Four Ways to Find Fulfillment Through Frugality

Most personal finance enthusiasts embrace frugality for good reason. If you want to pay off debt, build up savings or reach financial independence, it starts with spending discipline. A budget is critical, and you must make sacrifices. You’ll never reach those goals without cutting out the excess.

My wife and I got married 15 years ago with $3,000 in savings and $50,000 in student and car loans. Early on, when we made about $65,000 a year in combined income, frugality mattered. We operated for years on a cash envelope system, where monthly budgets for groceries, restaurants and allowance were set aside in cash. Once the money was gone, we were out of luck until the next month. We followed a rule for years that any expense over $50 had to be discussed beforehand.

That early spending discipline served us well. The debt disappeared quickly, we established an emergency fund, and we invested in retirement accounts early. Many of those positive money habits carry over to this day, even if we did stop using the envelope system.

A low-cost lifestyle makes a lot of sense during certain seasons of life. But my spending philosophy has evolved beyond budget cuts since those early days of marriage. While I still review every line item of our family budget each month to look for more places to trim the fat, I now believe that where you do spend money can be just as critical as where you don’t. Your spending habits speak volumes about your values.

Frugality teaches essential lessons about money, but there’s also a downside to chronic cost-cutting. Because it gets cloaked in an aura of “responsibility,” it can be deceptive in a way that consumption isn’t. Frugality plays an important role in money management, but it shouldn’t dominate all aspects of personal finance.

Frugality Builds the Foundation

I laid my personal finance foundation through frugality, but my spending philosophy didn’t end there. As I learned more about money, my approach evolved into 4 core tenets that guide my budget.

Track every penny and cut wasteful spending

Every personal finance journey should start with frugality. Living on a tight budget doesn’t just improve your current money situation; it also provides a permanent lens for how to evaluate purchases. Even if you move into a season of life with more discretionary income, the lessons of frugality last a lifetime. Wasteful spending will always bother you, even when you can afford it.

Frugality requires two things: an understanding of where all your money goes and a desire to live with less. I know where almost every dollar of spending has gone since 2010, when I first started using Mint to track expenses. The discipline of categorizing every transaction for eight years and counting results in a better budget, easier identification of waste, and increased self-awareness of where I overspend.

This detailed history of my financial track record also exposes places where consumerism has crept into my life. I practice ongoing budget optimization, which means I constantly look to cut out the excess. We’ve done a good job over the years of reducing unnecessary expenses, but lifestyle inflation sneaks up on you. By tracking expenses closely, that frugality training kicks in and prevents it from getting out of control.

Don’t skimp on things that bring joy

Here’s the first danger of frugality: It robs you of joy. A healthy budget should leave room for the things and people you love, even if it means spending money on “luxuries.” Without the freedom to splurge in a few areas, you become a slave to frugality instead of a slave to materialism.

For example, my wife and I have always been restaurant addicts. We never buy each other gifts, we share a used Toyota Camry, and we shop for clothes once a year. But we don’t hesitate to drop $100 on a nice dinner. Almost every Friday night, we go out to dinner. The kids look forward to it, we have made some of our biggest decisions and best memories during this family bonding time.

Of course, I still scrutinize our restaurant spending. We mix in $30 pizza nights to keep costs down, and we funded our habit entirely through Craigslist sales and freelancing last year. I live with this luxury because it brings us joy.

Strict frugality can also hurt the people we love. I learned the hard way early in my marriage that being too frugal can strain relationships. Whenever I criticized by wife for a small purchase, it created tension. Frugality can also make friends feel uncomfortable. Finally, it becomes cruel if we withhold good things from the people we love just to save a few bucks.

In almost every spending category, I push hard until I find the bottom. But selective freedom from frugality provides endurance for sticking with a budget when it feels tedious. If you save for these splurges, or get creative about how to fund them, these little joys provide a welcome balance to frugality.

Leave room for giving, and then increase it

Even when we had little money in the bank, we gave away at least 10 percent of our income. We committed that baseline amount as a non-negotiable tithe to our church, and at times we supported additional causes. Recently, we have pushed our giving percentage higher as we seek to climb the ladder of generosity.

Like frugality, giving is a discipline. It requires planning and sacrifice to make generosity a permanent part of your personal finances. And it’s much easier to grow in generosity if you start early. If you make giving a priority, you will cut your spending accordingly to make room for charity.

Frugality encourages generosity, and generosity reinforces frugality. I came to this conclusion after structuring my budget to put us on a path to financial independence. Even though we were only seven years away from early retirement, we pivoted and decided to pursue radical generosity instead. Right now, we’re committed to giving away dollar for dollar at least as much as we’re saving for the future. We’re setting financial finish lines.

This might seem foolish, but I believe frugality should lead to increased savings and increased giving. Wasteful spending inhibits both. I evaluate expenses not just through the lens of how much I could have saved, but also how much I good I could have otherwise done. Frugality becomes even more powerful when used as a tool for increased generosity; every dollar saved is another dollar I can give away.

Operate from an abundance mindset

Challenged by the parable of the rich fool, I want to avoid hoarding wealth when I already have enough. As some of the wealthiest people in history, we have an obligation to budget for generosity. That requires an abundance mindset instead of a scarcity mindset.

I want to get off the treadmill of both wasteful consumerism and aimless wealth accumulation. That means shunning the American Dream in two ways. First, I limit unnecessary and irresponsible spending, and I don’t pursue more and more possessions. Second, I use the savings to increase my giving, not just my comfort. That’s the core philosophy behind The Rich Fool personal finance blog.

If you believe resources are scarce and live in fear they might run out, you will always keep the excess. But if you believe you have been blessed with abundance, and you’re content once your needs are met, you will view excess wealth as an opportunity to help others.

Frugality Should Provide Purpose

Frugality isn’t just about spending less and saving more. It’s a tool that empowers you to spend money on things that have meaning and purpose – instead of empty possessions that don’t bring fulfillment. Here’s a similar definition for minimalism.

If you’re frugal for the sake of being frugal, you could be missing out on the chance to experience joy and share your blessings with others. But when you approach frugality as a training ground that opens up your budget for spending money on the most important things in life, it provides meaning and purpose in a way that a bigger bank account can’t.