Is Extreme Frugality For You?
| August 20, 2010 | Posted by Roshawn Watson under Uncategorized |
By: Roshawn Watson
We all know the story. So many of us do a job we hate to pay for a consumption-focused lifestyle that we can barely afford.We trade our precious hours for a steady paycheck. Regardless of the size of that paycheck, for most people it is never quite enough. This is commonly referred to as the rat race. Recently, I read that nothing could be more insulting to the rat. Even rats know better than to stay in this ridiculous model.
From Conspicuous Consumption to Calculated Consumption
The New York Times recently reported on Tammy Strobel and her husband Logan Smith, who both made radical changes in their lifestyles because they were so fed up with the work-spend treadmill (rat race). After selling their two cars, moving from a two-bedroom apartment to a 400-square foot studio, and giving away countless clothes, dishes, books, and their TV, they now enjoy very minimalist lives with a total of just 100 personal items.
This three-year journey has profoundly changed more than just their lifestyles. Now, they are debt-free, have money to travel and give, all on a salary of just $24,000 (decreased from $40,000). Moreover, Strobel reduced her hours to allow her more time to engage in her other interests. Their core messages are: acquisition of stuff does not bring happiness and bigger is not better. In fact, new research suggests just the opposite: people are happiest when their spending is on meaningful experiences rather than stuff, when they desire something long before they purchase it, and when they stop trying to keep up with Barbie and Ken. (Remember, Barbie and Ken are broke anyway). This fascinating premise is the subject of an upcoming article by Dr. Elizabeth Dunn: “If Money Doesn’t Make You Happy Then You Probably Aren’t Spending It Right.” Moreover, research by Professor Thomas DeLeire indicates that out of the nine major categories of consumption, only spending on leisure correlated with happiness.
Researchers also recommended substituting big purchases for many little ones.The argument is that the initial enjoyment from a new purchase wears off over time, as we become acclimated to a new norm.Thus, we stop deriving pleasure from a new purchase, even if it is a phenomenal one, such as that dream mansion in the exclusive neighborhood or that Maserati that you coveted on Cribs. This acclimation is known as hedonic adaptation. However, if we instead make several little purchases for meaningful experiences and for things that we truly value, then it takes much longer to adapt. Note that researchers have determined that anticipation of purchases also increases our happiness.
Even retailers are capitalizing on marketing the experience. Last June, I went to an after-hours shopping experience at Best Buy. One reason it was so memorable was because I won a flat-screen TV. With as many people as I have told and as many subsequent purchases that I have made, Best Buy got off way cheap! Perhaps the company that has mastered this concept is Apple. Their interactive retail experience creates tremendous consumer loyalty, which was recently spoofed in the popular (but very explicit) Iphone4 vs HTC Evo youtube video. With such powerful brand equity, it is no wonder Apple just reported its highest quarterly revenue ever as net income jumps 78%.
Being Practical With Frugality
The anti-materialism premise resonates with me, yet I feel conflicted because there are so many conveniences that I enjoy and make my life easier. I certainly am a conscientious consumer, so is there a happy medium?
Absolutely. I remember when getting out of debt a few years ago, I tried the whole minimalist lifestyle, and I was completely miserable. Perhaps, I didn’t execute the minimalist lifestyle correctly, but I quickly discovered that the aforementioned research findings rung true in my life. For example, my then girlfriend and I began to do things, such as going to plays and eating out with friends, that emphasized social experiences rather than just buying stuff. Additionally, I planned my purchases so that I was primarily buying things that had tremendous value to me. By not making myself completely miserable, I was able to stick with the process of aggressively paying down my debt until I became debt-free. For more ways to stay motivated while paying debt, click here.
Although it would certainly be somewhat disingenuous for me to promote extreme austerity, I can say structuring my life so that I am no longer controlled by materialism has been extremely helpful in eliminating-debt, building wealth, and being an overall happier person. Most of us may never forego our cars and televisions; however, that does not mean that we cannot embrace the principles of “calculated consumption.” Afterall, “if money doesn’t make you happy, then you probably aren’t spending it right.”
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Copyright 2012, Roshawn Watson, Pharm.D., Ph.D. All Rights Reserved.
Fantastic Roshawn! I'll never get my blog up to speed if you keep writing great stuff like this! That's okay, tweeting your posts works into my busy-mommy lifestyle better than writing my own anyway!____Your confession to being not-exactly-minimalist really resonated with me. Sometimes I actually feel guilty for enjoying certain things in my life that a die-hard minimalist would snub. So now I think I'll call myself a conscious consumer – I like the way that sounds. Feels right!____Thanks!
Hey Chris, You are more than welcome, and thanks for the comment and RT. The whole concept of materialism is so very interesting to me. Our desires can become so distorted by what society says that we must have. However, if we truly value, can afford, and have no moral reservations about purchasing something there typically aren't many good reasons why we should feel guilty about buying, right?
I think sometimes the most frugal can take it a little too far 🙂
Not surprisingly I suppose, I'm kind of in the happy medium camp with you. I'm never comfortable with extremes, so I prefer the concept of "calculated consumption" over extreme frugality. Having said that, if you're happy with an extremely frugal lifestyle, go for it!
Thanks for a great article Shawn.
Thanks for the comment @BalanceJunkie. I really think extreme frugality can be dangerously close to being miserly. If you are happy like you say, then there isn't much problem. However, all too often, the extremely frugal become inordinately preoccupied with not having stuff and saving money. In some ways, I believe this can still be considered a form of materialism because the focus is still on the stuff. This is certainly not desirable to me and would make me unhappy.
You are exactly right…it is a challenge to find our place on the spectrum between extreme frugality and conspicuous consumption. I like good food, can't pass up certain books and movies when they first come out and nice vacations…stuff that can be expensive although I coupon like crazy and constantly look for deals. I do feel guilty sometimes though,
FYI: Thorstein Veblen was the economist who first coined the term "conspicuous consumption".
My recent post Treasury returns versus maturity
I'll have to look up Thorstein Veblen then.
WRT your comment, just knowing that there is a continuum can be very enlightening. It easy to overdo it in either direction. I don't begrudge the more frugal unless they try to convert me 🙂 I don't begrudge the hyper-consumers until they ask me for a bailout. It's all about balance!
I'm also in the middle on this one. I consider myself a person with simple needs, but not so simple as to be super-minimalist. Everyone is different, so they should be as frugal as they can without being miserable (and without overspending/racking up debt).
I really enjoyed this article Roshawn. Interestingly enough, I've found this concept to be untrue for myself personally, but it definitely applies to many if not most other people. As "evil" as this may sound to some, I find conspicuous consumption to be tremendously gratifying.
I also find spending on leisure to be a poor use of funds when you can instead spend on material possessions. I sometimes consider travel to be a waste because you don't have anything to show for it when you're done. Having a new shiny product to show off to others sounds much better than a vacation to me. Sometimes I'm surprised at my own behavior, but this really is how I feel. I guess someone has to go against the grain though, right? 😉
Hello Penny,
The funny part about this subject is I am a big proponent of frugality and sometimes forget that I am not also not nearly as frugal as some others. I derive little joy in deprivation, but I do find making smart purchases (less impulsive) results in much less guilt. I certainly agree that we should not be miserable. What is the purpose of getting your finances in order if we are miserable anyway?
Thanks so much for stopping by and commenting.
Hey Jon,
I love when people take the contrarian view and don't think you evil at all, just different.
Your statement: "I find conspicuous consumption to be tremendously gratifying" makes me wonder why. In Thomas Stanley's Stop Acting Rich, he profiled several multimillionaires and said that his research found that balance sheet affluent (very high net worth) millionaires are sometimes glittering (but not typically). By glittering, I mean they live what most would consider a high consumption lifestyle. The caveat is that these people have already built their fortunes, so they are really frugal by most people standards. For example, if you purchase a $75-100K car every year but are worth $15 million, you can afford the car regardless if others deem your spending as wasteful.
The biggest caution is the high income earners with low net worth (income statement affluent). These guys earn a lot but most of their income goes to subsidize their lifestyle. Accordingly, they are not rich and will never be rich. Their toys are a way too large part of their financial world.
In terms of experiencing purchasing versus material possessions, I certainly get your rationale. About 6 years ago, I worked with a very high income professional who felt the same way. For me, this is about balance too. If I really want a material possession and it fits reasonably in my budget, then there not much of an issue. However, what if I also want to spend on a social experience and funds are limited for whatever reason. Then, my decision is based on which one brings me the most value. If the new thrill of that ipad will wear off long before the the thrill of a trip to Jamaica, then I'll rather go to Jamaica. However, because I am frugal, I can care less about showing off to others. I have nothing to prove, value financial independence over approval of my peers, and most people are broke anyway. 🙂 That's because I know that most people can only afford their toys by hyperconsuming. It's just a statistical fact that very few people can spend like the rich and be rich at the same time, so I am not impressed very much.
One caveat is I absolutely love watch people enjoy their money after they really have some. Thus, if you are financially successful and enjoy your money, then you do have my admiration.
Sorry for such a long-winded response. Thanks for reading, being a subscriber, and commenting. Kind regards,
Shawn
Thanks for the reply! I really appreciate you taking the time to get back to me with such a detailed answer. I read everything you write here, so I know exactly what you mean when you refer to people who overspend and act rich instead of being rich. While I don't feel I've taken it too far, I also understand that *anyone* can take it too far and make themselves broke, no matter how much money they started out with.
What I've done to make sure my behavior isn't financially harmful is to turn my attention to my business projects. Rather than owning the most expensive car, I'll try to make an apartment building as luxurious and well liked as possible. I'm about to start the process over again on a new building in another month or two, so I'm excited to see how it goes. The last one went really well, but only because I knew when to stop.
Hey Jon,
I highly value comments, so I thank you for sharing your thoughts and experiences. I think your real-estate business sounds pretty interesting. There are so many opinions in real estate on which market is the most profitable and easy to manage. For example, some landlords hate to deal with a "high end" renter because he or she may have "too many demands." Other people may find him to be "better educated and more apt to take care of the home."
In your situation, it sounds like you have the best of both worlds though. You get to experience nice things as part of your business. That's a win-win.
Kind Regards,
Shawn
Hello! Amanda here from Yakezie Frugal Confessions. Great post–I like the phrase calculated consumption.
Hey Amanda,
I agree, calculated consumption does sound a lot more palatable.
Thanks for stopping by and the comment
Extreme frugality is definitely not for me. I enjoy life too much!
The problem also is my income. I would probably enjoy frugality more if I made less money.
I just like to save. It's a fun game.
My recent post The 300 Million Dollar “A” Yacht Owned By A Russian Billionaire
My husband would be so jealous that you won a flat screen at bestbuy…congrats.
I am in the middle. I am frugal about a lot of things, but it gives us wiggle room to go on nice vacations, save for retirement, and eat good food. I guess we practice 'calculated consumption', I just never thought of it that way.
My recent post Cantaloupe Salsa
Hey Krista,
Thanks for stopping by and the comment. Yeah, the TV completely shocked me, so unexpected!!!!
Yeah, I have been getting a lot of feedback regarding that calculated consumption piece. Because frugality gets such a bad name, I think it gets rid of the negative stigma associated with it. Kind Regards,
Shawn
My recent post Is Extreme Frugality For You
[…] our desire for them is satiated, and the “high” dissipates. This phenomena is known as hedonistic adaptation, which is when the joy and excitement obtained from purchases diminish with time. Once it loses its […]
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