This is a guest post by former Get Rich Slowly staff writer Donna Freedman, a veteran personal finance journalist — and one of my favorite writers. Since leaving GRS, Donna has published two books: Your Playbook for Tough Times and Your Playbook for Tough Times, volume two. These are both excellent handbooks for folks trying to make ends meet under difficult circumstances.
Frugalists aren't averse to spending. They're just canny about how they buy, or whether they buy at all.
That's a tough sell, so to speak, in a country where we're persistently pressured to keep up with the Joneses (or the Kardashians). Flash sales, one-click shopping apps, deal websites, and near-weekly sales at brick and mortar stores make it soooo easy to buy.
Haul photos on social media, hot deals shared by friends, clothing or cosmetics worn by favorite celebrities, that bling your sister-in-law sported at Christmas – spending triggers, every one of them.
It's tempting to believe that next purchase will be the one that makes you finally, truly happy. Except that it probably won't, thanks to what sociologists call the “hedonic treadmill” or “hedonic adaptation” – our tendency to adjust back to previous levels of happiness after a spike in glee.
J.D.'s note: You might have seen this concept referred to as “lifestyle inflation” at GRS and other money blogs.
Maybe that initial joy is caused by a pay raise or the purchase of a big-ticket item like a luxury car, or even a smaller-ticket item like a leather jacket or the cookware you were convinced would change your life. All too quickly the Lexus becomes just another vehicle, and the raise seems to melt away thanks to lifestyle inflation (like, say, a higher auto insurance rate).
A steady practice of purchasing sets the bar higher every day. Shopping, meals out, luxury vehicles, fabulous entertainment all become needs rather than wants. Little extras and perks are no longer treats – they're the bare minimum of acceptable.
Saying “Yes” to What Matters
As a midlife university student paying off divorce-related debt, my default setting was “no.”
- No, I couldn't shop anywhere but the secondhand store.
- No, I couldn't go out every weekend.
- No, I couldn't stop brown-bagging.
My dollars had better places to go than malls or movie theaters. Specifically, they were slated for slaying my divorce-related debt, and for building my emergency fund and retirement account.
Once I was debt-free and reasonably well-funded, the “no” setting turned into “well, sure – if you really think it through”. I was able to say “yes” to things that really mattered: health insurance, charitable donations, therapeutic massage, travel.
Mostly, though, I kept soaking beans instead of ordering in, taking the bus instead of buying another car (I'd given the old one to my daughter and son-in-law when they moved), and sticking with my thrift-shop apartment furnishings.
It's not that I minded spending. I just didn't want it to be too easy. You shouldn't want it to be easy, either.
Saying “no” or “not today” doesn't just improve the bottom line; it also enhances the occasions when you do say yes. A really nice meal out or tickets to the opera or the monster truck rally feel super-special precisely because you don't get them all the time.
I love steak, probably because I rarely eat it – but when I do, oh boy is it ever great. Would I enjoy it as much if I ate it twice a week? Probably not.
Three simple steps to avoid lifestyle inflation:
1. Bank every raise or bonus. Divert the difference in pay immediately into a high-yield savings or retirement account.
2. Prioritize Debt. If you come into extra money, put it to work paying down debt.
3. Focus Internally. You don't have to keep up with the Joneses, promise. Living below your means isn't just smart, it's the very definition of financial stability.
Deferred Gratification Doesn't Have to Hurt
Understand: I'm not saying you should never buy anything. Frugality does not translate to a life of joyless self-denial. What it does mean is making conscious decisions about what's right for you and your money.
Obviously you should enjoy the fruits of your labors. Never underestimate the effect of a Saturday matinee or a craft beer with friends; even small treats can feel supremely luxurious.
But treat yourself mindfully rather than automatically. How easy it is to think, “It's just a hobby magazine” or “I deserve to hit the clubs every weekend while I'm young and carefree”. Pile up enough of those publications and pay enough of those cover charges and it starts to look like real money.
Deferred gratification doesn't have to hurt. In fact, new electronics might be exponentially cooler because you researched them, anticipated their purchase for weeks, and then paid cash. Which brings me to a word you don't hear all that often: sacrifice.
Putting off immediate desires used to be a defining characteristic of adulthood. First apartments and first homes were small and modestly decorated (and “decorate” was often code for “things from your grandparents' attics”). Making it in the real world meant years of hard work and of using it up, wearing it out, making it do or doing without.
That notion may seem downright quaint to those who grew up in a culture of buy now and pay eventually. Why shouldn't you have the latest smartphone upgrade? Why shouldn't your first apartment have throw pillows and wallpaper borders and pillow shams that match the dust ruffle? Why shouldn't your kids have the best that money can buy?
Because you pay for many months or even for years, that's why, and because it's not just the interest charges that hurt. Being in debt means opportunity cost – think of where that money could have gone! – and more to the point, it limits your options. How many people do you know who hate their jobs but can't afford to quit because they need to make minimum payments on the credit cards that paid for all the things they bought to take their minds off the fact that they hate their jobs?
Frugal people do attend shows and sporting events, buy cars, take vacations. What they don't do is get these things by going into debt without a clear plan to pay it off. That's like sticking your head in a lion's mouth on the theory that it might not be hungry today. But it probably is – and you won't know for sure until you feel the jaws clamp down.
Face it: You probably won't win the lottery or have a rich uncle leave you a bundle. Your needs and your wants will be met by the dollars and cents that you earn and build.
It can be hard to imagine how the things you give up today will make a big difference decades down the road. But you are responsible for that future, which means being responsible in the present.
Donna's books are available on Amazon and Kindle for $9.49 and $7.99, respectively. She's also created a Get Rich Slowly discount for the e-versions (PDFs). You'll pay $5 per book if you visit her online payment platform and using the code GRS1 for the original “Playbook” and GRS2 for “Playbook Vol. 2.”