Okay, it’s time to get real:
Statistics show that most of us are WAY overspending. We’re either not saving enough to maintain a sufficient emergency fund or – even worse – spending more than we earn. In fact, the average American household spends 90% of its income.
At the same time, wages across most sectors are pretty stagnant. Pay fell during the Great Recession of 2008, and most of us haven’t seen much of a rebound.
That formula can equal financial disaster.
So, what’s a solution to keep yourself solvent and maintain your financial footing? If you’re not in line for a promotion with a huge raise, or you’re not seeking a second (or third) job to significantly boost your income, you’ll need to focus on prudent spending. This is also known as frugality. There are some amazing benefits to living below your means.
What Frugality Is – and Isn’t
Frugality can be defined simply as living well below your means. It doesn’t necessarily mean living like a pauper. Another way to look at it is spending very intentionally: You prioritize how you spend your hard-earned money, only buying the things that really matter to you.
And cutting back on spending money for things that aren’t a priority is not only smart, it’s also your path to financial freedom.
At first blush, you might assume that frugal means cheap. But this is NOT the case. Frugal living doesn’t require you to buy the cheapest item and sacrifice quality only to save a few pennies. You just compensate based on your priorities. If you choose to spend more on a high-quality extra virgin olive oil, for example, you could opt for a generic brand of paper towels. Or maybe you cut your monthly clothing allowance to save up for a nice vacation. Or forego dining out for several months to pay for a bathroom renovation. The best part is that you’re completely in charge of determining your priorities.
Benefit 1: You’ll Be Able to Retire Earlier
Frugality is a habit that teaches you to live happily on less. If you’ve been living paycheck to paycheck, you have certainly noticed that you’re tied to your job (even if you don’t love what you do). If you conscientiously plan to live within (or below) your means today, you can save and invest more money, breaking this reliance and gaining the freedom to pursue your true passions.
For many people, this means leaving the workforce before originally planned. If you love your job, great! Keep working if that makes you happy. But if not, frugality can be your key to early retirement. What’s more, establishing a frugal lifestyle before you retire – and sticking with it for the most part – will keep your expenses down during retirement. You’ll have no problem living within the means of your retirement benefits. But you’ll also have accumulated a good chunk of investments, which means your twilight years can be more extravagant if you so choose.
Benefit 2: You’ll Enjoy Your Purchases Longer
Adopting a frugal lifestyle means you consider each major expense critically and strategically. Do you really need an upgraded cell phone? Or a bigger TV? Or a brand-new winter coat each year? Rather than knee-jerking into your purchases, you pause and weigh the pros and cons. Rationalizing each purchase means you’ll end up only buying what you really need – and many times you’ll realize that what you already have is perfectly sufficient.
An added bonus is that living this way is also a great way to help the planet! In our culture of disposability, it’s refreshing to stop adding to the landfills.
Benefit 3: You’ll Reduce Financial-Induced Stress
In a survey conducted by the American Psychological Association, finances were at the top of the list of causes of stress for American adults. In fact, it’s estimated that about three-fourths of American adults are constantly worried about their financial security. And all that worry is connected to numerous health issues, including poor diet, alcohol and drug misuse, depression and anxiety, sleep problems, migraines, heart disease, and even diabetes.
If you’re married or in a committed relationship, frugal living has an additional benefit. You’ll practically eliminate money arguments that are consistently named a leading cause of break-ups in America. Financial security goes a long way in reducing strain on relationships.
Are you looking for other ways to jump-start your savings? Frugality is just one suggested method to cut your expenditures and boost your fiscal stability. At DebtGuru.com, we’re all about working with folks just like you to create a financial plan that makes sense for your unique situation. Reach out to one of our helpful counselors today to get started on your journey to financial success.