By: Nick Howard
Many in the personal finance world toss around the term, frugality, and little are aware of its significance. In life, one’s actions, words; successes, failures; are determined by one thing: mindset. The mindset is a set of beliefs and priorities that drive such actions. For example, if one has a growth mindset, that individual strives earnestly to improve their craft, and get better every day. On the other hand, a mindset of negativity causes regression, and failure to improve upon setbacks.
A growth mindset, or negativity mindset, dictate our life path, likewise the mindset of frugality dictates one’ financial path. Frugality can be defined as limiting financial expenditures as much as possible, whilst caring for the human need to fulfill wants and needs. Therefore, a mindset of frugality includes saving money wherever and whenever possible – still fulfilling one’s needs and having the occasional treat – and taking full ownership of one’s financial future.
One can achieve the frugality mindset through setting clear financial goals with action steps and proper accountability; prioritizing such goals and executing on them day-to-day; and lastly, adjusting in the face of adversity.
First, one must set goals for their financial future. If a person feels they spend too much money at the bars, buying clothing, or other impulse-spending, they should begin tracking monthly expenses, and set a clear, actionable goal on how to accomplish this. A goal can look like this: “I will spend less money at the bars by limiting myself to one trip per week, only bringing cash in the amount of $20, and using the money I would have spent to add to my emergency fund.” Additionally, one must set up accountability – a friend or family member that can check-in and hold one to their goals.
Next, one must prioritize their goals and execute on them day to day. The frugality mindset can add to this by always having one’s financial future in mind while making present day decisions. For example, if one spends their entire paycheck upon receiving it, they are not planning for their future and will not be prepared for uncertain life events, and/or retirement. But if one prioritizes his or her financial future, they can execute through putting money away from each paycheck, and adding it to their emergency savings account, or Roth 401k. Prioritizing the future, and executing on it today is the key to the frugality mindset.
Finally, to achieve the frugality mindset, one must adjust in the face of adversity. In other words, if a negative life event happens, a person can adjust their budget – potentially putting less in savings for the time being and prioritizing getting care for their child or spouse, as an example. Life is messy, and not allowing for enough flexibility in one’s budget can create additional stress and anxiety in one’s life. Saving and preparing for tough times with the frugality mindset allows for such flexibility.
Stay frugal, my friends.
Keeping it frugal!