It shouldn't be the only way you're improving your bottom line, but it does give results, fast.
Frugal Dad is concerned that frugal people spend too much time being frugal. And that may well be true: For someone who already has their finances under good control, some money-saving activities are simply too little payback for too much time. Someone with a six-figure salary and a seven-figure net worth probably can find better uses for their time than trying to save $10 on their grocery bill by clipping coupons and scouring the circulars for loss leaders.
I know, I know, these kinds of activities likely played a big part in getting those people up to seven figures. By the time they get there, they're practiced it for so long that anything else seems foreign. But, as Frugal Dad put it, reducing expenses is only half of making the bottom line better. These well-off people, should they choose to, could do much better by starting a business that paid them hundreds per hour instead of filling out rebates for $5 per hour. (Aspiring millionaires would do well to increase their income in addition to being frugal as well.)
But what about the people who aren't as well off? Maybe they're making $40k or $50k, but have a lot less saved up than they probably should for their age. This is the situation for which packing your lunch, buying generic, buying used, skipping Starbucks, and clipping coupons will help.
And it helps immediately. The week you take lunch to work at $2 a day instead of hitting Subway at $5 a day, you've improved your bottom line by $15. Boom. Or brew your coffee in the morning instead of hitting Starbucks. $10 per week. Boom. Instant graitification.
Building up income streams takes longer, especially the kind of income streams you want (passive ones). Overnight success may take fifteen years but even modest success with a business can take at least months, especially if the monetary outlay is small. Depending on how dire the finances are, this may be too long to wait.
Higher income may be better in the long run, but that's the long run. Frugality is here and now.
(Note: Thanks to Gather Little By Little for including this post in the Festival of Frugality!)
I liked Frugal Dad's post, I thought he brought up a good point that I don't see too many people talking about. That said, I think most Americans could drastically improve their standard of living by being a bit more frugal. I had no idea how much money I was wasting on stupid stuff that didn't even matter to me, until I actually saw where all my money was going.
You're assuming the time could be better used in some other way. If I am going to spend Sunday morning reading the newspaper, then pulling the coupons isn't wasting time – the time was already "wasted".
MBH,
Frugality definitely leads to more savings and immediately. There's no insurance in life that you'll ever get that 6 figuure income but if you want to work towards a 6 and 7 figure savings, you better know how to make your money work for you.
Jerry
Mark: That's true. Not that reading the Sunday paper is a waste of time, either.
Frugality is about choosing when to live excessively and when not to. For the everyday things in life, why spend more than you have to? Being frugal in that way allows you to reallocate those savings for the special times and occasions.
I think a good way to make sure that you make a good use of your time on frugality is to really focus on your top two spending areas.
You'll still spend time on your other expenses, just not as much as on the top twos.
And I agree with MBH that work meals are probably the easiest and most painless way to cut back on food spending.
I swapped out subway (a cheap lunch at $6.31 a pop) for making my own, and saved about $20-$25 the first week.
It's an easy sacrifice, because I don't mind cutting back on meals for myself.
These are great points in your article. This is how I expain to my 7 year old if we save more money on not eating out and on clothes or toys we can take a vacation sooner. I pose the question all the time when she asks, “Would you rather us go to lunch at Panera Bread and spend $20 all the time or save the money and go to Disney World a lot faster”. You can imagine what her response is all the time. My husband brings his lunch everyday to work and just buys soup at the cafeteria for $1.50, that is a huge reduction in our bills and needless to say it is healthier for him.