I’m not talking about being “cheap” but does the concept of frugality scale with someone’s means?
For example would you still consider someone making $1m per year to be frugal if they only spend $300k? Thats a savings rate of 70% but their total spend is still a lot of money
Genuinely curious to see what this group thinks
Do you think frugality scales with income?
byu/atkfcj inpersonalfinance
Posted by atkfcj
31 Comments
Frugal isn’t a fixed number or percentage. It’s a lifestyle. So no it doesn’t scale with anything.
No. The cost of frugal scales by location, but not by pay
Many very wealthy people are extremely frugal with habits that might surprise you. Like they will find ways to not spend small amounts of money that a common person would regularly spend.
A lot of the practical ratios kind of fall apart at higher incomes. Groceries for a family of 4 mart be 500/month (arbitrary made up number) and if you make a million a year with the same family in the same place and buy groceries in the same place, even if you get more expensive brands, it may be 600/month.
It’s why someone may spend 60% of their check on housing, if you making a million a year, your other fixed-rate expenses become a much smaller percentage of their income.
For me, frugality is about efficiency of spending. It does not scale with income because under your logic, a person making 100M a year while only spending 30M a year would be considered frugal, which is of course ridiculous.
Only to the extent that when your very poor you have no options. Frugality can sometimes blend with just buying the crap-tier version. Dollar store dish soap is pretty close to water.
When you have a bit more money, you can spend more on quality but still be frugal. Example: I bought a Bosch dishwasher because I wanted something that actually cleaned my dishes and wouldn’t crap out after 2 years, but I bought the lower tier version without a lot of bells and whistles to be frugal.
My household makes about $270k in a good year. We spent about half of that and save the rest. I don’t consider myself frugal at all because $135k affords us a very rich lifestyle where we can own nice newer cars, go on frequent vacations, eat out on weekends, and not be particularly careful at the grocery store. We can eat steak and drink a lot of wine. My niece is actually frugal – she makes quite a bit too but rarely eats out and keeps her grocery spend under $300 a month for two. I’d like to live a richer lifestyle but honestly I have no idea how to do that. Wasn’t brought up in a culture of excess so the whole concept is very foreign to me. I spend what I need to spend to be happy and no more.
There is a frugal sub that maybe better answers this, and probably already has discussed it.
The example you gave is someone living well below their means and isn’t really indicative of being frugal, as far as my opinion goes. There is no indication how they spend it so the level of frugality can’t be ascertained.
No, a billionaire is not frugal because he only spend a fraction of his income a year
It’s more of a personality trait than an actual textbook definition of financial activity. If you recycle and upscale your furniture while making $50k you’re likely to continue to do so at $200k.
My wife and I have seen pretty large income growth over our years together and some things stay the same, but some change.
We still max out all retirement vehicles and have the same savings rate. Still buy our cars used for cash, they’re just nicer now. Put 20% down on our house, it’s just nicer now.
On the other hand:
Couldn’t tell you the last time we paid full price for a home good. Clothing, toiletries, home decor, yard equipment, all couponed/thrifted.
My wife calls it save and splurge, I call it don’t cheap out on durable goods, cheap out everywhere else.
But it’s more of a mindset than an actual definition.
Frugality isn’t about the absolute number it’s about how you handle what you have. Someone spending 300k on a 1m income can still be frugal if they’re intentional and not wasteful and someone on low income can be reckless even if they spend very little.
Yes, I think it does. Frugality means you’re spending money wisely and not frivolously. As income goes up a frugal person may still spend more on higher quality items that ultimately have a better value but aren’t affordable for people making less.
They’re buying macadamia nuts as a snack now instead of almonds. They’re buying furniture and clothes that will last longer. They’re buying a modest home in a good school district. These things all cost more but have a better long term return in terms of utility so its still frugal to buy a $100 shirt if it lasts longer than 3 $40 shirts.
I find people are frugal about weird things. My parents grew up poor but still act like leaving a light on is going to bankrupt them. Meanwhile they have a pool filtration system that basically runs 24/7.
It’s a weird thing with well off boomers I’ve notice. Electricity, food and gas are “expensive” to them. They love a cheap meal. Meanwhile a 700 dollar car payment on a new car they barely drive is “a good deal”. It’s too expensive to get the fast Internet they use all the time, but they still pay for cable in every room and use pay per view when they forget how to open Netflix.
? No, usually if you make more your lifestyle changes. There are exceptions of OGs that never changed their lifestyle, but it’s rare.
I suppose if you compare to peers making the same money.
I rememer doing work at VCs multi-million dollar house and, he had a buy one get one coupon for a common chain mexican restaraunt, that was set aside very intentionally for use later.
Lifestyle creep isn’t for everyone.
I just go by what the word means, it’s synonym is “sparing”, so it does not scale at all.
I guess it depends. My net pay a month is 8k. All my expenses add up to about 4k. Since my mortgage/escrow is now only 19 percent of my monthly expense. Am I frugal being able to save 50 percent of my net pay a month or did I just so happen to buy a house at great time and then get a nice promotion a couple years later?
It’s not clear to me what you mean by “frugal” so it’s hard to give a real answer.
I think frugality is based on what you spend money on and not what percentage of your income you are spending.
No, I don’t. I feel more frugal now than when I didn’t have any money.
I don’t make it my personality. I can be inconsistent about when I make frugal choices or not. I might get something which is extravagant to another person, and still appreciate saving thousands of dollars on the purchase.
Being frugal is about getting the most value out of your dollar. A frugal person isn’t going to spend 100% more on a tool that is overspecced for their needs. They aren’t looking for the cheapest item overall, but they are looking for the cheapest that suits them.
A frugal business owner could justify spending $100k on a truck if they could not find an alternative that is more cost efficient and it is necessary to fulfill the job.
It isn’t about how much you make or have rather how you approach spending money.
We are at almost twice the average household income for our town. As we made more, I bought more tools. When I was broke I could not afford a welder. Last couple years I fixed my own exhaust and saved a few hundred dollars. Still have cheap house and cars. The cars are lasting us well.
Frugailty is “being economical with money or resources and avoiding waste and unnecessary spending.” So I think someone who makes 500k a year can be somewhat frugal by avoiding waste but they probably have unnecessary spending. Also, cost of living matters, too.
So I know people who are quite wealthy, who are far more frugal than I am
Everybody’s life experience experiences and upbringing might lead us to view money in different ways
I try not to speak an absolute, but would guess that people who have experienced times when money was extremely tight, are more likely to be frugal, regardless of their income
And I think we’ve all seen people go kind of from feast to feminine at times living high off the hog at one point in a few years later, having lost their home and having to rebuild the closer you are to those kind of things, the more likely you might be to being frugal, regardless of how much you’re making
Being frugal in a modern sense isn’t about how little of your income you spend, it’s how much you allow yourself to spend on little income.
Huge difference.
It’s way more individual than it has to do with actual money. Obviously it does scale because you can be frugal and still spend 90%+ of your income.
My savings rate has scaled with my income, but not really my “frugality.” I save more money by virtue of making more money, but I largely buy the same stuff at 150k that I did at 75k.
Biggest difference is rent in the last decade and it will likely go up again, but genuinely there’s no way to be “frugal” about CoL in the Bay Area. Just try to find something that works and fit all other items around it.
I think it scales in non obvious investment related ways. Poverty charges dividends but being wealthy lets you make money. Get solar? All of a sudden your electric bill is nothing. Get an EV with solar? Your gas bill is deleted and your solar pays itself back even faster. Things become investments that return money or prevent the slow drain of savings – if you’re wise.
Kinda. Frugality is a state of mind. To me it’s mostly about not being wasteful and saving money is secondary. Someone with a lower income would likely see it more as saving money.
If something is expensive but quality and I know will last forever I definitely buy that over the cheap thing I will need to replace in a year because that’s less wasteful. To me that’s my frugal mindset. In my 20s though I would have found the cheapest thing to get by because I didn’t have another choice.
What is frugal for one person may be completely different for another person based on their personal situation.
Consider the following example:
Your car is broken. It’s a few years old and a few additional repairs are likely needed soon. You are capable of fixing it, but it will take several hours to complete the job. What is the frugal approach? It may depend on your income, lifestyle, work etc
If you are underemployed working 20 hours a week and have the time, it would be frugal to do the job yourself
If you are a busy professional making $150 an hour 80 hours a week, it’s likely having the car fixed by a professional would be the frugal thing to do
If you are a CEO and travel all the time to important meetings and don’t have time to deal with car malfunctions, the frugal thing might be to buy a modest new reliable car
So I would say yes, the definition of frugal likely depends on your situation.