Perhaps it was the “He who dies with the most toys wins” bumper stickers that gave us the idea that living frugally equals being miserable. Because of that misconception, a lot of people who are either in financial difficulty or wanting to achieve certain financial goals are looking at everything but economizing as a way to achieve it.

In my opinion, living frugally equates more accurately with success, satisfaction, freedom and creativity. If this attitude underlies your spending philosophy, you will find economy to be an effortless lifestyle. Let’s look at the main component of the frugal living philosophy to see if this is something you could consider for yourself.

Main Component of Frugality


The first principle, and the most important one, is that frugal living is better living.

Many people have a knee–jerk reaction to any form of economizing, erroneously believing that all this austerity will mean years and years of subsistence living in return for incredibly small improvements in our lives.

Our friends will look down on us or even worse, pity us. We’ll never go to the beach or drive anything more than a sub-compact relic. It would be far easier and much quicker to take out a loan or get a second job.

But with careful attention to our spending, we can have our friends admire, if not envy us; have several beach vacations each year; and drive a late model car; all with out the burden of an extra loan repayment or the time crunch of a second job.

So for starters, understand that living frugally is all about getting more, not having less.

The Credit Card Cycle

Let me give you an illustration. Let’s pretend, for example, that your Christmas spending is out of hand. Because of buying last minute gifts in desperation, you ran your credit card way too high and in January, began paying only the minimum payment.

The amount of interest you are accruing is going to double the purchase price of the gifts. Plus, it is hard to even meet the minimum payment.

Then in February, your car breaks down. You want to put the repair on your credit card but with the Christmas purchases still lingering, you can only put part of the repair on your card. Plus interest payments are now making the car repair much more expensive than the original bill. You pay the rest of the bill with cash, but now you are short for electricity and groceries. You start juggling bills as they come in but eventually you fall behind and the phone calls start.

What about a second job?

It seems like now is the time to get a second part time job to at least take care of the credit card bill. In terms of straight money, the second job looks like the answer to all your problems. Seldom, however, do we factor in the hidden costs of a second job. First of all, $10.00 an hour is not $10.00 an hour. With federal, state, local, social security and Medicare taxes it is more like $8.00 an hour. If you must get child care, you have cut into your hourly wage still further. Because you will be rushed, you will not be shopping or cooking economically (or even healthfully) so you must factor in meals from outside sources.

Some of your wage will be taken up with commuting expenses. Perhaps the worst culprit of all is the treats you feel entitled to buy for yourself because you are so frazzled with trying to fit everything into your day.

Do the math for your particular location and be honest with your extra expenditures from the second job and you may find out that that $10.00 per hour job is actually just $5.00. Get distracted and miss a credit card payment one month and you can wipe out most of that.

If you manage to get the credit card bill paid off at all, you may just be in time to start dealing with another Christmas. Pull the credit card back out because you are running out of time. It becomes an endless cycle.

The Frugal Approach

Now, let’s look at how a frugal person would approach this. The goal is to have a holiday where everyone on your gift list is treated generously and let’s throw in some entertaining as well.

Make a list of people to gift and assign a dollar amount to each gift.

Frugality demands some planning so the frugal person begins by making a list of people to gift and assigns a dollar amount to each gift. For example, let’s say there are 10 people on your list and you want to spend $100.00 on each of them. That is $1000.00 total for gifts.

Now, look at your list.  Does everyone have to have a $100.00 gift? Are there people who could be removed? Are there people who would value something besides a gift, for example an aunt who would enjoy a lunch out with you and the kids or a grandparent that would like their garage cleaned or their car waxed? Are there people to spend more than $100.00 on such as your teenager?

Shopping All Year

Now, the frugal person will divide the $1000.00 by 52 to determine how much money to set back each week to pay for Christmas. This amounts to $20 per week; hardly noticeable most weeks.

Now you may think that the economizer would want to put this into a Christmas club at the bank in order to get the interest on the set aside money.

Perhaps, But a better strategy would be to keep that money accumulating somewhere that is accessible because buying Christmas presents throughout the year is a great way to save money. The money-wise person will not let shopping go until November, but rather keep an eye out for gifts all year round.

For example, winter clothing clearance sales are great places to pick up gifts for adults whose size does not change from year to year. It is not unusual to find shirts, sweaters, sports clothes, purses, and outerwear for 30%-75% less.

So instead of buying a sweater for $89, the frugal person buys two sweaters for around $50; far less than the original $100 price point and double the gifts.

This is a concrete example of the more for less philosophy we were discussing.

Another example is jewelry and sporting goods. Browse the clearance section of online jewelers and outfitters throughout the year. Because the frugal person has months to find a purchase instead of just weeks or even days, chances are really good that he or she will find each person the perfect gift at an incredibly low price. The same is true of many other vendors.

Wrapping It Up

Stash gift purchases in a large tote box in a closet and come the holiday season, the frugal person is ready to start wrapping, (with clearance wrap bought the January before of course) rather than shopping. So at this point, no money is going out. Christmas is paid for.

But that isn’t all to this story. Let’s say that the frugal person was able to shave $25 off each person’s gift total. That makes a whopping $250 excess. This money is available for entertaining. Fix the family Christmas Eve meal for a dozen people for a comfortable $150, and have $100 for another gathering.

These are two quite different scenarios and it would be hard to conclude that simply throwing money at Christmas made for a more meaningful holiday. If someone on your guest list received two perfect gifts for half the money and you were able to easily open your home to family and friends, then you achieved more – a lot more.

Stop feeling that you don’t have enough money to achieve the things you want to achieve. Step back, begin finding ways to accomplish everything with less money, and put the excess to wise use. But first, begin by believing that this is the better, more meaningful way to live.

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Posted by Omar Maxwell

Omar is a professional blogger that enjoys providing insight into financial companies and Pure Checks.

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