Our first frugal post covered some basic what’s and how’s of frugality, but the why went unasked. That was mainly because the ‘why’ is necessarily personal, political and judgemental. We’re making a value judgement, based on what we want. We’re not saying folk who don’t follow our example are frivolous fools, sheep to the marketing shepherds and dooming themselves, but we obviously prefer our way and think there are huge benefits.
Let’s talk TVs.
We could run into each other in John Lewis’s electronics department whilst browsing for big screens. We both love films and a netflix binge. We both think some things absolutely need a big screen and appreciate the quality of picture and sound. We’ve got the same income too but after browsing for an hour, we come to different choices.
You go for an OLED, 65”, ULTRA HD 4K ready masterpiece and pay £1999 for it. It is gorgeous.
I go for a 49” ULTRAD HD 4K ready screen and pay £799 You have dozens more features than my TV and on movie night, we would definitely want to go to yours. You have the better TV, hands down. I’ll make the popcorn.
You’re also £1200 worse off. That’s the obvious trade-off. You got better quality, but I spent less. Why did I not go for the same TV as you?
That TV is a big step up for me, a huge improvement on the 28” tv I bought when I moved into my flat. The first film I watched on my new screen was Les Miserables and it was just incredible. There are films I want to rewatch just to see them in the increased depth and detail. Lord of the Rings is going to be incredible. It still impresses me, 2 years on. (The TV, that is. Lord of the Rings is still going strong 14 years later.)
The £1200 I didn’t spend went into my savings, adding to funds that have grown as I kept making frugal choices. Those savings represent a lot beyond the actual numbers. Mostly, security. If something goes seriously wrong, I have a chance to fix it. I’m very unlikely to go homeless now and less likely each month. You’ve probably seen stats about how vulnerable most people are to homelessness, how one missed paycheck could cause a huge number to miss their rent. That wrecks lives and I don’t think it’s fair to accuse the landlord instantly. If you don’t pay him, he can’t pay his mortgage. If he can’t pay his mortgage, he loses the house and can’t pay for his food. Everyone has a responsibility here.
Savings, in the form of an emergency fund, are a safety net. We don’t need to think of broken cars or limbs here - an Emergency Fund that covers 6 months of expenses is license to leave a bad work situation and preserve your mental health. Or it gives you breathing space if a relationship ends and you need to find somewhere else to live. Or, or, or. Basically, it gives you options.
Why I have those values
As a quick detour, part of the reason most people have the values they do about money is because of how they were brought up. I feel that very strongly - both my parents were from working class, and quite financially strained backgrounds. They’ve both always been very frugal naturally, as a result of this. They can both clearly remember a time when life wasn’t as financially stable for them as it is now, and that’s a really strong motivation not to go back there. I’ve also seen in my wider family what happens when you don’t necessarily have those values, and that’s a double lesson in the importance of being cautious and sensible with your cash.
My family also place a really strong emphasis in looking after yourself and not relying on others for help unless it’s really necessary, and that fits with my general perspective on how society works in the UK. We do have some safety nets that provide protection, but they are under strain already. So personally, I feel it’s my job to be my own safety net - I only ever want to have to ask for help if I’m in really dire straits. That’s why I’ve prioritised building myself an emergency fund.
Honestly, I think most misfortune is reasonably foreseeable - it’s not an act of god for a few £1500 disasters to come your way, whether a plumbing situation, car crash or similar - and so as sensible adults we should prepare for that misfortune. If everyone thought like this, and kept what they could as a safety net, we might find people would be able to live less precariously. And that would mean that, longer term, there might be more public money available to support those in the midst of major, long term crises, or struggling with complex disabilities - those for whom responsibly putting 10% away each month just would not cover it, because life has thrown them an extraordinary series of curve balls.
It doesn’t matter if you make £70k or £24k, if you’re suddenly redundant and have no savings, the amount you have to support you is £0, and you will face hard times. That’s the lesson my parents and grandparents taught me: you won’t need a safety net if you’ve brought your own parachute.
Living frugally means having savings, which means having healthy choices. That is, we aren’t as constrained by financial circumstances. That means anything from the trivial, like holidays or a take-away, to leaving a bad work situation, to being able to afford the passivhaus smallholding of our dreams.
It means we can sponsor that friend we want to support and attend the wedding we want to attend, and crucially we won’t be putting ourselves into debt or hardship to do so.
More substantially, a combination of savings and patience means we generally pay less for what we buy. We aren’t under pressure to acquire things instantly, which means we can hold off, research, get an idea of a fair price and wait for sales. We never have to buy on credit, so never have to pay interest. We can bulk buy some things, getting them cheaper. We can wait for the game and game system to drop hugely in price.
This is something I’ve been unconsciously doing for years. I love gaming; I can spend six or seven hundred hours on a good game, trying to improve my skills and perform better each time. But if you looked at the tech I have in my house for gaming, you’d be really surprised to hear me say that. I don’t have the latest consoles; I’m still rocking a PS3 and a battered but stoic old XBox. I’ve taken to getting games from CEX - we recently got a couple of 2013-era games for £4 total. Sure, it’s the original Assassin’s Creed and Tomb Raider: Underworld, which everyone and their girlfriend has played already, but they’re new to me and C, and bringing us hours of fun so far. That’s the thing; we can still enjoy the games even if we’re five years out of date by this point - and we didn’t spend £60 to get them new.
Saving money means saving additional money, which is a revelation. It also means making money in the…
One of the odd apparent injustices is that the people with most money need it the least. The beautiful lesson of ‘The Millionaire Next Door’ is that wealthy people rarely look wealthy. They have great wealth because they spend a lot less than they earn and save the difference. If you store those savings wisely, they grow and grow through the magic of compound interest.
People’s individual situations will vary a lot and you can’t apply this to individual people universally, but folk short of money are generally spending too much, saving too little. Sometimes that’s by necessity - their living situation is such that their choices are badly limited. Other times, it is a case of making more impulsive decisions around money that then put them in a financially precarious place. But it’s not a universal injustice that rich folk have more than they need, it’s logical: they save what they don’t spend and it builds up. If they were to start spending and ‘acting like millionaires’, they’d be poor.
This is why so many rich and famous people end up bankrupt and famous. They spent what they earned and put very little aside for safety.
As for the regular person, we have to consider our futures and pensions. I can write a lot more on this, but a huge problem for the UK is the aging population’s need for a pension in the face of increasing life expectancy and low savings. The baby boomer generation generally saved well, generations X and Millennials? Not so much. Forecasters see this problem and have already tried to limit the damage: the age you can access the state pension equalised for both genders, then increased to 67 from 65. I have no doubt that a move to 70 is going to happen in the next 15 years, and where to go from there? I don’t want to work until 67, let alone 70, so building up savings and a personal pension is my insurance against that. If everyone in my generation were doing the same, the reliance on the state would decrease, providing greater security and enabling money to be budgeted elsewhere.
For us, we have a vision of our ideal life. Living strictly frugally means a high savings rate and letting those savings grow to enable us to achieve that ideal life. Every skipped takeaway and cheap holiday adds to the fund that will help us get the life we want on our own terms.