Everyone has their own reasons for being frugal, but it’s hard to imagine that anyone would be frugal at all if not for some serious benefits.
In this article, I’d like to explore 11 benefits of being frugal, so here we go.
1. You can save money
Honestly, I can’t think of a better reason for being frugal than saving money. And it’s for this reason that all of the other benefits are even possible (but I’ll explain that later).
Perhaps there are some people who are frugal because they have no choice, but rarely do I find this to be true. Most people are frugal because they choose to be. They work at it, and get good at it. It becomes an art, really!
If being frugal is something that you are currently doing, chances are you are doing it to save money. You could be spending all your money if you wanted to, but you refuse to do that because you want to save money.
Saving money is the reason why most people are frugal. It’s the foundation, the very reason why all the other benefits are possible.
Related: How to Save Money: 8 Simple Tips
2. You can live on less money
Because you’re saving money, you are actually able to live on less money. This is a luxury that’s incredibly liberating.
Most people live paycheck to paycheck and some are stuck in dead end jobs they hate. They stay because they have to. In fact, the lifestyle they live has dictated that they have to stay. They make a certain amount of money, so naturally they think they have to continue to make that amount of money. It’s a trap! It makes them stay at a job they hate.
The frugal person, however, doesn’t live paycheck to paycheck (or doesn’t have to, anyway).
The frugal person could take a different job, making less money, because they’ve made that possible.
The frugal person is not trapped . . . nor are they slave to a job they hate. They can live on less money if they wanted to.
3. You can help others
If you’ve ever had a friend ask for help, this might hit home for you. But just imagine.
What if a friend asked for help, and you weren’t able to help because your finances were too tight? Honestly, this is the case with most people.
When you live paycheck to paycheck, you have no room to help others and being frugal can help with that.
Granted, sometimes it’s not a good idea to help others (if they have some bad habits or something), but that’s irrelevant. I’m talking about those who would help others but can’t because their situation precludes it.
When you live a frugal life, you can get by with less, and this will help free up money so you can help others.
No, you don’t have to, but it’s nice to know that you could if you wanted to. To be able to have that luxury is truly a blessing.
4. You can give to charities
This is a similar to helping others, but it’s more specific to a cause, usually. Whether you give to your local church, or some other charity, frugal living might be the very reason you are able to do that in the first place. It’s that simple.
5. You can become wealthy
Most millionaires are first generation rich, meaning they did not inherit their wealth. They built their wealth over the duration of their life. They did this by living on less than they make, and avoiding debt (more or less).
What’s fascinating about these people is their frugal lifestyle: they drive used cars, live on a budge, drink cheap wine, etc.
I read a book a few years back, TheMillionaireNextDoor, that illustrates this behavoir perfectly: the guy next door to you (who lives a simple and frugal life) might just be a millionaire (most of them are).
It’s an interesting book that focuses on the lifestyle and habits of most millionaires. It’s interesting because you can adopt some of these habits and practice them in your own life (I know I have in mine). The book completely transformed the way I think about money; it’s was a “game changer” for me.
The fact of the matter is this: If you want to become wealthy, you have to do what wealthy people do; the book will show you exactly what that looks like, but the key is living below your means. Being frugal is a great way to live below your means.
Related: Get Rich by Living Below Your Means
6. You can save for retirement
Being frugal isn’t the whole story, though. Sure, it might allow you to free up some extra money, but if you let that money sit in a simple savings account, it’s not going to do anything for you. You have to invest it.
Dave Ramsey suggests investing 15% of your household income in retirement accounts. TheTotalMoneyMakeover explains exactly how to do that. In short, Ramsey recommends investing in 401(k)s and Roth IRAs.
He recommends 15% because that’s what he has learned from the many millionaires he’s studied; all of them invested about 15% for retirement. It’s a proven plan.
However, 15% is a lot! And it may not be possible if you have all your money tied up in monthly payments and are living paycheck to paycheck. That’s where the frugal lifestyle can help.
If you do it right, you should be able to free up enough money to invest 15% for retirement (maybe more).
7. You can save for kids’ college
When you have extra cash (because you choose to live on less than you make), you might have a chance to save for your kids’ college. The best way to do this is through college savings investments, like ESAs and 529s. They are similar to 401(k)s and IRAs in how they grow, but they are different in the sense that the withdrawals have to be used for qualified education expenses. Nevertheless, they are great vehicles for college savings.
8. You can pay your house off
They say that if you pay an extra mortgage payments once a year, you can shed 7 years off your mortgage. So just think.
If your mortgage is $1200 a month (which isn’t cheap by the way), that would be an extra $100 a month, which is entirely doable with a frugal lifestyle.
If $100 a month saves you 7 years, just imagine what two or three hundred dollars a month would do!
Living a frugal life might be the very reason you’re able to pay an extra one or two hundred dollars a month on your house. You will be able to pay your house off in no time.
When your house is paid for, you can start building some serious wealth! Think about it.
Using the same numbers as above, if your house was paid for, you would add about $1200 a month in savings (minus taxes and insurance, of course), but that’s crazy!
9. You can get out of debt
Dave Ramsey talks about paying off debt using the “debt snowball” method, and here’s how it works.
As you’re paying off debt with minimum payments, you take any extra cash you have and throw it towards your smallest debt.
Say your smallest debt is $1000; your minimum monthly payment is $100 on it; and the extra cash you have is $100. Once the $1000 is paid for, you take the money you were using for it and throw at your next smallest debt (maybe it’s $2000, with a minimum payment of $150). So now instead of only paying $150 on it, you now have $350 to pay on it ($200 from the previous debt, plus the $150 that you been paying on it). And on and on you go, until all your debt is paid for. That’s the “debt snowball.”
10. You can save for vacations
This isn’t something I’d recommend if you have outstanding debt (you want that paid off as soon as possible); this is more for those who have no debt and would like to still go on vacations from time to time. It’s best to save up cash to pay for those vacations.
Vacations are luxuries and you don’t need to take them, especially if you can’t afford to For example, if you’re still in debt. However, if you are out of debt and want to go on vacations, I would recommend saving up the cash to pay for them. Being frugal might allow you to do that.
11. You can save for emergencies
When you’re being frugal and living on less than you make, you should always be saving for emergencies.
Obviously, if you have all your money tied up in crap, you are not in a position to save; you have to fix that. If you don’t, you’re gonna run into a situation where you have an emergency and have no way to fund it. This might cause you to go further into debt, and that defeats the purpose, obviously.
This is why it’s important to save wherever you can, pinch pennies, get an extra job, whatever you have to do in order to get a small pile of cash saved up for emergencies. Once that’s saved, you can focus on freeing up more money by getting out of debt and whatnot. Being frugal can help you do that.
Related: How to Get Rich Slow: 6 Simple Steps
When frugality fails
So it’s obvious there are many benefits to being frugal and many reasons to do it. However, there is a way that being frugal can fail, so here’s a word of caution. Most people who are frugal don’t have an issue with this, but I have to mention it:
Being frugal should not give you a license to consume as much as possible.
Here’s what I mean.
If, to you, frugality means consuming more, you might be in trouble. The whole point is to live on less than you make, so you can free up as much money as possible. If, when you free up money, you are tying it all up in something else, what’s the point? That’s why it’s important to consider doing things in a specific order. This requires a specific mind-set . . . and a specific plan. Here’s what I mean.
Make up your mind to be frugal in order to enjoy all the benefits; not to simply consume more. Here’s what I would do, in the order I would do it:
- Make up your mind that you want to win with money.
- Start living as frugal as you possibly can, making sure you are living on less than you make.
- Start saving the extra money, until you save $1000.
- Get aggressive by paying off all debt using the debt snowball.
- Save an emergency fund that would allow you to live for 3-6 months without a job.
- Save 15 percent of your income for retirement by investing in 401(k)s and (or) IRAs.
- Save for kids’ college.
- Pay extra towards the house until it’s paid for.
- Go on vacations. Save more, invest more, and give more. Leave an inheritance to your kids. Give generously to your favorite charities, and help others in need. Do whatever you want, really; you’ve become wealthy at this point.
This is what I’ve been doing for the last 10 years, and I have never looked back.
Right now, I’m on step 6 and 7, but I can certainly see how building wealth is right within my means. It’s within everyone’s, if that’s what you aspire to do.
Remember, this a gradual process that could take a long time. It’s by no means some “get rich quick scheme.”
You can build wealth, but you have to have the right mind-set; you have to do it the right way. Otherwise, you risk of failing. If you try to do it all at once, you will fail. If you intend to be frugal so you can consume more, you will probably fail.
When done right, you won’t fail. When you stay on track, not only can you enjoy all the benefits of being frugal, you can also become wealthy . . . which is the greatest benefit of all.