Adam Goodman

Frugality is Not Budgeting

I was recently at brunch talking with a group of friends when one of them started talking about frugality and how it is a good way to save money and keep within your budget. Now I`m not one to say whether frugality is good or bad, it really depends on your situation, your financial goals, and what you want out of life, but I did start thinking about how many people think that frugality = budgeting. In the past, I’ve talked about the cost of a cup of coffee, and I can see how this might lead one to think that frugality is important, but I think it’s really important to be clear – effective budgeting does not mean you need to be frugal.

When creating a budget you need to remember five things:

  1. Include all of your expenses into your budget, regardless of whether it is a daily coffee fix or rent
  2. Set a realistic budget – your expenses should not be more than your income
  3. Remember to pay yourself 10%, and put that money to good use by using compound interest
  4. Don’t live beyond your means – if you can only afford to go out for dinner once a week, only go out for dinner once a week
  5. Budgets help you meet financial goals, so if you haven’t set any goals, now would be a good time to do it

At the end of the day, a budget is a tool which will help you save and spend your money, but it’s up to you to decide how you want to do it.  Frugality and budgeting are not mutually exclusive, nor are they mutually inclusive; it’s up to you to decide how you want to spend your money.  If you enjoy going out for dinner, then go out for dinner, but do it within your budget.

Just because you are following a budget doesn’t mean you have to be frugal, and just because you are frugal, doesn’t mean you are following a budget.  Living your entire life without enjoying it because you are afraid to spend money will not lead you to happiness.  So my question to you is, are you being frugal, or are you following a sound budget to meet your financial goals?

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One Response to “Frugality is Not Budgeting”

  1. [...] is not a four letter word. I love this article "Frugality is Not Budgeting" because the list of five things you need to remember when creating a budget are so spot on: 1. [...]

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