The easiest way to make a million dollars is to start with 10 million dollars...

While it's true that you may not clip coupons when you are rich, it doesn't mean you aren't frugal. Some things become a tradeoff between time/money/lifestyle. The time it takes to find a coupon, clip it and buy the product may not be worth it once you have a higher income. It was once calculated that it Bill Gates made more money in the time it would take to pick up a hundred dollar bill than the bill itself. In that case though, he made an extra $100 in that time...as long as he wan't putting together a 100 billion dollar deal at the time, then he'd probably pick it up...if picking it up delayed him from submitting a time sensitive document for the deal, he'd probably ignore it.

I think the level of frugallity will change, just like the level of spending changes in your life. When you were a kid, $5 was a lot of money, as a teen a $100, as an Adult you begin to wish you had $5 again...

What you haggle over are larger ticket items, mortgage points, closing prices, etc. In the time some people use to save 50 cents, you save 1000's. You're still frugal, just at a different level.

"I've been rich and I've been poor. Believe me, honey, rich is better." - Sophie Tucker

 

The funny thing is that it's possible to survive on $30K/year, yet people are struggling on $100K+/year.
Frugality is important to anyone who is spending more than they are earning.

Be it the family earning $40K/year and spending $45K, or the family earning $150K/year and spending $155K, both need to be more frugal.

Guy earning $200K/year doesn't need to be as frugal as the guy making $30K/year, but it's still easy to run through $200K/year. There's always going to be someone earning more, so until you can lose the "keeping up with the Jones" mentalily, your finances will suffer.

 

"Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away." - Antoine de Saint-Exupery

The funny thing is that it's possible to survive on $30K/year, yet people are struggling on $100K+/year...

That resonates with me.

My spouse and I have excellent careers but use coupons and price matching to save 50% on our grocery bill (annualized). Saved money is a tool to fund early retirement.

EDIT - it costs $8 in ingredients to make 100 sushi rolls, at home. In a restaurant, that's a $100 meal for four people. "Frugal" can also be "fun."

http://www.mcarterbrown.com/forums/general-chat/193425-making-sushi-rolls-home-$8-84-new-tips-perfect-rolls.html

 

To me being frugal means getting the maximum enjoyment out of available dollars. So being frugal should never stop regardless of income but how one practices frugality should change as income increases. Clipping coupons only makes sense if the value it provides in enhanced future spending ability and enjoyment is worthy of the time sacrificed. This would not be the case for a billionaire.

 

Waste is waste, there's no point in wasting money regardless of how wealthy you are. To me, frugality is about avoiding waste; it's about using your money wisely.

 

I couldn't agree more.

 

I think most of us forget why we were frugal. It is because the money saved up can in turn earn money as investments.

To start off with nothing, you have to exchange your time for money so that the money can roll into more money.
As an example. Once your money rolls more than $10 per hour without you doing anything, it is an easy decision (and more efficient) to overlook/ignore anything where the difference is around $10.

So when you get richer, you exchange money for time.

If you look at money at time as two different assets. Time is more valuable as you age as it becomes rarer while money is more valuable at the beginning due to compounding.

 

If you look at money at time as two different assets. Time is more valuable as you age as it becomes rarer while money is more valuable at the beginning due to compounding.

Jesus Christ, Causalien..

My cortisol levels just shot through the roof and are now surging through every bloodstream in my body.
That is some dark and depressing ****ake mushrooms.

 

As the only wage earner in our family (2 adults, 2 kids), frugality has more to do with putting more away to derive an income from investments. I see it as a way to increase investment income in my wife's investment acount to maximize to get as much as possible before that income is taxed (10,300 I think).

What's more evident however, is the fact that both of our parents were, like many in southern Ontario - GTA area in the 1960's, quite frugal to begin with. Frugaility is perhaps something that one inherits. But there is a difference between being frugal and being cheap. I make about 88K per year, bought a small place in an expensive city (Vancouver), and hope to move to a larger house/property within 4-5 years. I think I'll always be frugal - I see it as a kind of competition, to get the best value for the lowest cost.

 

If I may make some generalizations:
Most poor people are frugal because they have to be;
Some rich people are frugal because they want to become richer, or at least not become poorer;
Of those in between, the smart ones are frugal because they don't want to become like their debt-ridden cohorts.

 

Yup- I like to think I am the one in between. I internally struggle regularily to avoid keeping up with the Joneses. I am winning mind you but I never take my eye off the ball. I can confidantly say that I am the only one of my friends with a mortgage that will be paid off before I am 40 and no credit card debt. But hey- they go on alot of fancy vacations- so they must be happy.

I admit I have my vices (expensive cheese as one) but they are hardly budget busting. Otherwise I think I am frugal because I mostly want to be.

 

I certainly don't clip coupons now. But then again, I do use the odd Groupon which is kind of like a digital coupon. Maybe I use coupons more now then. :stupid:

I think that I still have some frugality about me in that I don't like to buy things we don't need, I don't like to buy things that are needlessly expensive for what they do (God, I hate my wife's iphone plan but that was her money and her decision) and I still try to buy things on sale or wait for them to go on sale. I have also realized there are lots of things that I have bought that I could just as easily have rented instead and I try to do that more now with books and movies.

I will say that I don't worry much about say losing $100 on something or if something break that costs a couple of hundred dollars - that is probably the most enjoyable thing about having some savings now and a higher salary. I still worry some about my investments but not the same way when I just graduated from residency and have $195K on my $200K LOC and no ability to get anymore credit at all - maxed out basically. It was tight for a month but then the cashflow started to gush and breathing space was achieved.

 

I think this is a funny thread, because it's the exact same conversation as you might hear 'normal' people talking about, but framed in a way that you would only see on a website like this.

The relatively rare question 'At what income and/or net worth do you no longer need to worry about being frugal?' is functionally the same as the more common 'how much money would you need to have to make you happy?'.

At all income and wealth levels there is a trade-off between current lifestyle expenditures and financial security (the probability of being able to maintain a specified level of lifestyle expenditures into the future). When framed as the 'happiness' question, a simple summary of the research evidence is that the typical person thinks that their 'happy' level of income is just around the corner, if they were able to make 50% more they would be able to pay for all the little things that are out of reach and which are the only things that they seriously consider buying which they cannot.

 

Reminds me of the line from Wall Street: Money Never Sleeps:

Jacob: What’s your number?
Bretton Woods: Excuse me?
Jacob: The amount of money you would need to be able to walk away from it all and just live happily ever after. See, I find that everyone has a number and it’s usually an exact number, so what is yours?
Bretton: More.

Loved this exchange.

The reality is, we're a greedy species, and we almost all want more.
Unions, politicians, CEOs, corporate bankers, teachers, airline pilots, postal workers, lawyers, doctors, investment bankers... we all want more.

 

+1 to Causalien

My thoughts exactly.

If you are interested in behavioural finance, I suggest Ramit Sethi's website. He once asked his readers: ''How did your lifestyle change once you crossed the 100K treshold ?'' Most people said not much. They just did not sweat the small stuff anymore. I agree 100%.

The book ''Your Money or Your Life'' has an interesting approach. When I read it a couple of years ago, I figured out what my real wage was (including all the extra costs and time lost involved in earning my wage such as work clothes, transport, etc). Such an exercice is truly eye opening and can give you a good idea if being frugal in certain situations makes sense or not.

Dave

 

Interesting reading here, it's quite interesting to hear everyone's perspective on this.

I can't speak to the point of being frugal or not after achieving a certain income, as mine is no doubt lower than most of the people on this forum, but I guess I can say I could fall into the frugal category with a gross income now of less than 16 or 17K per year, and yet I am still putting away 5K every year, yet I feel I live quite comfortably.

I have never clipped coupons, but I walk to the local grocery store and plan out my meal based on what's on sale. Right now I'm enjoying a thick slab of steak washed down with some nice cloudy home-made wine :biggrin: If I find say a grocery cart filled with 500g blocks of cheese marked down to 2 bucks apiece I take the whole cart and throw them all in the freezer. Likewise clothing etc, I buy in bulk.

My thoughts
I see the Joneses rushing to and fro every day, why the h*ll would I wanna keep up to them, I'm quite content to live in squallor and hang out with my dogs and put my feet up with a good book and enjoy nature etc. but hey, to each his own

 

I think Causalien said it perfectly. I don't think that sense of frugality really changes, but as you get older and attain more wealth, you begin to place different values on time and money, which can change certain financial decisions. An example: I eat out a lot more now instead of cooking at home because my time is more valuable than it was 10 years ago. It's not that I've become less frugal, just that in my current work situation, it is sometimes more cost-effective to spend the extra hour in the office and buy a meal on the way home than a decade ago.

I think the title of the thread is a bit strange as well. What are we defining as poor people? Those with low net worths? Or those who don't earn much income? As Dmoney already pointed out, you can make a ton of money and still be pretty poor if you're not really tracking your finances.

 

I don't think that sense of frugality really changes, but as you get older and attain more wealth, you begin to place different values on time and money, which can change certain financial decisions. An example: I eat out a lot more now instead of cooking at home because my time is more valuable than it was 10 years ago..

Interesting....we're 'retired', (me since I was 46...I'm now pushing 70...my lady's 10 years younger), and hardly ever eat out. Our time is too valuable to waste driving to a restaurant, waiting to be served, and eating a meal that's probably not as good as the ones we prepare ourselves, and a helluva lot cheaper.

WRT 'frugality'....there's not much we 'want', (certainly no electronic gimmicks/gadgets and the like), therefore we live cheaply and don't feel that we're 'missing out' on anything......we also don't hesitate to buy the few things that we DO want.

Minimalists...I guess.

 

At what income and/or net worth do you no longer need to worry about being frugal?

What are people's thoughts on this?

The point at which you can stop being frugal is when you've achieved everything you want to achieve and have a stable income source that allows you to spend more frivolously.

 

Frugality means different things for different people. If we could agree on what is frugality this would be an easy question to answer. From my perspective the question isn't frugality but rather are you living within your means. What doesn't make sense to me are people who live below their means after retirement. They save right up untill the final sad moment. It makes good sense to live below your means to save for retirement. Perhaps in retirement you might live a little below your means just to be sure you don't run out. But the people who save like crazy( my inlaws) because they think it is morally right, baffle me. You can only do 2 things with money: spend it or give it away. The rest is only timing.
In my case no one would ever call me frugal but we live within our means-very well thank you. So whether we spend $10k or $1million a year so what?

 

Frugality means different things for different people. If we could agree on what is frugality this would be an easy question to answer.

Indeed. There's no one-size-fits-all; from our perspective we're not (overly) consciously 'frugal'.......we don't feel we're 'missing out' on anything, ergo we're not internally bombarded by concerns about what we don't have.

Moneywise, we live below our means, which imparts the 'illusion' (an 'illusion' we're well aware of), of security......our 'nut' remains untouched, and good luck to the friends and relatives who may someday inherit all/some.............that said, we went to Botswana 2 years ago, and Zambia and/or Sumatra are on our 'wish list', (Beemers & Mercs aren't).

 

And then you have people like me who are so desperate to quit the rat race and retire in my early 40's that we live on less than 30k a year despite the fact that my wife and I gross about 170k annually. The real miracle is that my wife is fine the whole plan - even the part which requires her to work 5 -7 years longer than myself. If we decided to "live up to" our income level for just a few years, my early retirement plans would take a serious hit - so our frugal ways will continue. To be honest, on 30k we don't really sacrifice much at all.

 

If we decided to "live up to" our income level for just a few years, my early retirement plans would take a serious hit - so our frugal ways will continue. To be honest, on 30k we don't really sacrifice much at all.

Just to add to this, being frugal is sort of like going on a diet.

At first, you really miss the fast food, chips, donuts, etc.

But after a while, it just becomes more natural to eat less food and eat healthier. You don't miss the garbage as much. It becomes a lifestyle.

 

Square Root is uncovering the problem that occurs in retirement with people that have built their own wealth from being extremely frugal with money. They have trained themselves their whole live to save and live well below their means. They have been finacially successful beyond an average person yet live in retirement, continue saving and hording, then they die with all that money. It gets passed down to someone who doesn't know how to handle that much money or build wealth, and bam it's gone.

 

I like being frugal- depending on the situation. I make a low income, but spend my money where I get personal value- nice camera and guitar gear, extended travels in obscure places, etc. But when it comes to daily expenses, I live very cheaply, even to the point of being a bit of a tightwad. The reason is that I was very frivolous with my money in my 20's and 30's, so now it pains me to fritter it away (unless there's a sale on fritters...!!). I shop at Value Village, don't drink, rarely go out (prefer creative/intellectual pursuits in my leisure time) and buy everything off craigslist or on sale with my cashback credit card. I've learned that wealth is built incrementally, and that I've regretted wasting money that I could use when times get a bit tough. Having said all that, I could see myself spending pretty freely were I wealthy. My wife is much the same.

PS- I use most of my excess income on investments.

 

I think we can all agree that for a given expenditure level, everyone would want to get the "most" out of their spending. That is, each person would spend according to their tastes and personal utility function. Most of the debate around frugality centers on what people spend their money on, eg we don't go out much, or we drive old cars, or we never buy expensive clothes. These are matters of personal taste and quite frankly not worth debating in my view. Clearly our goal in life should be a balance between consumption (depending on personal goals and tastes) and a longer term desire for savings(to enable retirement) or to create a legacy. I see no virtue in frugality for it's own sake.

 

Keith, I agree that it is stupid and pointless to try to "keep up with the Jones" but I also don't think it makes any sense to consciously under spend them either. I think the best approach is to ignore them, whoever the heck they are. Do what makes you happy. Maybe that's what you meant?

 

I don't ignore them. We often have them over for a BBQ. They might bring their expensive wine and specially brewed beer. I serve cheapo but good Chilean red when theirs runs out and standard brewery beer. It does not matter to me. I tell them how my AWD Escape handles like my BMW 3 series did (except for turning circle). When I talk about my portfolio (seldom), they make some vague comments about their investment advisor. One of them was paying $750/mo for cell phone plans for the 4 of them! I just said that I hoped they held Rogers shares!

 

I think frugality is important for all types of people. You know the interesting thing that I've learned over the years, is that the people who appear the most well off cause they're flashey are usually not that well off they just have a lease on a mercedes and $50k in credit card debt. The people I know who actually are well off, well those are the guys driving the old beat up vehicles and wearing clothes until they fall apart. I met this guy who's 20 years old and drives a brand new BMW works in the same building as me. I got to chatting with him and found out he makes $18/hour in the call centre, lives with his parents and pays $1000 a month in lease payments for that car. Oh I see. There is a lesson in there for sure.

 

what you see as a waist for others it's not at all... sure it's not the best decision to get 1k/month car when you're 20, but how many times are you going to be 20 ? he (like me) might love cars, and that's one of the best feelings rolling in a brand new bmw especially when you're 20 (I did same thing)... who knows that car might encourage him to do well in life so he can get better car later... I hate people who always judge others, "oh he's in brand new bmw his credit cards probably maxed out and he's living on a credit, bla, bla, and I'm such an amazing guy rolling in 100 year old toyota corola where I don't pay anything monthly and rather invest then buy that pos bla bla"..

 

Yes I see a concern with that example above, but for the frugally people that have amassed wealth and then die, you can't take it to the grave so what is the point?
Does dieing broke make sense? Working less? etc

 

Just taking a counterpoint to the previous statement, one could say that money is only unimportant as long as you don't have a need for it, so a little overkill can't hurt, and as long as it's unimportant, maybe just leave it to your favorite charity rather than ruining your heir's chance to learn on their own, just a thought.

 

@Cashmoney. While I also know of people like that, especially in the US, I know many more who don't owe a cent, drive expensive cars, own expensive real estate, take expensive trips, give a lot to charity, and still don't spend above their means. So what should these people do? Volunteer to pay more tax perhaps? No I think not as that would be a real waste.

 

I think it depends on your money blueprint/how you were raised(how your parents handled money-your early enviroment around $)I don't think frugality is a rich or poor trait(alot of wealthly people got wealthly being srewd in business)and clipping coupons for example is no different than them shopping prices in business deals ect.(you look for vaule no matter what the $ amt is)I also think it depends from where one starts,people who grew-up poor never forget what that is like and NEVER want to go back.I always think it depends on the skill-set a person has and there personality....I actually think introverts and intellects build wealth from frugality more than extroverts and people strong in sales skills as a example.