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The 5 Principles of Frugal Living

by Chris Poindexter

There’s an unfortunate misconception among many that conflates the terms “frugal” and “cheap,” even though they carry quite different meanings. When someone says “cheap,” they’re talking about getting a product at the absolutely lowest cost, regardless of quality. It’s also the root of the word cheapskate, a person who is not only cheap but imposes their lifestyle on those around them. The term “frugal” implies a value component — and recognizes that the cheapest product may not always be the one that provides the best value. People who are frugal don’t mind paying more if they get more in return. There are a lot of very wealthy frugal people; they are people who could pay more and paper their mistakes with money, but they didn’t get rich without understanding the value of a dollar.

Being frugal is about getting the most value for your money, whether it’s investments, housing, transportation, or food. Being value-oriented is not difficult, but it does take time, and sometimes requires a spreadsheet to really understand the value basis of a financial decision. It almost goes without saying that being value-oriented will put you at odds with the financial status quo, which is largely based on consumers spending freely and making most of their purchases on credit. Here are five tips for holding on to more of your money — while sticking it to the man.


People make crazy financial decisions about transportation, and end up stabbing themselves in the pocketbook. Many families are making payments on at least one car, sometimes two — and those might be lease payments instead of car loans. Leasing a car makes sense in a very narrow set of circumstances where there might be tax advantages, otherwise it’s a loser for everyone but the car dealership.

Two things you should never buy new are cars and motorcycles. Places like CarMax take the worry out of buying a used car by skimming the very best of the used car inventory on the market. When it comes to motorcycles, there are literally hundreds of quality bikes purchased by owners, ridden for a few thousand miles, then parked in the garage where they sit for years. Instead of a second car, we spent a fraction of that amount on a used motorcycle, which is all we need. There are no car payments, and our insurance bill is a fraction of what we’d pay on a second car.


Frugal people consider medical bills a necessary but unpleasant expense; they know that staying in shape is the best way to keep medical expenses at a minimum. Eating right, exercising, getting enough sleep, and investing in quality time off are all habits of the truly frugal. Smoking is a complete waste of money and harmful to your health, as are drugs and excessive alcohol consumption. Spending money on something like a quality bicycle, and making time to use it, is an investment in your health, and a lifestyle choice that also serves your financial interests. According to DailyFinance, the average smoker spends between $1,500 and $3,000 on cigarettes every year. Spend half that amount on a decent bike, and it will last for years with proper maintenance.


Joining food co-ops, buying in bulk, and making your own food are all activities in the pantry of frugal people. Instead of buying a box of breakfast cereal, frugal people know you can make a nutritious, delicious, and high quality breakfast cereal in 30 minutes that will last all week. Frugal people can spend one day canning enough salsa to last all year; and that a bulk box of oranges will make frozen juice for months. Frugal people know that drinking water is better for you than soda — and healthier. The goal is to find bulk savings that also preserve your free time.


Frugal investors know that funds like the Spartan® 500 Index Fund, that track the market with a thrifty 0.07% gross expense ratio, will yield better returns over time than almost any managed fund. Employing dollar cost averaging, making small purchases over time, will insure above average returns with minimal downside risk. Not only that, but you don’t have to spend a lot of time tracking funds or managing your investments. High quality, low fee index funds take the worry and expense out of investing.


Frugal people hate debt, any kind of debt, including mortgages. Frugal people understand that the concept of “good debt” is an artificial construct of the financial entertainment industry. Interest is the ultimate affront to frugal freaks, because it’s a complete waste of money that robs purchases of value. The truly frugal are not tempted by credit card rewards programs, because they know trying to beat multi-billion dollar corporations at a game they run is ultimately a losing strategy.

Being frugal is both a mindset and a lifestyle, based on getting value from life. You don’t have to be rich to be frugal, but practice frugal habits long enough and financial success will almost inevitably follow.

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