Financial Benefits & Drawbacks of a Frugal MacDoogal Mentality
Spending style — like most personality traits — exists on a spectrum. On one end you have YOLO/Carpe Diem/Overspending and on the other end you have Frugal MacDoogals/Misers/Financially Anxious.
Where people lie on the spectrum can change over time. Perhaps in your teens you were more on the YOLO side, but as you grew older, you tended more towards the frugal side. Likewise, perhaps you were miserly at the beginning of your career when income was tight and unpredictable, but as you start to earn more you learned to relax and enjoy your money a bit more once there was more room in the budget.
Wherever you are on the spectrum, when you are in a relationship, it is important to understand where your partner is as well.
In Couples Financial Therapy, it is often the case that the people in relationships are on opposite sides of the mid-point of this spectrum. The Spenders tend to end up in long-term relationships with the Savers.
And perhaps there is some cosmic wisdom in this pairing — because the Spenders need the Savers (to keep them from losing all their money) AND the Savers need the Spenders (to keep them from over-prioritizing money).
This blog is one of a two-part series looking at the benefits and drawbacks of both of these mentalities (click here to view the benefits/drawbacks breakdown of the YOLO/Carpe Diem mindset).
Financial Benefits of a Frugal Mentality:
Savings Growth: Individuals with a frugal mentality tend to prioritize saving and investing over spending on unnecessary items. This disciplined approach can lead to substantial savings growth over time.
Debt Reduction: By avoiding unnecessary purchases and living within their means, frugal individuals are more likely to pay off debts faster. This can lead to increased financial freedom and lower interest payments in the long run.
Emergency Fund: A frugal mindset often includes building an emergency fund to cover unexpected expenses. Having this financial safety net can prevent individuals from going into debt or dipping into long-term savings during emergencies.
Drawbacks of a Frugal Mentality:
Missed Experiences: Extreme frugality may lead individuals to forgo experiences like travel, entertainment, or dining out in an effort to save money. This approach could result in missed opportunities for personal growth and enjoyment.
Quality Sacrifice: In some cases, a frugal mentality may lead individuals to opt for the cheapest option available, sacrificing quality in the process. While this can save money upfront, it may result in higher long-term costs due to the need for replacements or repairs.
Social Limitations: Being overly frugal can sometimes strain social relationships, especially if it involves declining invitations to social events that come with a cost or always choosing the cheapest option when out with friends. This could lead to feelings of isolation or missing out on bonding opportunities.
Striking a balance between frugality and enjoying life is key to achieving long-term financial wellness.
As with any virtue, frugality can quickly turn to vice if taken to an extreme. Overall, while a frugal mentality can bring security and a sense of control to life, it's essential to strike a balance between securing one's financial future and not forgetting to live life well.
Indeed, when we look at the regrets of the dying, none of the most common ones discuss wishing they had saved more money, and that might point to some of the wisdom of the genuine YOLO mentality:
“I wish I'd had the courage to live a life true to myself, not the life others expected of me.”
“I wish I hadn't worked so hard.”
“I wish I'd had the courage to express my feelings.”
“I wish I had stayed in touch with my friends.”
“I wish I had let myself be happier” (Warren, 2012)
None of the regrets were: I wish I’d saved more money! The frugal person can learn how to have fun, while doing so safely.
If you (or someone you know) needs help with this, give me a call. Financial Therapy can be wonderful for helping discuss these issues. If I am not a good fit, I will help them find someone who is.
Email: DrZepeda@FinancialTherapyTexas.com
Phone: 713-291-9553
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