Notes on Frugality
This post examines the virtue of frugality (a.k.a. thrift, economy). I hope it will be helpful to people who want to know more about this virtue and how to nurture it.
What is this virtue?
Frugality concerns the efficiency of your economic choices: how you earn you living, husband resources, spend money, and the like. A frugal person is conscious of the value of their resources and of their time, and makes trade-offs wisely.
Frugality is usually contrasted with its vice-of-deficiency: extravagance, prodigality, squandering, wastefulness, being a spendthrift. In this it is allied with virtues like efficiency, moderation, prudence, and simplicity. Benjamin Franklin paired frugality with industry as the key virtues for financial security: “[W]aste neither time nor money, but make the best use of both. Without industry and frugality nothing will do, and with them everything.”
Sometimes that same contrast is made not to the vice itself, but to the likely consequences of that vice: indebtedness, dependence on others, poverty. If you are not frugal, you may suffer for it, and this may also include having to lower your standards of dignity. Franklin also had a nice bon mot about that: “It is hard for an empty bag to stand upright.”
Frugality sometimes is also contrasted with its vice-of-excess, which goes by names like miserliness, niggardliness, or stinginess. There is some tension between frugality and the virtues of generosity and magnificence.
Occasionally in older works you will see a virtue called “frugality” that is described in a way that makes it sound more like temperance. (For example, in one translation of Cicero’s Tusculan Disputations, he describes frugality as combining fortitude, justice, and prudence in one package, says the cowardly man cannot be called frugal, and says frugality’s “peculiar property seems to be to govern and appease all tendencies to too eager desire after anything, to restrain lust, and to preserve a decent steadiness in everything” — all of which doesn’t really resemble how we use the term “frugal” today.)
“Men don’t understand how great a revenue sparingness is.” ―Cicero
Frugality is a facet of life optimization. A frugal person lives efficiently, in a streamlined way that enables them to accomplish more with less effort.
Time is money
Most every adult gets through life by exchanging resources they control for things they need and want. Most of us have to work for a living in order to get those resources in the first place. In wealthier countries, the number of hours per year the typical adult worker works for a living has dropped by almost half in the last hundred and fifty years but that worker still spends about 1,500 hours per year “at work” — about a quarter of their waking hours.
That does not count time spent commuting to and from work, or other time spent on things that support one’s employability (taking licensing exams, hunting for a job, networking). It also doesn’t count the portion of time a person spends in school that is primarily for the purposes of vocational training. On the other hand, there is also a period of childhood and (if we’re lucky) retirement in which many people have their basic needs more-or-less taken care of without having to contemporaneously work to obtain the resources that make that possible.
But without splitting hairs, it’s clear that the portion of the typical person’s life that is devoted in large part to generating economic resources is considerable.
Some people are fortunate enough to make their living in a way that is inherently rewarding as well as financially compensated. But for most of us there is some degree of trade-off — to a greater or lesser extent we spend our working hours doing something we would not be doing were we not being paid for it.
The money you spend is, in this way, a sort of crystallized version of the time, effort, and attention you took away from your own immediate interests and put instead into obtaining the money. When you spend that money, it is as though you were redevoting that time, effort, and attention back to your own interests. But hardly anyone, when they spend money, asks themselves if they really want to devote X amount of time, effort, and attention on whatever it is they’re buying.
The fact that the time, effort, and attention is mediated through the more abstract and fungible medium of money, and the fact that there is a delay from the moment this time, effort, and attention is exerted to the moment its equivalent in money is spent, make it difficult for our minds to process in this way. Pulling a dollar bill from your wallet feels much the same as pulling a $10 bill or a $100 bill. Seeing a digit in your bank account balance change feels about the same whether that digit is in the ones’ place or the hundreds’ place. But the more visceral difference between having to stay ten minutes late one night at your stinking job and having to work through the whole damn weekend is a difference of the same magnitude.
There is also the fact that once you have earned the money, the time, effort, and attention you put into earning it is a sunk cost. So seeing that money as the exact equivalent of the sunk time, effort, and attention isn’t quite right. You have to look at it with fresh eyes: What is that money worth to me now. And that isn’t as simple as it might seem.
What is money worth?
Money seems at first to have an absolute value. It is denominated in nice, simple, natural numbers. Five bucks will buy you a venti mocha the same as it will for Elon Musk or anyone else. But because different people have to put in different amounts of time, effort, and attention to earn five dollars, what looks superficially like the same exchange of money for goods/services may really be a very different exchange of time/effort/attention for goods/services. For this reason, it can be a mistake to look for universal standards of frugal spending — what is frugal for you might not be for someone else, and vice-versa.
In David Copperfield, the character Wilkins Micawber put it this way:
Annual income twenty pounds, annual expenditure nineteen, nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
An extra sixpence means much more to one than the other, and so they will reasonably value the same amount differently. But it’s even more confusing than that: Not only is five bucks legitimately worth more or less to different people, but it is worth more or less to the same person — for instance, depending on whether those dollars are wholly insufficient, marginally sufficient, or surplus relative to their needs. For another example, if you’ll be homeless tomorrow if you can’t scrape up another $400 for the rent, you probably won’t be very tempted by an opportunity to work six hours today for $50 per hour — you’d be better off spending the time packing your bags and looking for somewhere to shelter. But an opportunity to work the next 12 hours for $35 per hour might be the difference between having a roof over your head next month or not. By being willing to work more for less, it’s not that you are being irrational in how you are valuing your time, but that the value of money is a discontinuous function of its quantity in your case.
Money is time
The translation between money and time/effort/attention also runs in the opposite direction. You can buy free time with money (for example, by paying someone else to do some time-consuming chore for you). If it costs you less in time/effort/attention to earn that money than the time/effort/attention you can purchase with it, such a purchase may be a frugal bargain, and being unwilling to make such a purchase from motives of short-sighted frugality might be a case of “penny wise, pound foolish.”
Some money-saving do-it-yourself tips can be ironically unfrugal by this same measure: costing you so much extra time and effort that it would have been more frugal to whip out your wallet from the get go. (Though being able to do-it-yourself can help to build skills and understanding that go beyond the immediate need that is satisfied, so take that into account.)
The tempting reward of retail therapy
Something that further baffles people is that we seem to be able to give ourselves a reinforcing psychological reward simply by making a purchase — one that seems harder to obtain by earning or saving money, and one that can temporarily inflate the apparent value of what we purchase. The folk practice of “retail therapy” takes advantage of this reward mechanism to provide a short-term mood boost. Some people abuse this mechanism to the point where it resembles other compulsive addictions.✴ If your pursuit of frugality is frustrated by cravings like these, you may need to work on the virtues of temperance and/or self control.
Vendors and advertisers eagerly take advantage of this, and of various other cognitive biases that can make us undervalue our time and money and overestimate the value of what we exchange them for. Although each vendor and advertiser has the specific goal of trying to convince us to purchase their particular product or service, their collective efforts can in this way have the effect of eroding our rational frugality in general. If money is burning a hole in your pocket, consider that the fire may have been deliberately set.
What frugality communicates
One’s earning and spending decisions have signalling effects as well. People often communicate what they value or are interested in — are invested in — by what they spend money on. Someone’s more expensive tastes are likely to be among the unusual things people mention about them (or that they themselves casually let drop or post photos of). Advertisers often imply that if you purchase their products, you’ll also get a boost of esteem from those around you as a bonus. Conspicuous consumption is a good way of broadcasting which economic strata you aspire to. In ways like these, as you spend money you also contribute to the construction of your persona. (And if you buy an expensive persona, you may find it also costs a lot to feed.)
Frugality is an attitude towards earning and spending that also sends a message and contributes to your persona. One possible obstacle to frugality is the sense in some circles that it’s vulgar or unfashionable to be concerned about it. Being casual with money, ignorant about budgeting basics, and so forth can give one an air of devil-may-care financial security and confidence. Being calculating and frugal can give the impression that you are obsessive about money or fearful about the future.
This can work the other way, too, however. Someone who is sensibly frugal can thereby become genuinely confident about their financial situation in a way that is at least as attractive as being ignorantly blasé, and can also seem respectably down-to-earth and sensible.
In 1978, the teenaged autodidact Dolly Freed wrote about her family’s deliberately frugal lifestyle. She noted:
[M]oney doesn’t buy only goods and services, it also buys prestige and status. Being somewhat egocentric, we don’t feel the need to buy prestige or status. The neat trick that Diogenes pulled was to turn the tables on those of his contemporaries who believed that “Life is a game and money is how you keep score.” He didn’t keep score. We don’t keep score. You needn’t keep score either if you don’t want to. It’s entirely up to you.
Money and the hedonic treadmill
Several years back, an American wealth management firm decided to do some market research by surveying about 800 wealthy American adults (people with at least $500,000 in investable assets).
When asked how much they needed to feel financially secure in the future, respondents consistently cited a need to approximately double their current level of assets. Those with $10 million or more felt they needed a median of $18.1 million; those with $5 million or more needed $10.4 million, and those with a half million to $1 million said they needed $2.4 million.
Furthermore, a third of those surveyed said “that having enough money is a constant worry in their life.”
There seems to be some sort of bias that causes people to be more apt to look at their current financial situation from above rather than from below. Instead of saying “how financially fortunate I am now compared to how I would be if I had half as much as I do,” they say “how financially fortunate I would finally be if I only had twice as much as I do.”
This is sometimes blamed on a lifestyle-ratchet: If your financial situation improves, you may respond by increasing your expenses — moving into a nicer home, taking on a more expensive hobby, developing a taste for fine wine — in such a way that your baseline expectations change. What started as a delightful improvement in your economic fortunes becomes instead the Lifestyle-You-Are-Accustomed-To, one which it would now be a painful deprivation to do without. It seems many people guess they would prefer to live an insecurely, marginally wealthy life than a securely, comfortably ordinary one, and have to learn by experience that it’s not as fun as they expected.
If you can avoid this ratcheting temptation, through discipline and conscious deliberation, and maybe eventually by means of establishing a habitually frugal character, you can finally hope to reach a point of financial satisfaction rather than constantly seeing that point recede into the distance twice as quickly as you approach it. And if you can deratchet yourself from any unrewarding excessive expense in your current lifestyle, you may find that you’ve already reached that point.
If you notice that you are in the habit of comparing your financial situation enviously to people with a lot more than you have (or whose unfrugal habits make it appear that they have a lot more than you have), consider that maybe this is a source of bias. To correct for this you might also try comparing yourself to the average person in your surroundings, in your culture, on earth today, and over the course of human history, so as to gain a fuller perspective.
My experience with frugality
In 2003 I had just started to hit the six-figure salary range in my San Francisco area tech job, and I felt pretty high on the hog. But in reaction to the Iraq War (or at least with that as the final straw) I became a conscientious objector to federal taxes, and I decided to reduce my income to the point at which I no longer owe federal income tax. As a result, I had to adjust my lifestyle so that I could live on a much lower income. So I got some quick practical lessons in frugality.
Money magazine profiled me briefly some years ago for an article on how people avoid paying taxes. They concluded that their readers probably wouldn’t enjoy what they called the “ascetic lifestyle” that comes along with my technique. But if this is “asceticism,” asceticism is very underrated. The life I’m leading now is fuller and more enjoyable than ever, I have less anxiety (and less guilt about my taxes) and feel more integrity, and I’m genuinely living a life of abundance.
One way I measure this abundance is in the amount of free time I have. It typically takes less time to earn less money, so you can give yourself a time raise by giving yourself a pay cut. (And the fact that I no longer have income tax withheld from my wages means that although my total income went down, my hourly take-home went up.) In a typical year nowadays I devote fewer than 500 hours to making a living, compared with maybe 2,500 hours of commute+office time back when I was making the big bucks. Having seen both sides, I now feel that much of the time I was surrendering in order to pursue a career and more money is more valuable to me than the extra money I gained in the trade.
By living frugally, even while earning much less than before I squirrel away about 40% of what I earn for retirement or for health emergencies, so I don’t feel I’m being neglectful in that way, either.
When I first adopted my more frugal lifestyle, I thought I was going to be making a noble sacrifice for my principles. But it wasn’t long before I realized that my life had improved through my frugal choices, and now I think of a well-paying full-time job (even with all the perks) as something that would be a sacrifice in comparison. The frugal life I took on out of conscientious necessity, I now would continue in simply because I prefer it. (Still, of all the things I don’t miss spending money on since I started living more frugally, I don’t miss the government the most.)
I don’t mean to suggest that the specific choices I made would be the right ones for everyone. I’ve been very lucky in many ways. I went to college when it was still more-or-less affordable, and by the time I got my degree I had no more debt than fit on a Discover card balance. That degree that helps me command a good pay rate in a variety of work in which I can set my own hours. I’ve never had aspirations to have children, so have never had to cope with the economic challenges of parenthood. The rest of my family are economically self-supporting; I don’t have dependents. I don’t have any expensive chronic medical conditions. I live in a wealthy country that abounds in cheap second-hand cast-offs that are, absolutely if not relatively, items of delightful luxury — and in an internet era in which entertainment and education is plentifully available for next-to-nothing at the push of a button.
But I think my experience — of believing frugality would be harsh medicine, but then discovering it to be sweet nectar once I actually tried some — ought to be encouraging to people who are considering it.
It helps, if you want to be rational and prudent about your budget, to know what that budget is in some detail. You can better discover and correct the inefficiencies in your economic behavior if you have data to base your decisions on. But people often shrink from the task of attending to their incomes and outgoes in anything approaching a rigorous way.
Do you really know how much you earn, even? Sure, you may know your salary or your wage, but have you done the math — accounting for what gets deducted from your paycheck for this and that, for the various costs of being employed (e.g. commute expenses), but also adding in bonuses and benefits and what having that extra line on your résumé is worth to you?
Do you know how much you spend on this and that? How much of your budget goes to food, and in what ways? How much does your car cost you per mile, once you add up all of the costs — the car itself, insurance, registration, maintenance and repairs, gas, tolls, parking and traffic tickets? How much would that cost have to be to be no longer worth it to you — do you know your figure, even within an order of magnitude?
Many of us only have a foggy idea of the answers to questions like these, and yet those answers are an important way of describing the efficiency of how we live our day-to-day lives: whether what we’re doing is really worth the cost.
When I started my experiment in frugality, one of the things I did was to carry around a notebook for one month each year and make a note of every time I spent money: how much, and on what. This accounting helped me to keep my lifestyle affordable on my under-the-tax-line income, and also helps me to better understand where my money is going. (Here is an example.) I sometimes catch myself ratcheting up my lifestyle in this way, and so, having noticed, can loosen the ratchet and scale down again.
Help with frugality
Personal economics can be a subtle art. It has many facets and is not always intuitive. Fortunately, if you are interested in improving your frugal living skills, there is a lot of help to be had. Here are some examples:
The book Your Money or Your Life helps people to consciously reevaluate the way they conceptualize money and then take concrete steps to become more optimally frugal.
The Early Retirement Extreme blog (and wiki) is full of useful tips and insights.
Discussion fora like r/LeanFIRE (FIRE = Financially Independent, Retire Early) allow you to share experiences with and learn from others who are in a variety of life stages and situations but all have frugal living and financial security as a goal.
Benjamin Franklin, Autobiography (1791)
Benjamin Franklin, The Way to Wealth (1758)
Cicero, Tusculan Disputations (C. D. Yonge translation, 1853)
Cicero, Paradoxa Stoicorum
Charlie Giattino, Esteban Ortiz-Ospina and Max Roser, “Working Hours” Our World In Data (2020 revision)
(we have after all just been considering it, Q.E.D.)
Charles Dickens, David Copperfield (1849) chapter ⅻ
Jaimee Bell, “The psychology of shopping addiction” Big Think (3 March 2020)
Dolly Freed, Possum Living: How to Live Well Without a Job and with (Almost) No Money (1978)
“PNC Advisors Survey Finds that Wealth Brings Complication, Added Responsibilities” The PNC Financial Services Group, Inc. press release, 10 January 2005
Marlys Harris, “How To Pay Zero Taxes” Money (March 2008)
Reminded of a tweet from Gwern:
Interesting. To me the connotations would have been the opposite — being ‘frugal’ sounds more virtuous to me than being ‘thrifty’.
Thanks for writing this. I am interested in this sort of thing.
Sometimes I hear people say expenses tend to be more. To what degree is this generalizable?