What is frugality? Wikipedia defines as having “the quality of being frugal, sparing, thrifty, prudent or economical.”
Some people see it negatively as being misers or cheap, or in Filipino… kuripot.
While some, see it more positively as being prudent or smart about spending… matipid.
And still some, don’t think about it at all – meaning they see frugality as a “poor way to build wealth” and thus, not worth their time.
Too often, I read advice and meet people who thinks being frugal is not a good mindset to have. They say that it’s limiting and time-consuming; and sometimes, the money you do get to save is insignificant when you look at your overall finances.
A friend of mine shares, “If I can afford it, I buy it already; rather than spending an hour or so going around looking for the cheapest deal. Time is gold for me.”
He also tells, “Saving is for losers. It’s a slow and painful way to get rich. I’d rather learn how to invest rather than learn how to save.”
I find his points valid; because indeed, being frugal consumes time which could otherwise be spent on making money. And also, I agree that investing is the best way to build wealth.
You could say that it is the shocking truth – frugality won’t make you rich.
One of the earliest personal finance books I’ve read was “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy”. The book features research done on Americans whose net worth exceeds one million dollars.
The authors profiled those millionaires and found many surprising facts about them which they published in the book. Two of the many discoveries that they had was that:
- 1. Millionaires spend less than what they earn. That they are in fact, “prugal” or a combination of prudent and frugal;
- 2. And most of those millionaires avoid buying status objects or leading a status lifestyle.
That’s why the book was entitled, “The Millionaire Next Door” because they found that most of America’s wealthy are not CEO’s and company VP’s, nor are they venture capitalists and investors. A huge percentage of them are “ordinary people”.
Here’s a summary excerpt from the book:
The flashy millionaires glamorized by the media actually represent only a tiny minority of America’s rich. Most of the truly wealthy in this country don’t live in Beverly Hills or on Park Avenue — they live next door.
The typical wealthy individual is a businessman who has lived in the same town for all of his adult life and owns a small factory, a chain of stores or a service company. He lives next door to people with a fraction of his wealth.
While the paycheck-to-paycheck crowd drives new cars, most millionaires don’t. They’re not wearing expensive clothes and watches and their houses are relatively modest compared to their financial status.
What does this all mean?
It means that while frugality itself will not make you rich. It does however, increase the possibility of getting rich through other means.
Savers are not losers. In fact, they’re winners who create opportunities for themselves.
Being frugal allows you to pay off your debts. It enables you to save money quicker. But more importantly, it teaches you how to manage your money, despite how little it is now.
I’m a firm believer that if you can’t manage your cashflow when it’s “just enough”; then you won’t be able to manage a million more of it when it comes to your lap.
Perhaps that the reason why most lottery winners lose all their money a few years, or even just months after they hit the jackpot.
In the end, I’d say that being frugal is important and it is a mindset that you should not ignore. Being prudent with your finances is the first step in learning how to build wealth – and when it comes to getting rich, there certainly is no shortcuts.
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