Updated: Feb 9
How does being frugal allows us to live more?
1) Not seduced by things and consumption
Stanley & Danko (1996): We discovered seven common denominators among those who successfully build wealth. The first is: they live well below their means, they live with frugality.
“To be frugal is to practice moderation, restraint, prudence, thrift, and financial equilibrium, but it certainly isn’t being miserly or stingy. The rich get richer by acting poorer. The poor get poorer by acting richer.” (Machig & Behrend)
“Being frugal is the cornerstone of wealth-building.” We have to resist being seduced by a high-consumption lifestyle (p. 23).
“Three words that profile the affluent: frugal, frugal, frugal.” (p. 28)
2) Think in terms of resources
“Millionaires are frugal when frugality translates into real increases in the economic productivity of a household. Webster defines frugal as “characterized by or reflecting economy in the expenditure of resources.” The key word here is resources.” (283)
3) Buy Quality
If you are buying cheap, you’re probably not being frugal. Frugal is not cheap or miserly, it is getting high value for money and enjoying it fully. The self-made millionaires are frugal about time expenditures, they distinguish between “first-cost” and life-cycle-cost. They think in life-cycle distinctions. Stanley (2000)
“Most millionaires look to the future. They are very likely to compute the lifetime costs and benefits of various activities that have some potential in saving money. This type of behavior is a high correlation for accumulating wealth, and it’s just one such element in the millionaires’ overall frugal game plan.” (278).
4) Exercise self-discipline to check numbers.
Donald Trump cashed a check for 50 cents. It happened when Spy magazine ran an article about “Who is the Cheapest Millionaire.” They sent out checks for 50 cents to see who would cash them. Trump did. His response?
“They may call it cheap; I call it watching the bottom line. Every dollar counts in business, and for that matter, every dime. Penny-pinching? You bet, I’m all for it. I always try to read my bills to make sure I’m not being over-charged.” (59). “My parents hammered frugality into me at an early age, and it’s the most important money-management skill a person can use. Call it penny-pinching if you want to; I call it financial smarts.” (61)
In conclusion, we learn from successful individuals whom have built and understand this principle. No matter how much you earn and can make at the end of each month. The focus should rather be placed on how much can you save and live below your means to sustain your wealth.