In our consumer-driven society, the concept of living within our means and making wise financial choices — also known as frugality — is widely appealing. Research shows that 92 percent of Americans find frugality attractive in a partner in its study of 2,000 individuals. However, a thin line exists between being frugal and being an “underspender.”
Excessive frugality can pose dangers and challenges, despite its initial appeal.
The Problem With The Frugality Concept
Former CFO and money coach Jenny Whichello, speaking on the dichotomy between frugality and intentional spending, highlights the crucial disparity between these approaches. According to Whichello, being intentional with spending necessitates a clear understanding of how money can be utilized to achieve personal goals and support individual values.
On the other hand, mere frugality centers on the singular objective of saving money for the sake of saving, lacking any meaningful connection to broader financial aspirations and goals.
Hanna Morrell, a holistic financial coach, recognizes how convincing the language of frugality can be, describing it as having “a great sales pitch.” It tells us that we make sound and logical decisions by embracing frugality, ultimately paving the way toward financial prosperity.
However, Morrell questions this notion, contending that frugality is not the sole pathway to financial success. Morrell asserts that frugality falls short as the optimal tool for attaining a fulfilling life and substantial savings. She posits, “But because it’s the only tool we’ve been given through generations of conventional financial wisdom, it’s the only tool we can use.”
Pitfalls of Being Overly Frugal
Frugality, when taken to the extreme, can have profound ramifications on various aspects of one’s life, including mental well-being, relationships, and overall quality of life. Morrell sheds light on the psychological impact of excessive frugality, particularly its reinforcement of loss aversion—”Something our brains are already kind of obsessed with.”
According to Morrell, when we strive to make prudent financial decisions through frugality, our brains interpret it as a form of pressure. Unfortunately, our brains do not perform optimally under such pressure, often leading to poor decision-making.
In these moments, our focus narrows down to scarcity, and we tend to fixate on frugality and restrictive measures as the only means of making what we believe to be sound choices.
“Because the pressure and expectations of frugality are so high and ever-increasing, the financial coach says, “we end up trapped in a cycle of failure. We then try to counter the failure by restricting even more, and the cycle gets faster and faster.”
The repetitive failure from excessive frugality exacts a heavy emotional toll on individuals, often leading to devastating consequences. Trapped in the confines of frugality, she explains that individuals may feel isolated as they consciously distance themselves from social interactions to avoid situations requiring spending money, thereby violating the principles of frugality.
This self-imposed isolation can further exacerbate feelings of loneliness and detachment. Moreover, the relentless pursuit of frugality can instill a deep-seated belief that one does not deserve or has not earned the right to enjoy life’s pleasures. Individuals may also harbor sentiments of inadequacies.
“In my coaching,” Morrell relays, “I hear people saying they haven’t earned a vacation or saved up enough to rest, or they don’t make enough to enjoy even a day off. They are constantly on, constantly stressed, and if they do rest or take a vacation, they cannot enjoy it.”
As a result of this self-imposed isolation and perpetual self-denial, she notes that these folks will find their connections to others shriveling up and likely fail themselves even further for it.
Adopting a More Holistic Approach
It is important to keep money in perspective, and one way to do this is to adopt a more moderate approach to frugality. Here are several key pieces of advice to consider, according to experts in the field.
Expected Spending Over Frugality
Morrell acknowledges the common advice of viewing money as a tool, recognizing its truth, and acknowledging the difficulty in implementing such a mindset. This is a challenge, particularly for individuals locked in compulsive frugality, as their emotional connection to money, or the perceived lack thereof, runs deep.
In light of this, Morrell offers a simpler approach—practicing expected spending instead of restricted spending.
Drawing upon the concept of mental accounting, Morrell suggests giving money a job. Initially, Morrell advises against immediately changing spending habits, even if one realizes the detrimental effects of excessive frugality.
Abruptly cutting oneself off from frugality may result in a whiplash effect. Instead, each time money is spent, it is crucial to remind oneself that the expenditure serves a specific purpose. For example, while purchasing groceries, one can consciously remind themselves that the job of this money is to buy essential food items.
Similarly, when filling up the car with gas, acknowledging that the money’s purpose is to cover fuel expenses can help shift the perspective. By gently reinforcing the notion that spending money is fulfilling a purpose for oneself, individuals can gradually detach themselves from the frugality trap.
Expected spending, as opposed to frugal spending, tends to be less emotionally charged, leading to improved decision-making over time. It is important to note that moving away from frugality does not imply willy-nilly, free-for-all, unrestricted spending. Rather, the goal is to cultivate thoughtful and intentional spending habits for a healthy, integrated, and holistic relationship with their finances.
The Mindful Strategy
Whichello advises against embracing frugality as a complete integration into one’s lifestyle. Instead, they advocate for a more mindful approach to spending.
One valuable suggestion they offer is placing a reminder in one’s wallet or on their computer (if online shopping is a temptation) with the simple question, “What do I want more?” This prompts individuals to consider their true values and priorities before making a spending decision, ensuring their choices align with their vision and goals.
On a similar note, Dan Lear, a certified financial planner and partner at Affiance Financial in Minneapolis, Minnesota, acknowledges the merits of frugality in helping people live within their means and accumulate savings to achieve their objectives.
However, Lear emphasizes the need to reframe the concept of frugality from simply saving as much money as possible to determining how much money is truly needed. By shifting this perspective, individuals can feel more at ease when allocating funds for themselves and their loved ones.
Lear highlights the importance of crafting a comprehensive financial plan that enables individuals to pursue long-term financial goals while also embracing experiences and aspirations from their bucket list.
Individuals can develop a more positive and sustainable relationship with their financial resources if they embrace purposeful spending and break free from the emotional grasp of frugality.
This article was produced and syndicated by Wealth of Geeks.