Yes, Frugality is Only for the Rich


The Difference Between Absolute and Relative Frugality

Let’s imagine two families that each spend $46,000 a year. If that family makes $46k/year, they are a cautionary tale. But if that family makes, say $250k/year, they are paraded around as frugal experts.

This is basically how I read the uproar about the Frugalwoods, i.e. the latter couple. There was an article critiquing them because their situation is unrealistic to most people. Then there were critiques of that critique, stating that frugality was for everyone.

These latter articles made it seem like the lower and middle class should aspire to the “extreme frugal” habits of the Frugalwoods.  One article even says the Frugalwoods should be applauded because “they’ve exhibited a level of self-restraint and stick-to-itiveness that the rest of us can only dream of.” I mean, I guess the rich can only dream of it. The lower income and middle class live this reality every single day.

Why Do we Celebrate the Rich for Something that the Middle Class Do Every Day?

Consider that 50% of U.S. households earn $50k or less, representing 70% of the population. Captain Obvious says, that’s the vast majority of people in this country. Some of these households are going into debt, sure, but if we assume 50% of this group is living below or at their means, that’s 44 million households (34% of all U.S. households) living on less than what the Frugalwoods spend per year (assuming $50k after taxes is around $40k. Some commenters have stated the Frugalwoods are living on a bit less than $46k but it’s still around this figure).

If frugality were actually about living on less, then these 44 million households should be as equally vaunted as those making more. But living off <$46k when you’re making <$46k is stressful. No one wants to follow advice on how to be struggling, even if the actual budget would be the same. What’s better is living a bucolic Instagrammable lifestyle where one can talk about minimalism and having “more time for the things that matter” on $46k. The only people who can live that life are the rich.  

I love love love this comment by Dr. McFrugal:
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On Reddit, this sentiment is echoed:
Being frugal really starts to apply when you make enough money that you could afford luxuries, but you turn them down to save money. That’s frugality. The college kid who is eating Ramen every day because he doesn’t have a choice – that’s not frugality, that’s survival mode.

Frugality is only for the rich because the poor and middle class are just surviving.

I have nothing against the Frugalwoods. It’s not their fault that they’re celebrated for something that millions of other people are forced to do. It’s like a couple that’s celebrated by living on $12/day traveling to another part of the world, even though the general populace lives on $2/day. It’s like an able-bodied person using a wheelchair for a day, and being average at it, and everyone saying, hey people in wheelchairs, look and learn from this guy.

It’s not the couple’s fault that they’re feted. The problem lies in the lack of understanding of what is normal for the majority. There are millions of families with even lower than “extreme frugality” budgets, but it’s the rich people with higher budgets who are getting celebrated. That means it’s not the budget that is celebrated but the income and the percentage. Lower and middle incomes may win on absolute spending but if you define frugality as percentage saved, the rich will always win. 

This is not to say that the lower or middle class should give up hope and spend willy-nilly.  Saving money is obviously good and should be encouraged even if you don’t get a book deal. What I’m really critiquing is the critiques of the critique.  If “extremely frugal” people like the Frugalwoods are spending more in absolute terms than lower and middle income people, then the lower and middle income people are just as frugal. At some point,  you hit the threshold for how little money one can spend. If well-educated, book-selling, rich “extreme frugal” people are spending more than you, even with all the advantages that the rich have for saving money (like better rates because they can pay for their house in cash) than maybe the 44 million households making it work on less have hit the absolute limit. Let’s not chastise them regarding “learning frugal habits” just because their savings percentages are low. The savings are low because of lack of income, not lack of frugality.

We also need to question why we inexplicably praise rich people for doing the same thing as the middle class as if that’s a huge hardship for them. We have impossible, standards for the lower and middle class and very low standards for the rich. This is unfair. There are a few takeaways I get from this situation.

1. Let’s stop pretending rich people have all the answers.

I know someone might say, well saving a lot of money on a high income is more difficult than living paycheck to paycheck on that same income. I don’t even know if I need to explain this but here are 4 reasons why being rich is easier than being poor:
  • There’s a lot of comfort from the idea that you can just solve problems with money if you want to/have to. You can’t do that if you are lower income.
  • There’s comfort in knowing that saving money can produce tangible results soon. If you’re rich, you can live like a pauper and possibly retire in a few years. If you’re poor, living like a pauper means you can retire in 45 years. It’s the difference between sprinting for 500m and sprinting a marathon.
  • Being rich makes saving money easier. I got a coupon in the mail for a free meal at a new fast casual place that opened up. That would never happen if I didn’t live in a fancy area where people can be expected to come back for paying meals in the future. Living in a rich area means you’re treated better and have better perks. And don’t tell me “avoiding lifestyle inflation is hard.” No, figuring out if you can afford rent next month is hard. Not buying new things when your old things are getting faded is easy.
  • Being rich means you can screw the poor. My friend told me that when he was a kid, his mom paid way too much for a beater because she had bad credit. If I wanted that beater (this never would have happened because I was 10 at the time, but let’s say this happened today), the dealer would have offered it to me for less because I have excellent credit and could pay cash. Not only would I have gotten a better deal on that car, but if I had gotten that car, which was just one option for me, she would have been screwed. That was the only car available for her. Being rich means you have all the options that the poor have and also the options of the middle and upper classes. Being poor means you hope the rich don’t take your options in their quest for frugality.

So yes, being rich makes everything easier. Don’t let anyone tell you differently. It’s more impressive to live on a lower income if you’re lower income. It’s easy being rich.

2. Everyone should first seek to understand.

I’m weirded out by bloggers who talk about “nonfrugal” people as if they are some single entity that is obsessed with conspicuous consumption. Some people are like that, for sure. But others are making all the right choices and are constrained by their circumstances. Others are making most of the right choices. Others are recovering from some of the wrong choices. Some people just make different choices.

And most people suffer from the simple malady of not being rich.

The middle and lower class have tips and tricks that the rich can’t even comprehend and it’s a bit sad that they’re underrepresented in personal finance blogs.  Poorerthanyou started a group highlighting articles geared for lower or middle income folks but it shouldn’t just be people with lower incomes that read it. Everyone should read this. Personal finance shouldn’t be about lower income people needing to learn from higher income people –  everyone should be learning from everyone else.



18 thoughts on “Yes, Frugality is Only for the Rich

  1. What a well written post!
    Did you ever read the book Stuff White People Like? Really funny take on what Americans are into. I think if that book was published today, playing poor would be at the top of the list. 🙂

    1. No, but I used to read You know you’re Asian when….lists. It helped me realize what things were uniquely Asian so I wouldn’t weird out my nonAsian friends. I’ll have to check that book out too!

  2. I think the Frugalwoods are semi-unfairly critiqued because they live in the Boston region. Their total yearly spending was somewhere between 36-46,000 dollars, of which 26,000 or more is housing. 55-70% of their total spending is on housing. This is an insanely high percentage.

    Excluding housing, the Frugalwoods entire budget was 10-20,000 a year. If they paid the median rent in the US of about 1,000/month circa 2015, their total budget is between 22-32,000/year. Given that a household making 54,000 is going to take home about 41,500 a year, the Frugalwoods would be saving about 10-20,000 dollars every year, or 24-48% of their income.

    This is about 4 to 8 times HIGHER than the savings rate of the median US household which sits at 5.7%.

    If we used Boston median household incomes (~83,000/year) as our reference point, and the Frugalwoods actual housing, they’re still saving 22-40% of their income, still way higher than everyone else.

    I’m not disagreeing with the premise that frugality is way easier for high earners because, yeah, the worst case scenario is a lower savings rate not actual catastrophe. And yeah, frugality isn’t really an option so much as a way of life for people anywhere near the poverty line. No disagreements there.

    But I do think frugality is both critical and incredibly productive once you’re making the median household income. Freeing up an extra 5-10% is generally do-able on the median household income, and that extra 5-10% very easily becomes a million dollars over the course of a working career when invested.

    1. I’m not saying frugality is easier for high earners; I’m saying it’s ONLY recognized in high earners. For instance, your comment only notes savings rates – not absolute costs. Using savings rates instead of absolute costs is always going to make high earners look amazing even when they’re living similar lifestyles.

      If you’re that excited about the Frugalwoods, then I can only assume you’ll be more impressed when you meet people who live on even lower salaries in higher COL areas and have real expenses like childcare, student loans, health care, and elder care.

      1. I’m sorry if my comment made it seem like I disagree with your post really strongly. I get semi-defensive about critiques about the Frugalwoods because I’m in a fairly similar situation in terms of location, income, etc, so those critiques hit close to home.

        I agree, 100%, with the idea that being frugal isn’t a choice, it’s a lifestyle necessity (aka struggling to make ends meet) for A LOT off people make less than the median wage.

        I agree 100% with the fact that frugality is only recognized and praised in the rich because the media, and bloggers, generally want a feel good story rather than a story of struggle. I would love more voices in the PF community from people making less money than the average PF blogger because, as you say, we all have a lot to learn from each other.

        I think my disagreement stems from who gets called “rich” and thus who can “choose” to practice frugality. I think I might define “rich” more broadly to include the median household income and up in most cases.

        Part of this stems from the fact that for five years of my life I made 25,000/year in a weird bubble called graduate school. Which, for a family with kids would’ve been devastatingly poor, but for a single person in that city was actually very doable. Especially since I knew it was by default a temporary stay at 25,000 and never really adopted a poverty mindset like you’ve talked about in your previous posts.

        Following my cohort of graduate students who all made the same salary, I think it is fair to say that frugality is an option and a choice even at 25,000/year if you’re single, kid-free, young, and healthy. Caveats which obviously don’t apply to everyone making those wages. During that time I saved about 500 a month. Other people saved closer to a thousand every month. Some people barely stayed above water while others consistently went into worse and worse debt each month. From my personal experience, 25,000/year in some cities is “rich enough” so that you can practice frugality, whereas 25,000/year in a different city (Boston) is now poor enough that frugality is no longer an option and just surviving becomes your daily focus.

        And I’m not claiming being a graduate student is equivalent to what you’re talking about here: That poor people don’t get to practice frugality, they’re forced to just make ends meet by any means necessary. Graduate students are by default college graduates with better career options available to them. In a way, graduate school is its own little microcosm of poverty tourism.

        Also, sorry for the pair of long comments, this is obviously a pretty thought provoking post so thank you for helping me work through some of my thoughts and feelings on the topic.

      2. Ha it’s totally ok if you disagree with me. A lot of my posts are just hypotheses.

        I’m interested in why you get semi-defensive about frugality critiques. I’m sure you’re mindful with your money and even if I wasn’t sure, why would it matter to you what I or any random internet stranger thinks?

        When I was starting out, I felt a lot of stress because earning a lot of money was not what I thought it would be. I thought, at my income, that I would have a lavish lifestyle and that didn’t turn out to be the case in a HCOL area with student loan debt. So I get the idea that it’s not that easy to be a rich person, that it’s not as easy to save as it seems – I get it to an extent. It’s still way easier than being a lower or middle class person. I’ve done that too – living on $20k in DC. It was fine but there wasn’t a lot of wiggle room.

  3. Thanks for the mention! And excellent post! It’s totally true that only the rich can be frugal. How can you live far below your means when those means sadly don’t amount to much. There’s only so much you can do. And I agree with all four of your reasons why being rich is so much easier than being poor. It’s unfortunate that once a person is in poverty, he/she is stuck in that culture of poverty and it is very difficult to climb out of it. Upward social and financial mobility is becoming harder these days. The income inequality gap between the ultra-rich and the poor is widening. It’s unfair and something should be done to make it more just.

    I would classify myself as frugal rich and I (and others) need to be more sensitive to the situation of others less fortunate. Just like you said, I think we can all learn from each other.

    When you said:
    “What’s better is living a bucolic Instagrammable lifestyle where one can talk about minimalism and having “more time for the things that matter” on $46k”

    I think a lot of PF/minimalist/fashion/travel bloggers are guilty of portraying this instagrammable lifestyle. I might be guilty of this too…

    1. I’ve seen your pantry and your food pics so I can attest that your life seems pretty sweet.

      Thanks for the excellent tweet that helped inspire the post!

    1. Exactly. I think we need to recognize both absolute and relative frugality as valid forms of frugality.

    2. I disagree Doc, as I do with pretty much everything in this blog post. There is only relative frugality. There are billions of people around the world that would be saying, “Only live on $X a year, cry me a river…” no matter how low your X is. It is all relative.

      This is what offends me most, “Frugality is only for the rich because the poor and middle class are just surviving.” This is not only absolutely (and relatively) wrong, it is evil. This kind thinking is probably the sole reason the poor and middle class will never get ahead in life, and will often remain one paycheck away from ruin, no matter what their income level! This is so evil, I can envision a master saying it to a slave! “You can’t make it on your own….” This is equally enslaving.

      Many of the people in my working class neighborhood have more vehicles than adults living in each house. All newer; most large and expensive; bought new. Most have HD TVs in multiple rooms, including the garage. All have a newer smart phones or tablets, including all children age five and above. Those living on $24,000 a year and couples making over $150,000 are equally, “just getting by”. The higher income just have bigger, better, and more adult toys. Most save little or nothing. If many didn’t still have pensions they would have nothing for their retirement except social security. All are choices they made, not “just surviving.” A relative few have made other choices.

      I’ll believe people are “just surviving” when I don’t see people at the store where my wife works making a few dollars above minimum wage lining up at the vending machine every single day to spend $2 a soda when the grocery store 40 feet away sells boxes of 12 for $4. Many buy lunch at the very expensive vendors next door, while the grocery story deli has a good selection at fairly reasonable prices. They could, of course, bring even cheaper lunches from home. I’ve asked many of them if they contribute to their company 401K, which gives a 100% match on the first 5%. All said they can’t afford to. They spend every dime they make. If they have a little extra at the end of the month, its off to the nearby Indian casino… I don’t see evidence of other decision making being any better. Actually, only a few of the managers contributed at all to their 401K and that at just the 5%. From what I could determine, only my wife and the store manager enroll in the ESPP which buys every quarter with a 15% discount. Choices….

      Here’s my simple rule: If you save 10% of your gross income you will be pretty well off by around 65 years old. If you save twice that much, or more, you are frugal. If you can save 50% of your gross income, you are either high income or extreme-frugal. The more you save, the earlier you could retire.

      1. I think you missed the point in that article that everyone should still save. I’m certainly not saying that families making $150k can’t save.

        You seem to be judging these people quite a bit. Why do you care so much?

  4. Bull pucky.

    Yes, I’m one of the frugal rich. But I’ve helped my bipolar sister-in-law with her budget every two weeks for the past 3 years, and her pay is a grand total of $1800 a month. So I understand the nitty gritty of being frugal poor because I’ve helped her plan and balance a budget with that income. Yes, it’s impossible for her to save 50% of her take home, but frugality isn’t defined by your savings rate, it’s defined by your behavior with your money.

    What she doesn’t do is cop out that “she’s tired” so she’s just going to run through McDonalds, and overspend while eating poorly, causing her to gain weight and feel bad in a vicious cycle. She plans her grocery budget, buys well and eats at home (generally salads and a protein – she eats better than I do.)

    Sure her 6 month emergency fund took her longer than it did for my wife and I to save ours. But she has a 6 month emergency fund that she built on $1800 a month! And yes, her car replacement fund only grows about $150 a month, but she’ll be a long way towards buying a decent car when her current one finally dies. And hopefully the one after that she’ll be able to pay cash for. But she’ll always be driving un-stylish used cars, because that’s where the deals are.

    You know the difference? She’s clear on her consequences. When she overspends her restaurant budget and has to take the excess from her car replacement fund, she sees the cost, and it helps her stay on track the following month. She has a 12 year old car. She doesn’t have cable. The only reason she has a flat screen TV is that someone gave her one as a gift. She made $25 on her cash back credit card last month, which doesn’t seem like a lot to most of us but to her is a big deal.

    So you’re wrong – there are frugal poor. Acting like the poor have no ability to make decisions based on the resulting consequences just makes them helpless victims. I also mentor for BBBS, and the mom of my little once spent her entire $3000 income tax refund on a stay at a big downtown hotel with room service and everything “to see what it feels like”. She has zero belief that she could do anything with that money to make her life better, so she’d better spend it on something big that she’d remember.

    A lot of my life has been trying to help poor people, many of them friends and relatives. I’ve never been able to fix any of their problems with money – money was at best a band-aid. Giving them a sense of control, of hope, of progress is everything.

    1. I can see that probably half the readers aren’t going to understand this article. Of course there are people who are poor that are managing their money well – that’s the point of the article. There are many poor people who are managing their money just as well as the frugal rich so we should stop celebrating the frugal rich as if they have secrets that the frugal poor need to learn.

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