A term often used synonymous with being "cheap".
Is that a completely fair comparison? We think not!
Here is why.
What is frugality to the "frugalist"?
The frugalist's version of frugality is encompassed and embodied by studying value.
Valuing your time. Valuing your life energy. Valuing your savings rate. Valuing your net worth. Valuing compound interest.
Frugality is also the act of becoming conscious.
Conscious of your spending habits. Conscious about what reliably makes you happy. Conscious about where you are directing a majority of your time and energy (don't worry, I am not big on traditional goal setting).
Finally, frugality is about freedom.
Financial independence and frugality are not necessarily the same thing.
Although they often are recited as part of a FIRE or F.I. war cry, they are not mutually inclusive.
Frugality is merely a tool that you can use to decrease the time it takes to attain financial independence. The concept is that by practicing frugality, monetarily speaking, you are able to widen the gap between income and expenses.
Obviously there are two variables that can be manipulated in this equation.
Income - Expenses = Margin of Potential
What do I mean by "Margin of Potential"?
Everyone has a "Margin of Potential" equation. If you make literally $0 annually, or if you make $100,000 per day, this equation applies to you.
For a vast majority of folks, it ends right there however. That is why I call it "Margin of Potential".
You can choose for this potential to land you in great deal of debt. In this case, the potential energy of your money is negative, especially if it has an interest rate associated with it. Think credit cards, car payments, couch payments, dog payments (yes, this is now a real thing). Financing of depreciating assets is one of the more dangerous things one can do.
I can already hear the arguments this one sounding something like, "But if I avoid paying for these in cash, I can invest the difference".
This brings me to my next point. Defining my version of margin. The "Margin of Potential" is yours in my example, not theirs. In other words, you own the margin - not the creditor.
This is where I hope that you decide to invest your "margin" and allow your dollars to go to work for you.
We will be discussing items such as investing, spending, saving, and more in future posts.
Leave a comment below on your reaction to this. Let me know if you have something to add to the conversation.
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Dr. Jon is a physical therapist by day, and a dedicated frugalist by night, deeply enthralled in the thrill of "pinching pennies" and investing the margin.