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The Case Against Frugality

As the recession of 2008 dragged on, frugality came into vogue, and many commentators believed a new and lasting way of life had begun. The savings rate went up, people held onto their cars longer, and second hand stores became all the rage.

In 2010, 63 percent of people said the recession had “forever changed” the way they spend and save, according to a Citigroup survey.

Just one year later, the savings rate took a southward turn, credit card debt started picking up again, and parking spaces at the mall became hard to find. When Citigroup re-ran its survey, the percentage of people who said the recession had “forever changed” the way they spend and save fell to just 52 percent.

Apparently “forever” isn’t quite as permanent as it sounds.

It happens a lot. Economic times get tough and people tighten the belt. Things get better and they spend more. When gas prices are low, SUVs fly off car dealer lots. When the price goes up, small cars gain popularity. I call it “binge/purge” money management.

In part, I blame the word “frugality.”

What’s wrong with frugality?

To be sure, I know there are many people who think of themselves as frugal, and for them, it’s a good thing. They simply hate to waste money. They’re not living by some temporary set of rules brought on by economic tough times. Frugality is a worldview that shapes their use of money in very positive ways.

However, with apologies to those who do frugal well, I’ve never cared for the term. For me, it’s always conjured up images of refusing to tip any more than 15 percent, dogmatically avoiding coffee shops as if spending a couple of bucks on a good cup of coffee is immoral, and generally living a Scrooge-like existence. Okay, I’m exaggerating, but not by much.

Mostly, I’ve thought of frugality as not much fun, where the overarching principle is to spend as little as possible. That, I believe, is one of the main reasons we see such a rapid shift away from saving and toward spending when economic tough times turn into economic good times. People just don’t like being frugal. They’ll do it while they have to, but not a moment longer.

Repositioning frugality

A better financial path begins with a better term, and the one I prefer is “money-smart.” Money-smart people:

  • Use a cash flow plan
  • Give generously
  • Get their biggest spending decision right, keeping their monthly housing costs to no more than 25 percent of gross income—preferably no more than 20 percent
  • Avoid all other debt
  • Build and maintain an emergency fund stocked with at least six months worth of living expenses
  • Invest 10-15 percent of monthly gross income for their later years
  • Know how to get great stuff at great prices, all the while realizing that the cheapest option may not actually be the most cost-effective option
  • Are really good at making trade-offs, happily choosing to spend less in one category in order to spend more on something else that’s more important to them

And they do these things all the time, not just in response to a financial crisis. If everyone took these steps, what a difference it would make!

A money plan for all types of economic weather

We can’t control the economy, but we can control our personal finances. By following the approach I just described at all times, there will be no need to make major changes when times turn bad.

To my frugal friends – those who wear the word well – carry on. But for everyone who’s ever grit their teeth through a season of forced frugality, let’s put an end to all the financial binging and purging. Let’s re-brand ourselves as money-smart and get on a more sustainable and enjoyable path toward financial success.

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18 Responses to The Case Against Frugality

  1. Franklin Bach September 8, 2017 at 11:55 AM #

    All exellent points and you hit all of the high spots. I never cared for term as 80% of the time people confuse it with the negative side being cheap. Money Smart or Smart Spending is a great step in the right direction of re-positioning this concept with more positive labels.

    • Matt Bell September 8, 2017 at 3:13 PM #

      Thanks for your feedback, Franklin. Glad to have found another kindred spirit!

  2. Menard September 8, 2017 at 1:34 AM #

    I think being frugal has a broader meaning and not limited to how you manage money. You could be frugal in terms of other resources such as time, effort and other resources. I do agree that we ought to give generously. That’s what distinguishes a frugal (or money-smart) person from a cheapo, like the unidentified coworker who stole my sandwich at work.

    • Matt Bell September 8, 2017 at 9:39 AM #

      Sorry to hear about the sandwich, Menard! That’s crazy.

      Great point about how frugality applies to other areas of life. Something I say to our kids from time to time is, “Let’s not spend money on dumb things (leaving lights on, not taking care of our stuff so it ends up costing us more in repair or replacement costs, etc.) so we have more to spend on fun things.

  3. Kathryn E Nielson September 7, 2017 at 6:41 PM #

    Fabulous article! Thanks for sharing. I agree with all of this. When the recession hit, we did the binge/purge money thing, then rested on our laurels, then got it in the butt. We have since adopted exactly the lifestyle you describe, and I spend a lot less time worrying about money.

    • Matt Bell September 7, 2017 at 6:55 PM #

      Thanks for sharing your experience, Kathryn. I’ve done the whole learn-some-lessons-the-hard-way thing, too. Not a lot of fun when you’re going through them, but those tend to be the lessons that stick. Glad to hear you’re doing well now.

  4. Our Family Fortune September 7, 2017 at 1:16 PM #

    Matt, good points, but I think you’re missing a big part of your “money smart” plan: work your butt off and earn as much as you can while you can! Frugality only gets you so far, whereas earning more can allow you to save an out-sized amount while living a great life. Follow Steve Martin’s advice: be so good they can’t ignore you. Use that to save way more than 10-15%, and the next recession (hopefully) won’t hurt you at all.

    • Matt Bell September 7, 2017 at 3:12 PM #

      Hard to argue with that! Although the phenomenon where someone makes a big income and spends even more is pretty common. So it’s important to do both — maximize your earning potential and also be in the game on the outgo side of things. But your point is well taken.

  5. Handy Millennial September 7, 2017 at 9:48 AM #

    This a great article. I think you would find that **most** frugal people think exactly like this about frugality. But its all about branding. Its actually a giant accomplishment that frugality has gotten such a bad rap. Just think, if frugal is bad, logically spending is good. So if we can give frugality a bad brand, then maybe we can fill our stores, malls, dealerships, etc. etc. Of course this isn’t some great big conspiracy, simply the culmination of many small efforts by various sources over a long time.

    • Matt Bell September 7, 2017 at 10:13 AM #

      Thanks for your feedback, Handy M. I certainly don’t want to be part of any effort to push people away from frugality and toward consumerism! My intent is to encourage more people to be more intentional in their use of money.

      You may be right — that frugal people are all about doing the things I highlighted. I just think “frugality” may have something of a PR problem, and that more people would be drawn to these behaviors if they were repositioned.

  6. Team CF September 7, 2017 at 9:19 AM #

    The name does not matter, it’s what you do (or don’t do) financially that matters. Be money smart, that for sure!

    • Matt Bell September 7, 2017 at 9:55 AM #

      Ultimately, that’s right, Team CF. I’m sure there are a lot of people who don’t need to worry about how they refer to certain behaviors or financial tools. But I’ve found that in my life, and for many of the participants in workshops I’ve taught over the years, the terms do matter.

      Budgeting is the best example that comes to mind. So many non-budgeters just hate the idea. But when I tell people that budgets are not about “less” — obsessively spending less on everything — and that they’re actually about “more” — being more knowledgeable about where your money is going so you can be more proactive in putting it where you really want it so you have more for what matters most, I usually find at least a few resisters who are willing to give it a try. 🙂 But again, I hear ya — what matters most is what you end up doing or not doing.

  7. Mr. Groovy September 7, 2017 at 8:46 AM #

    Agreed, Matt. Frugality smacks of deprivation. And most people can’t stomach that for long. Money smart, however, is more about mindfulness; that is, it’s more about getting the big things right (spending on housing and transportation, for instance) and not fretting over the small stuff (enjoy that microbrew!). Way to rebrand an important mindset, my friend. May the ranks of the money smart grow.

    • Matt Bell September 7, 2017 at 9:47 AM #

      Thanks, Mr. G. I like that term – mindfulness. Spending money well is a lot about awareness and making conscious, proactive choices based on what matters most to each person. Sometimes, it’s been my experience that “frugality” can gets its hooks in people, making them think they “can’t afford” pretty much anything, or as I said in the article, feeling obligated to always take the least expensive option. I do believe in sweating the small stuff, but as you said, getting the big things right, like housing and transportation, will have a much greater impact on a person’s finances.

  8. Jamie @ Medium Sized Family September 7, 2017 at 8:36 AM #

    I’ll admit that wording can make all the difference. I do enjoy the term money-smart! I find myself defending frugality as being all the things you list here as being money-smart. But maybe if I were to just change my initial wording a bit, I wouldn’t have to always be on the defense! And here I thought it was a battle between “cheap” and “frugal”…

    • Matt Bell September 7, 2017 at 9:41 AM #

      Thanks for stopping by, Jamie, and for your thoughts on this topic. You raise a good point about the line between cheap and frugal. “Cheap” or “stingy” are things I’d never want to be accused of!

      And as I said, I certainly know people who do the whole frugal thing well. It’s just that, for me, the word has a negative connotation. I like positioning things positively. It’s sort of like “budget” or even “spending plan.” I don’t care for either term, and I’m actually a strong proponent of budgeting. I just call ours a “cash flow plan.” You often hear people referring to a “budget” as something you “go on” like a diet. Who wants that? And “spending plan” only covers a portion of all the financial categories. “Cash flow plan” covers it all, including giving, saving, investing, and of course, income.

  9. Jeremy September 7, 2017 at 6:58 AM #

    Whole heartedly agree!

    • Matt Bell September 7, 2017 at 9:58 AM #

      Thanks, Jeremy!

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