Updated on 09.17.14

When Your Finances Improve, Is Frugality Necessary?

Trent Hamm

Frugal Joe's Ordinary Beer by MontageMan on Flickr!When I first started writing The Simple Dollar, I was working at a very stable 9-to-5 job that paid quite well. My wife and I lived in a very small apartment with our one child, a boy who wasn’t even a year old yet. Neither of our vehicles were paid off, but they were both still in fairly good shape. We had very little savings and still had a pretty big pile of debt in front of us – in fact, that’s why I started The Simple Dollar, to talk about money and learn along the way.

Roll forward to today. I’m now a full time writer, which basically means I set my own schedule when I work. My wife and I now own a four bedroom house (of which one of the bedrooms has been converted into an office). We now have two children – that boy is now three and a girl who is over a year old. Both of our vehicles are paid off, but they’re getting quite old and one of them is on the fast track to being replaced. We have very few debts now – just one student loan and a mortgage, no credit cards – and our savings are quite healthy.

In short, we’re in a completely different financial situation now than we were two years ago when I started The Simple Dollar.

When I go back and read some of the earliest posts on The Simple Dollar and consider them in light of those changes, it’s easy to see how much my own standards of frugality have changed and evolved. Here are some examples.

My earliest coupon strategy involved a lot of work and it was also fairly naive. Today, I spend much less time hunting for coupons, mostly just identifying great deals from the Sunday paper (ones that obviously beat warehouse prices and generics on products we already buy) and occasionally order more of those coupons from brokers.

I used to think saving money in my pocket change jar was a great way to save, but I came to eventually realize that having a lot of pocket cash was actually hurting me because it made spending money very, very easy.

When I was first divesting myself of a lot of my material goods, I spent way too much time trying to game eBay. Now, I only eBay items if it’s clear it will be worth the time – otherwise, I’m content to pass items on to people who will use them or else donate the items to Goodwill.

I used to worry a lot about slight differences in interest rates between banks. Now I realize that most of that worrying and sweating only amounts to a few dollars a year – and good customer service is worth quite a bit more than that if you need it.

In short, things have changed. As my financial situation has become more secure in many ways (and less secure in at least one key way, my “freelancing” job), my priorities for frugality have changed as well.

The biggest change has been a sharp reduction in my free time. With a large house to maintain and a second child that needs and deserves a lot of attention (in addition to the continuing love and attention for the first child), I simply don’t have as many free hours as I once had to chase down savings.

This means that my frugality has to focus more intently on the bigger items. What actions provide the biggest bang for the buck, particularly over the long haul? Spending an hour tracking down coupons to save $4 on my grocery bill? Or spending fifteen minutes making a bucket of homemade laundry detergent that will save $6 over the time we use it followed by making a homemade supper? In the past, I would have done all of these things – today, it’s a choice between the two.

A bigger question lurks behind all of this, though. Given that I’m in a better financial situation than I was two years ago, am I now behaving in a less frugal fashion? In other words, since I’m not as financially pressured as I once was, am I skipping over some of the frugal choices I could be making?

I believe the answer is yes.

That’s not to say I don’t spend my spare time working on projects that will save money. We make laundry detergent, cook lots of meals at home, and so on, and I thoroughly enjoy trying out new tactics that I discover.

Given that, we’ve reached a point of financial security where it makes sense for both of us to focus on other areas of growth. For example, if I have a spare hour today, I might spend it trying to build a new skill or read something that I can apply in my work, whereas two years ago I might have hunted down some coupons or tried to figure out a clever way to save some additional cash.

Yet, in the end, these different choices are just variations on the same theme. In both cases, we’re seeking to increase the gap between our income and our spending.

With frugality, the goal is to reduce your spending. With less money going out, you have more money you can save and apply to your debts and personal savings goals.

With other areas of personal and career growth, the goal is to increase your income. Again, with more money coming in without an increase in spending, you have more money you can save.

What’s the real key in both stories? Control your spending and keep it much lower than your income. If you do that, then frugality and career development go hand in hand – they both serve to increase the amount of money you can keep.

Another question: when is it better to be frugal than it is to focus on career growth? Frugality is something that tends to pay off pretty quickly. If you shave spending immediately, you’ll see the benefits very quickly in your checking account balance and you can immediately use it to keep your head above water.

Career growth and personal development pay off much more slowly. It may take years, in fact, before you see a dime’s worth of return on that investment.

Many people are in financial situations where they simply don’t have the time necessary to invest in career growth and personal development. They need to make changes now in order to keep their head above water. For them, cutting spending is the best choice as it provides immediate results.

Later on, though, when you’ve mastered a lot of great techniques for trimming your spending, you may want to look at other avenues for increasing the gap between your spending and your income, and working on your career is a great way to do just that. You can work on skills that improve your current career, or focus on laying the groundwork for something completely different. These investments of time won’t pay off immediately, but if you have your spending under control and spend far less than you earn, you have the time and breathing room to make it happen.

Times change, but spending less than you earn always works.

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  1. J says:

    “It’s only free if your time is worthless.”

    This saying sprang immediately to mind reading this post. I’m sure you are going to catch hell from many people who concern themselves only with the “money” side of the equation. But life’s not only about money, it’s about time. We only have a finite amount of both, and to me, frugality is about finding a way to maximize the returns from both. Money is merely a conduit to in many cases allow for a tradeoff of time for money, and each person’s optimal point is different.

    Take something as mundane as clearing snow from your driveway or mowing the lawn. You can be “frugal” if you just use a shovel, although it might take you four hours after a good storm to get out of the driveway. Or perhaps you could knock that down to an hour by purchasing a snowblower, or maybe even a beater pickup with a plow. But that would involve spending hundreds of dollars, although you’d be able to spend more time elsewhere. You can even slide it to the “spend no time at all” and hire someone to plow and shovel for you.

    Which approach is “right” or “frugal”? They all are. Say you have a couple of teenagers who need to get some exercise and have nothing to do after school. Sounds like a great use of their time to get out and shovel. Say you have a family and need to get to work, but are making ends meet. Perhaps the snowblower would be a good fit, to allow more time to be spent with the family, a tradeoff of money for time. And finally, let’s say that you are a person who performs some highly skilled labor for which you are paid by the hour. Spending four hours shoveling the driveway is likely not a good use of what could otherwise be four billed hours.

    So I’m glad that you are honest about how your situation has changed. As a freelance writer, it’s likely that the investment of time into something that “returns” very little money to you versus drumming up new business is not an effective way to be “frugal”.

  2. Johanna says:

    Another key to the story: Frugality is a tool, a means to an end. Not an end (or a virtue) in itself. If where you are and where you want to go have changed, and frugality is no longer helping you to get there, then don’t be frugal. You don’t need any more of a justification than that.

  3. J.D. says:

    Great post, Trent. This conversation has been occurring behind the scenes at GRS lately, too, and I plan to write about it over the next couple of weeks. What’s occurring in the comments of an old entry and in e-mail will become a public discussion.

    I have a metaphor that I won’t share here, but I agree with you that once the basics are taken care of, money becomes a tool to be used to make life better. That’s the whole point of going through the debt reduction and savings, right?

  4. RDS @ Smart Financial Values says:

    There is a lot to think over in this post. I am not sure I agree with you that you are being less frugal. However, I think that it comes down to a definition of frugal. If you define frugality purely as minimizing monetary costs than your behavior is clearly less frugal. However, if you define frugality as making the most of all of your resources – including your time – then you might not be any less frugal.

    As you explained, your financial situation has improved (you know have more dollars than you used to) and your spare time has decreased (you now have less minutes than you used to). Therefore, it is understandable that dollars are not quite as valuable to you as they used to be and minutes are more valuable than they once were.

  5. Good point, and a more realistic viewpoint on frugality than is normally put forth. Thanks!

  6. The Personal Finance Playbook says:

    Just a quick economic addition to the point made by the first poster. If your time is billed out at $100 per hour and you can pay someone $20 bucks to cut your lawn (assume it takes an hour), it’s smarter for you to pay someone to do it and go to work for an hour. Not to mention the added cost of having a lawn mower, buying gas for it, storing it, buying a trimmer, etc.

  7. KJ says:

    Thanks, Trent and J —

    I feel time, J’s finite and precious time, running past more acutely than I did in my hard-core-savings phase, so I, too, have shifted my behaviors to a softer, less time-consuming mode. (Not terribly far back, though — we were with my mister’s family for part of the vacation, and the contrast was eye-opening.)

    Like you, Trent, I’m in a much better financial place now, too, so I feel the leapfrogging to my new life was worth the detailed and time-consuming effort. Spending a little time in full-on frugality really makes you appreciate what’s important to you and your life.

    (I’ll also confess that, in the throes of my dollar-stretching times, I felt like a total superhero — for a new hobby, black-belt frugality was really fun and engaging, with concrete numeric progress!)

  8. CPA Kevin says:

    I think you also realize now that you’re not a salaried employee anymore you can work to create a higher income by learning new skills. Choosing to do that instead of spending time trying to save $4 clipping coupons is somewhat like trading short-term gratification for long-term benefits.

    I’m in a similar position. I’ve just about got all the cost-cutting done our family can handle. Now I need to focus on growing earnings to further widen the gap.

  9. Sherif Koussa says:

    “Spending an hour tracking down coupons to save $4 on my grocery bill? Or spending fifteen minutes making a bucket of homemade laundry detergent that will save $6”

    I think more of nor this nor that and doing an hour of work which will pay me about 40$/hour. What do you think?

  10. TC says:

    But the thing about frugality is, there’s a point of seriously diminishing returns. If you cut out cable, but you still can’t make ends meet, you can’t cut out cable again. Or say you reduce your grocery spending by 25%, but you find you need to reduce it some more; chances are, you won’t be able to reduce it by anything CLOSE to a quarter again, since you’re already operating close to the bone. What do you cut when you’ve already cut and cut and cut…

    On the other hand, in most cases (though possibly not today’s economy…), focusing on career advancement will give you a chance of continuing to make more money. You can keep going up–there is, or there is supposed to be, no ceiling on earnings–but once you get down to the bargain basement, where else can you go?

  11. Craig says:

    Very realistic way to look at it. I am not in your situation but can understand the fact that your views on saving change as your situation changes financially, but more importantly personally. Like you mentioned, may not have the time for the little savings, but major savings and I’m sure you are more educated now on ways to save.

  12. Matt says:

    This post shows growth and a healthy dose of reality in it; at least it did for me. If you were to keep doing everything you could to save every single penny you would eventually run out of time. I agree there are times when its important to do everything you can but when it comes time to more important things in life such as children spending a little more or in this case saving a little less is worth it. I wouldn’t trade an extra 10K a year in salary if it meant I lost time watching my daughter grow up.

  13. typome says:

    You now have more freedom than you did a few years ago, so that level of frugality isn’t as necessary. Imagine if you couldn’t pay rent and were deep in debt, maybe you would forgo cable and internet and clip coupons. But then imagine that over time you’re more financially stable; you’d then be in a position to be able to get your cable and internet back, and not clip so many coupons. A few years ago you needed to do those things; now, not so much.

    I could see you doing those things if you really enjoy it for the act itself, or for other reasons, like the environment. Maybe you like making your own detergent because it gives you pride, or because it helps the environment. But now with more money, you probably won’t do it just to save money.

    I’m at the same place where I don’t really clip coupons or feel like I need to sell everything (other than to clear clutter, and again, that’s not a money issue, more like a space issue). I’m in a good place, and I’m able to choose my level of frugality based on how much I enjoy them. I’m not going to start clipping coupons, but if I were ever in the unfortunate circumstance where I have to buckle down and be extra frugal, you can bet I’ll be clipping coupons and selling on ebay.

    Great article.

  14. Kay Em says:

    Great post – I totally agree. I look at frugality as time versus money – which do I have more of right now? A few years ago, I would have said my time was pretty cheap, but my money was scarce (i.e. expensive), so time-intensive savings projects had a greater benefit.

    Now that the debts are substantially paid down, my husband has a good job, and I’m finishing grad school, I have more money. My time, on the other hand, is very scarce.

    I used to spend hours shopping at three grocery stores to save $20 on the grocery bill. Now, I accept the larger grocery bill the cost of having additional hours to study for the next exam and to transition into my career.

  15. Jamie says:

    Excellent article Trent, you constructed the idea very well: in the beginning we are on “emergency mode” and that’s where frugality really pays off, later on though, career development and personal growth offer us the edge.

  16. David says:

    Your thoughts on pocket change and cash-in-hand spark a thought. Does today’s world of debit cards largely replacing cash promote that spending? Instead of a twenty burning a hole in your pcoket, you may have your only bank account sitting there waiting to be spent.

    I suppose thats why some folks like the cash in the envelop budget system.

  17. Alice says:

    “We have very few debts now – just one student loan and a mortgage, no credit cards – and our savings are quite healthy.”

    Surely you should be using at least some of your savings to pay off some of your debt? Your mortgage will have a higher interest rate than your savings account, so you’re making your financial situation worse by keeping money instead of reducing debt.

    Of course it’s always a good idea to keep some money saved for emergencies, but “healthy” savings sounds like you’re keeping much more than that.

  18. Saver Queen says:

    My goal has always been to maximize my income while minimizing my costs, but I think you reach a certain point where your time becomes more valuable. If you can get a better return on your investment doing something other than frugal money saving activities like making your own laundry detergent or clipping coupons, then it makes sense to do so. For example, if you earn $100 an hour at a freelance job, whey spend an hour of your time clipping coupons to save $10 or $20? On the other hand, if you’re like me, and enjoy spending time finding coupons and the best deals, and don’t earn a high hourly wage, it makes more sense.

  19. kristine says:

    Good reasonable post.
    My favorite saying:

    Time and money are interchangeable. You can always save on one by spending more of the other.

    I would add: …and the exchange rate can fluctuate as life’s priorites change.

    If you think of it that way, you are just being cost effective!

  20. Heather says:

    Did you know you can make other household cleaners very cheaply and quickly? Laundry soap is actually one of the cleaners with the lowest margin.

  21. Egirl says:

    I’m just barely at the point where I’m paying more than the minimum on my credit cards and putting a little more in savings. To my amazement, I was able to trim my 2008 spending by over $6500. I’m surprised that I was able to find that much in expenses to cut! I’m just starting the career growth portion of my frugality journey. Honestly, I don’t think I’ll change my frugal ways even when I’m making more money because (1) I really enjoy cooking vs. going out (I’m even learning to bake), (2) I love the serenity in my home since I cut out cable TV, (3) I’ve rediscovered that the public libraries are awesome sources of entertainment, and (4) unnecesssary spending really bothers me now. In short, my whole way of thinking about money has changed, and when the career growth part kicks in, I think I’ll be more motivated to see my savings and investments grow than to ease up on the frugality habits I’ve worked so hard to put in place.

    Thanks for the excellent post!

  22. steve says:

    If you have a credible, appealing, and practical way to grow your top line, I would always say it is worth it to devote your resources toward making that happen, instead of just focusing on keeping your expenses down. If you don’t have a credible, appealing,and practical way to do that, it may be worth your while to start thinking about it.

    The fact is, one of the things many people crave is the freedom that they regain when they are out of debt and can begin to make wider choices for themselves. Paradoxically, one of the choices people pick for themselves once they are not constrained by their debt payments may be other forms of work that more closely express their interests, or which offer them more personal leeway or agency. I know that for myself, if I were financially independent tomorrow I would probably be looking at interesting business possibilities. Something that is ofteh forgotten is that work is not always a yoke and a burden–it can be an arena where we express ourselves and have an opportunity to interact with others in a mutually satisfying way. All of the pressing problems we face and opportunities we have entail….WORK!

  23. Cheryl says:

    A wonderfully reflective post, Trent! I love your humility in acknowledging that your previous thoughts have changed with time, experience, and evolving priorities.

    @kristine re: “…and the exchange rate can fluctuate as life’s priorites change.” SO TRUE!!!

  24. Michele says:

    Regarding your comment of interest rates versus customer service, my husband and I were talking about this very philosophy a few days ago. We’ve noticed a quality-over-quantity shift as we and our friends have settled into the ‘married homeowner” stage of life. Nowadays if something breaks, we drive to the mom-and-pop place to buy the tools we need rather than chasing a few cents between Big Box Mart and Bigger Box Mart. It feels good to buy lesser amounts of quality items while also supporting family business.

  25. Oskar says:

    Good post,

    I need to say though that at lest for me frugality has two parts, the money part and the environment part. I will never change my frugality standards when it comes to the environment which means I will not buy unnecessary items and will always try to buy used items when possible and re-use much we already have. However when it comes to how far I will go to save an extra dollar that might change over time….

    Currently me in my wife live of one salary and save the other one, we think that this at least in theory will make us financially independent within 15-20 years when we will still be less than 50 years old. Although we live frugally we have a nice house, a good 3 year old car (‘only’ one) and we go for one long (a month) vacation every year. To keep the saving interesting short term we only use passive income for our vacations, this means for us right now dividends and interest, then we tailor the vacation after the money available…so far the vacations have been great and spanning in cost from 1500 to 5000 dollars.

  26. Samira says:

    In my goals for 2009, I wrote:

    Stop reading books/websites about how to get out of debt, declutter your office/home/life, or find your dream job. None of these conditions exist.

    At some point, after a long struggle, you have to declare Success!

    Does this mean you stop whatever behaviors got you to this place of attainment (i.e. frugality)? No. It means redefining your vision, mission and objectives. Growth. Process. Enjoy!

  27. Battra92 says:

    Well, I find that everyone has different standards. You have the Scrooges who live on gruel and in the cold when they could easily afford the comforts of life. On the other end you have the people who spend like crazy racking up debt and then going into full blown savings mode for a few months and then back to the old ways. There’s also the Suze Ormans of the world who will bring their own tap water and food to restaurants in plastic baggies but will buy hideous jackets and teeth bleaching while berating people who lease their car. So where is normal?

    Personally I think that it comes down to your life. You said you buy free range birds, I would never buy free range since I find it a marketing term (American chickens are allowed to roam free but inside of buildings.) On the other side I refuse to make my own laundry detergent and I will actually pay my parents to do it for me.

    It’s all about priorities I guess.

  28. Battra92 says:

    Oh and I forgot to comment on your eBay post. If it sells for less than $20 it’s not worth my time. I will however, sell media for less than that at Amazon.com since there is much less work involved.

  29. Amber says:

    We also have to remember, for some frugality is a lifestyle choice, one that is adopted to keep out the unnecessaries of life as to not corrupt our purpose (whatever that purpose for one might be.)Those people should not be looked down upon even if they have the means to make their life easier. I agree that their has to be a trade off somewhere between time and money, but too often in our society we’re just too lazy and we use our extra resources to give us validation to be lazy.

  30. Canadian says:

    Many frugal activities have environmental implications, so they are also worth doing even if your financial situation is great. For example, someone who is now well-off might stop clipping coupons but continue to use vinegar and baking soda to clean. Over-consumption is also a negative thing I think, both for the environment and for one’s own inner peace. So I would try not to consume more even if I were richer. Perhaps I would buy antique furniture rather than thrift store furniture though.

  31. Patricia Tucker says:

    After thinking about this for 24 hours, I realized Trent’s blog explained to me what I am experiencing. We are not in debt nor extreme financial situation. However, I began to get obsessive about being frugal. It became an end rather than a means, as someone above pointed out. After getting down to a place one is comfortable with, personal growth should be where one should look. Or rather than I. I was spending all my time “being frugal” and not on somethings that I feel matter or at least should matter until I figure out otherwise. Thanks for the thoughts, Trent.

  32. jana says:

    good food for thought trent. i would also like to add it very much depends on your age and situation. when you are 60 and retired, clipping coupons and shoveling makes sense. if you are 25, it makes sense to educate yourself more, perhaps.

  33. steve says:

    One thing to look at is the so-called marginal “elasticity” of spending related to income. This refers, when you get a raise or some other source of increased income, how much of it do you spend vs save?

    For most people in the debting lifestyle, they are spending 110% of any increase of income.

    After a few years of setting financial goals, tracking spending, and budgeting and being frugal to some degree or another, when you get an increase of income, it may be that you only spend 20-50% of that increase and save the rest. That additional 10-50% may amount to an appreciable increase in quality of life if spent wisely, while still allowing significant increased savings (money put aside for future goals and spending).

    I limit myself to spending 30% of marginal income increases at this time. It makes a significant, noticable difference in my quality of life, while still allowing me to devote the majority of the cash to important long term goals. If my income increased by more than 25,000 per year, I would probably stop increasing my spending beyond that point and save it all. After a certain point, if my income increased (say, beyond $120,000 a year) I would just spend the extra, to tell you the truth, as I would have enough to meet all of my short and long term goals and there would be little point in saving the extra money.

    My point is, be aware of your “spending elasticity” and actively manage how much you increase the spending that tends to come with increases of income.

  34. Broken Crock says:

    Time and money are different. Hardly anyone gets more than about 100 years of time; and even the wealthiest have this limit. Carl Pohlad, worth $2.6 billion, just died at age 93. Money, on the other hand, is unlimited. I believe I can make as much money as I am willing to work and take risks for.

  35. Jessica says:

    Thanks for the post, Trent! I have trouble with this too, i.e. balancing short term vs. long term time investments, trends, and thinking. Sometimes I get really caught up in the day-to-day and its immediate benefits that it is difficult to make the ‘leap of faith’ that long-term time/effort investments and personal/career development activities are just as worthwhile, if not moreso. Keep it up!

  36. katy says:

    No, they remain whether I am solvent or struggling. Andy Warhol said, ‘look poor, think rich’. (I am trying Andy!)

    That said, I want to relay what what I just heard at the laundromat:

    A well dressed young man was picking up some drycleaning and laundry and he just blurted out to the laundress when she asked how he was ‘I’m going to get a gun. I’m having a can of soup for lunch’. Whoa.

    This too shall pass. I hope. In the meantime, I’m thinking about this guy and how I can continue to stay afloat and do better. Thanks.

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