Would you rather get a 5% raise or save 5% in expenses?  After taxes, it may seem like the 5% savings is a better deal.  But, your income will be up 5% every year and this could add up to a lot of money over time.  When you get your next raise, it compounds on top of the old one.  So, regular increases in income tend to grow exponentially, just like investments.

The Bottom Line

The bottom line is that you must keep a lid on your spending. But, this doesn’t mean you should become preoccupied with being frugal. It is much more efficient and enjoyable to use that energy to increase your income. As your income rises, it’s OK to increase your spending, as long as you eliminate debt, avoid payments and save for your future.

Recommended Reading

This post was featured on the Carnival of Personal Finance.  If you aren’t familiar with the COPF, it’s the premiere carnival of its kind.  If you want to skip the junk posts and read informative articles from knowledgeable bloggers, this is the place.

7 comments to My Problem with Being Frugal

  • Brilliant post, Bret!

    I remember when lots of people would scoff at me a dozen years ago when I told them that I was making extra principal payments in order to pay off my mortgage early – now a paid off (or nearly paid off) mortgage is bigger status symbol than a Beemer in the driveway. Go figure.

    You’re right though, while I am glad people have finally figured out that buy-now-pay-later mentality is a loser’s game, the pendulum appears that it may be swinging a bit too far.

    Just how much further it has to go has yet to be seen.

    I’ll be highlighting your post in my weekly roundup at the end of the week! :-)

    My $0.02 (after taxes)

    Len
    Len Penzo dot Com

  • Budgeting skills are necessary at any income level…give people who are living on credit at $50k/year a 100% raise, and they’ll still be living on credit next year. Yes, people should be trying to increase their income, but savings and budgeting skills are what most people lack – not the desire for more income.

  • CJ

    Thanks for the post, Bret! I agree, building wealth requires focusing on how to increase your income. But it also requires knowing how to spend less than you make, which frugality helps teach. Balance is the key; if you focus on one and not the other, you’ll still end up poor and/or dissatisfied with life.

  • Len,

    Thanks a million for including me in your weekly round up. I love reading your blog.

    I’m a big fan of paying off the house early. I am about six years away and I am literally counting down the months. I learned this trick from my folks. They paid off their first two houses and rented them out to pay for their third house. Now, they are retired, living without a mortgage and collecting the rents from their first two properties. How great is that?

    I’m still really worried about all of the people with a pay later attitude. It just seems like the rich are preying on the working class and they are totally falling for it. Between the advertising and the easy credit, people are getting sucked into massive debt. Two great things that give me hope is the personal savings rate is way up and the new Credit Card Bill of rights law. I hope things get better and stay better for a while.

  • [...] Bret from BretFrohlich.com presents My Problem with Being Frugal. [...]

  • [...] This is the 213th edition of the carnival! Here are a couple posts that caught my attention: 29 Reasons Why Being A Part Time Entrepenuer Sucks How to Hard Reset your Financial Life Keys To Effective Money Management – Part 1: Attitude How To Get Out of Debt With A Debt Repayment Plan To Save Big, Think Small My Problem with Being Frugal [...]

  • [...] Earlier this month one of my favorite personal finance bloggers, Bret Frohlich, wrote a terrific piece where he declared war on frugality and explained why frugality doesn’t always pay. [...]