Frugality and Retirement


With a very difficult decade behind most consumers, the concept of being frugal doesn’t have the same stigma it did 20 years ago.  During the 1980’s, there began a shift from waiting and saving before making a large purchase such as a car or home, to maxing out credit cards and borrowing 100% of a home’s value in order to purchase a larger, more expensive house.  However, this trend is slowly beginning to fall to the frugal consumer considering the future.  In fact, becoming frugal actually ends up benefiting the consumer financially and psychologically.

Why Consumers Spend Money They Don’t Have

Beginning with elementary school, children begin to notice what others are wearing, saying, and doing.  They try to find their place to “fit in” and are prone to copy others in order to be accepted.  As they grow older, pressure from society to have the newest car, latest cell phone, or biggest house lead to excessive spending and ultimately financial ruin.  Retirement savings and paying off debt is not even in the far-off horizon for many in this situation.

Going to the Extreme

There is a growing trend towards living a life debt free.  In theory, this sounds very nice and friendly.  But, once a person begins talking about retiring at 30 and traveling the world, one must ask, “If this is so easy, why isn’t everyone doing it?”

What they fail to mention is that there is a difference between living a frugal lifestyle and living on Ramon noodles every day.  Not many people are willing to give up their car in order to walk to work or make their own clothes, so what are some sensible ways to live a frugal lifestyle without giving up your life?

Find a Household Spending Floor

The monthly goal of a family should not be to spend as much as they make or even worse, spend more than they make and put the rest on a credit card.  Instead, a frugal consumer will look at their necessities such as housing, transportation, food, etc., and then how much they need to save for a comfortable retirement.  After these two areas are determined, then money can be allocated for eating out, vacations, clothes, or whatever makes that person happy.

This spending floor is not solid.  It can change over time to reflect increases or decreases in income.  However, many people find that once they start living a frugal lifestyle, even when their spending floor drops, they don’t rush out and purchase a bunch of new junk.  Instead, they save even more.

Frugal People are Happy People

One would think that giving up that daily “Five-Bucks” latte would be difficult.  However, a 1978 scientific study of lottery winners showed that after two months, these new millionaires’ level of happiness returned to the same level as when they were one of the “regular” people.  As people move up the ladder of convenience, they lose the ability to enjoy the items previously thought of as enjoyable.  

For example, if a blue-collar man enjoyed a cold beer after a hot day, but suddenly won the lottery and became able to have expensive scotch poured to him by a butler, he would soon find that he experiences the same level of happiness as he did with the beer.  As a country, the United States routinely scores lower than other countries like Canada, Cuba, Denmark, Austria, etc., on the overall happiness scale.  But if stuff makes you happy, shouldn’t the U.S. rank #1 on every single survey?  Not if happiness can’t be bought, but comes from things such as family, community, and a secure retirement.

Retirement and Happiness

If a person chooses to be frugal during their lifetime and can save a fair amount of money for retirement, they are actually happier than those who bought whatever they wanted for instant gratification.  By cutting spending, consumers are finding ways to not only save more money for their retirement but cut down on using more of the Earth’s resources.  This is definitely becoming fashionably frugal.

Instead of leasing a new car every two years, these frugal, happy citizens have learned tricks to stretch the life of their older vehicle, feed the family a nutritious and delicious meal for less than $1 per person per meal, and how to cut a path towards a sustainable life that benefits not only their retirement, but the entire planet.  Who wouldn’t be happier in retirement knowing that they have enough money to live comfortably and that they saved the planet in the process?

Tips on Retirement Saving

Once a person decides that they want a happier life and a secure retirement, they wonder where to begin.  Some areas to take a financial inventory include:

  • Max out a work 401(k), especially if there is an employer match
  • Try to have the mortgage paid off by retirement
  • Line up a part-time job even after official retirement
  • Take advantage of free online tools such as retirement calculators or retirement income calculators to determine if there is enough money accumulated to meet expenses during retirement
  • Learn the rules pertaining to Roth and traditional IRA’s, Social Security, and the benefits of retiring past 62.
  • Before officially retiring, have two years’ worth of liquid savings set aside
  • Diversity by spreading retirement money between tax-deferred and Roth accounts
  • Pay down debts

Saving More Today for Tomorrow

Experts agree that working people should be saving as much as 15% of their annual salary for retirement.  To do this painlessly, increase the amount saved by one or two percentage points at a time.  Employ a company’s auto-increase feature if there is one available.

No matter how a person decides to become frugal, once they do, chances are they will not only lead a happier life but a happier retirement too.  

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