Long Term Benefits of a Frugal Lifestyle

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Have you ever been forced to make sacrifices? I am sure you didn’t enjoy it at the time, but you made it for a reason. Hardly anyone likes making sacrifices. Otherwise, they wouldn’t be known as such. We often make sacrifices in the financial aspect of our lives. Whether by force or personal choice, everyone adopts a frugal lifestyle from time to time or in certain areas of their life. Whether you realize it or not, these frugal choices offer long-term benefits. In fact, making drastic sacrifices now can open up many future possibilities.

My Frugal Lifestyle

My wife and I have gone through our fair share of financially-difficult times. While we are both in graduate school right now, things are better than they ever have been. When we first moved to the Northeast after graduating from college, we were forced to accept jobs solely for the purpose of paying the bills. The jobs were semi-related to our interest, but were unhealthy working environments. They were also low-paying jobs, despite living in one of the most expensive regions in the U.S. We were forced to limit our lifestyle – it wasn’t a matter of choice.

Yet, as I mentioned – things have improved. We could give into the temptation of lifestyle inflation, but we are choosing against it. Here’s some of the major sacrifices that my wife and I currently make by choice in order to save money for long-term goals:

  • Share One Car: My wife is the one who drives to work, while I take the train. This means long, dreaded walks in the winter. It also means that we are avoiding the maintenance, insurance, and fuel costs of second car.
  • Limit Our Dining Out Budget: We could choose to eat out a couple times a week, but instead we limit it to two times per month. Learning how to save money on food does not take an advanced degree. It does, however, take discipline and commitment.
  • Minimize Entertainment Costs: Instead of going out for drinks or going to the movies frequently, we try to eliminate all of these regular costs. It doesn’t mean that we avoid having a good time. It just means we are intentional with how we spend our money.

Benefits of Frugal Lifestyle

As I mentioned, making these (among many others) sacrifices now is not without a price. There are many times where I am tempted to give in to the consumerism of our time, but I have to remind myself that it will be worth it. As it turns out, this isn’t that difficult to do. There are many long-term benefits of accepting a frugal lifestyle.

  • Increased Financial Security: One of the major benefits of making these sort of sacrifices is the increased financial security. Spending significantly less money than you earn allows you to save and invest more money. It gives you the cushion necessary for peace of mind.
  • Require Less Income: One of the secrets to those who achieve early retirement is they lower the necessary income. In other words, their expenses are low enough that they can survive on passive investments. By making the sacrifices now, you continually avoid lifestyle inflation. This means that you don’t need as much money to live on later in life.

While I could continue to express the general benefits of living a frugal lifestyle, I think it is more beneficial to highlight some concrete figures. By incorporating only the three sacrifices mentioned above, I estimate that I save $7,500 per year. To some, this may not be worth the many sacrifices that we make. But to us, it is definitely worth it when you consider the long-term results.

Saving $7,500 per year means that we not only save that much more each month (increasing our retirement savings that much faster), but we also will require a lot less money in retirement. In just a matter of 20 years, this will mean the difference of over $400,000 (assuming an 8% interest). If I were to retire with this extra $400,000, that would mean an extra $16,000 each year for those sacrifices (assuming a safe withdrawal rate of 4%). If you combine this with the lower income required to maintain our lifestyle, the difference is somewhere around $23,000 each year. Talk about a huge difference!

While you may not be willing to give up the same things as me, I think that everyone can learn to appreciate delayed gratification in some shape or form. Making this a priority is a necessary step to resist lifestyle inflation and increase your chances at early retirement. Making sacrifices may not be fun and enjoyable right now, but it will give you the flexibility later in life.

What sacrifices do you make for future financial security?

This post was written by Corey, a staff writer from Passive Income to Retire, where he blogs about his efforts to reach early retirement.

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Money

Derek

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

30 Comments

    • I think frugality can be fun! Does anyone else out there think it’s sort of fun to deprive yourself of certain things? Maybe I’m just weird.

      • Self depriving mentality is a winning one. Sounds odd but when you learn to live without getting what you want, you feel in control and whole. For example, theres some cake in front of you. You might want it, you might throw it out or put it back in the fridge or give it to someone else. But what I think might make most people happy is to stare and that cake and say, I am sure you taste good but im just fine.

        With money, its the confidence in knowing not only do I not need money and live a lifestyle where I am in touch with myself as a human and nature, but if I do want to spend money, I have a ton of it. To know you can travel anywhere and go on ANY vacation in the entire world… Screw a week in hawaii, give your girl the trip of a lifetime and she will be yours.

        Or buy a nice car and live in denial like a narcissist trying to make the false image they have of themselves become true by more delusion.

        • It is nice to own little, but to afford much! Many Americans go about their lives the other way around. 😉

  1. I’m intrigued by your comment that you’re often ‘tempted to give in to the consumerism of our times.’ We all really do feel pressure to consume, and consume far more than we need, don’t we? Part of the key to resistance I think is recognizing there’s no connection between ‘stuff’ and happiness.
    Kurt @ Money Counselor recently posted..Fake Debt Collectors

  2. Living a frugal lifestyle makes you realize that the things that make you happy generaly has nothing to do with money. I have lived a rather modest lifestyle my entire life, but spent on things we felt were important. No regrets! I do not feel deprived at all nor do I feel as though I am missing out on anything.
    Krantcents recently posted..A Different Investment Strategy

  3. Completely agreed. 7500 per year is nothing to sneeze at.

    I recently got rid of my car and started taking public transit, so my wife is the only one with a car. I made the decision because it saved a ton of money, but as a pleasant side benefit, I arrive to work much less stressed not having to deal with rush hour traffic!
    Alex recently posted..HIIT Training – Happiness Experiment 21 Day 2

  4. my husband and I make sacrifices on the same three things! We increased our entertainment/dining out budget to $100 a month after paying off student loans (and are loving it!), but we’re still saving a lot of money by sharing a car. I like the simpleness of our lives right now; it helps me focus on things that matter and not get caught up in consumerism.
    Jessica @ Budget For Health recently posted..Italian Sausage & Roasted Vegetable Calzone

  5. I really agreed. I think its really happy then frugal living is fine. I hope frugality can be fun also! Thanks for the mentioning.

    • It sure can add up fast when you focus on both!


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