Is Frugality a Tool?

I have been pondering as of late why our community sometimes feels close minded. We, as a group, are not always open to the idea of luxury purchases. In many ways, I think this is often due to the opportunity cost fallacy. This theory, that money spent on the unnecessary (depending on whose viewpoint you agree with) could be invested and compounding, often leads to heated debates on social media. The fangs come out, and such words as justify and wasteful are thrown about with callous disregard to the unique viewpoints and financial situations of the audience members involved. On further inspection, it appears that the emphasis on spending, per se, is misplaced. What we are really talking about, in essence, is frugality. Is frugality a tool or a way of life?

How you answer this question depends not only on your world view, but also on the meaning you find behind financial independence in the first place.

Frugality as a Tool

Is Frugality a tool? Many high W2 income earners think so. They make a lot of money and enjoy spending it. They balance this joy with the deeper contentment of reaching financial independence. Often these folks only like to be penny wise because they have to. They would rather drive expensive cars and take expensive vacations, but realize that in the long run this is not the right path.

This caricature (and it is only a caricature because people don’t fit so neatly into a box) believes in saving a high percentage of income. But, if they had their druthers, would rather do that by increasing income and not decreasing spending. They maximize their W2’s and excel at the side hustle.

You will see many of these high income earners achieving financial independence. But, they will do so with a larger nest egg and a higher yearly spending allotment.

In these circles, there is no shame in driving a nice car or even foregoing travel hacking.

I fit squarely into this group.

Frugality as a Way of Life

The grand majority of financial independence seekers do not see a high income as the ticket to financial independence. In fact, there are loads of hacks and life optimization strategies that almost completely leave out income from the equation. In fact, there is a certain glory in rising to such heights without the benefit of a boatload of money coming in every year.

When you ask them if frugality is a tool, they answer no without hesitation.

It’s a way of life.

For this group, the use of money has nothing to do with utility. Frugality becomes not just a moral issue but also a badge of honor, an identity. And there is good reason.

Studies show that after a certain point, spending does not improve happiness. And we all know about the hedonic treadmill and hedonic adaption.

This group rightly argues that frugality not only helps reach financial independence, but also is one of the pillars of happiness and contentment. To live more on less.

Anyone who has ever read the minimalists knows what I’m talking about.

So it is not unfamiliar, nor unfair, to see a frugality blogger who now makes millions on their blog or marketing schemes. I would argue that they hold true to their frugal lifestyle regardless of how much money is coming in. They formed their philosophies as lower wage earners. Does the amount of the money coming in change the rightness of the worldview?

In Conclusion

I am desperately searching for an all-inclusive umbrella for the financial independence community. Whether you see frugality as a tool or a way of life, we all believe in living under our means, saving, and investing. We all dream of side hustles and getting out from under the thumb of the W2 man.

If you see frugality as a tool, you are likely to spend as much as you can within your FI budget.

If you see frugality as a way of life, you will probably cling to your frugal ways no matter what fortune brings to your bank account.

Either way. In this man’s humble opinion.

There is plenty of room for both.