After reading 1000’s of posts and articles from across the Personal Finance spectrum combined with some personal experiences I decided to take a crack at The 7 Levels of Frugality.
Are there broad generalizations? ——- Yes. Are they 100% accurate? —— No, but I think most people can peg themselves in a two-category range at a minimum. Read on and see where you fall.
While you are saving a ton of money, you haven’t thought about what you are going to do with it. The goal is simply to save more at any cost.
- You don’t put a lot of weight on quality, cost rules your decision making
- Things don’t get replaced when they are broken – your tool box contains duct tape
- You wear zubaz will holes in the butt out in public because you don’t want to buy new pants that have limited use
Its ok to be a cheapskate on certain things, but I think you may have lost site of the purpose of money. Stop hoarding it just to hoard it, and put it to use on happiness.
“The Frugality Master”
Every penny is tracked, justified and stretched. You have spent years building great money habits and are likely pushing for FIRE status (Financial Independent – Retired Early).
- Splurging on something new is a rare occurrence, you will try to get by with your current possessions and upgrading is tough to justify
- You will reach into the bottom of a 30 pound dog food bag to grab the last few kernels even though your arm will smell like dog food the rest of the day
- You weigh preventative maintenance vs cost of replacement and make informed decisions
- Are already debt free (Or closer by the paycheck) and prioritize saving over spending
One thing to watch out for – Don’t miss out on amazing opportunities because you don’t want to part with some cash
“The Thoughtful Splurger”
This category is very similar to the previous category but a premium is put on experiences over money. Likely can be found traveling the world or trying new restaurants. While you are pursuing FIRE, you refuse to give up certain experiences along the way.
- Weigh Quality vs Cost on specific items you care about or use frequently and will pay higher prices
- Are either Debt free or know the day you will be
- Outside of the justified splurges, you have your financial life together
Not because you don’t have the money, but you pick spots that you don’t care to spend more and stick to it. You understand the risks of debt and are working on getting rid of it at an accelerated rate.
- Generic over brand name because you can’t tell the difference
- For some reason or another you refuse to spend money on certain items – personally I hate greeting cards 🙂
- You save a good portion of your income, but could probably trim another 10-15% off spending with a few adjustments or sacrifices.
If you are only picking low cost areas to be frugal in, the balance sheet might not reflect it. Make sure the 20% of non-frugal decisions you make don’t skew the 80%.
There is always a break even category right? 50-50 shot your are improving or destroying your financial situation month in – month out.
- You aren’t frugal, but don’t spend more than you earn either
- You don’t spend a lot of time thinking through money decisions – but know enough to avoid the worst kinds of debt (Credit Card)
- Are able to cover all your bills every month without panicking, but don’t have a lot of money to cover emergencies
With a few minor tweaks to your spending you could bump yourself up into the frugal zone
You get frugal closer to Pay Day because your cash stash is dwindling. Maybe you had a rough month, maybe your house is eating to much of your paycheck.
- You will share a meal with your dog instead of buying dog food so it goes on the next credit card bill
- A Financial Emergency will send you into a panic
- Your financial decisions are made in 2-week increments, no long-term financial outlook
- Not saving money, but have a smidge of cost awareness
Set some yearly saving goals and make incremental changes to improve your financial situation
“Ballin in Debt”
Very little attention is paid to your finances, and specifically your spending. More is going out than coming in and the bulk of your money is not contributing to happiness.
- Credit Card Debt is standard, minimum payments aplenty
- You may weigh quality over cost, but the items you buy might not be used frequently or really matter to you. The “Have it to Have it” mentality.
- If you have a high income, you better keep it……forever
Take a hard look at your current trajectory, do you want to work forever? If not, there is not a better time to start changing than now
Where We Fall
We fall somewhere between “The Thoughtful Splurger” and “Frugal-Ish”. I know we haven’t reached Frugality Master status because I thought of this post when I wasn’t willing to spend any more time trying to get the rest of the dog food out of the bag. 5 bag shakes is my max.
Find Your Sweet Spot!
There isn’t a single level that everyone should strive to be in. But that doesn’t mean you should strive to be in one of the extremes either. I think everyone would agree that getting the most for your money while simultaneously creating happiness is ideal.
Work yourself into one of the “Sweet Spot” categories and experiment until you know your limits. You may be happiest being Frugal-ish while not giving up things that Frugal Masters scoff at. And its totally ok.
If you are in the bottom levels, start challenging yourself to cut some spending or think about your financial future.
Where do you fall? Curious to see if we have any of the extremes reading. I sprinkled in some first-hand experiences through a few categories for entertainment purposes.