What is frugalism? How pinching pennies could help you retire early (From The Daily Digest)
~ Wednesday, March 15, 2023 Blog Post ~
Story by Zeleb.es • March 15, 2023
Frugalism — A New Lifestyle?
Frugalism describes a special way of life to which the so-called “frugalists” are committed. The goal: save as much money as possible and then never have to depend on wage labor again as soon as possible — like Lars Hattwig.
Never work again in your mid-40s
The German Lars Hattwig has made it: The 47-year-old has not been dependent on a salary for several years. However, he had previously lived extremely sparingly as a frugalist.
What does the term frugalism mean?
The term “frugalism” comes from the English word frugal, which means your are thrifty and sparing with your spending.
What is frugalism?
Frugalism can be described as a lifestyle. The goal is to live so frugally that one has enough savings as early as possible so that you can live on these savings until the end of one’s life and thus no longer depend on working to live. People who implement this lifestyle are called frugalists.
Where does the lifestyle of frugalism come from?
Frugalism as a lifestyle is still a recent phenomenon. The term frugalism originated in the USA after the economic crisis about ten years ago. However, being frugal certainly isn’t anything new, but doing so to retire early is a newer trend.
Holding on to their money
According to Stern, the Institute for Trend and Future Research in Heidelberg says: “Americans are finding that many compatriots still have to be very conscious of keeping their money together.”
The pandemic made people thriftier
According to the trend researchers, a new wave of frugality can also be seen in the context of the COVID-19 pandemic. Due to the difficult economic times during the pandemic, many people changed their consumption behavior and have become more frugal, as Forbes reports.
Frugalism and frugality
However, frugality cannot be equated with frugalism. Pure thrift lacks the plan underlying frugalism of achieving financial independence through savings. Thrift is thus an essential part of frugalism.
How much do frugalists save?
Frugalists aim to save between 50 and 80 percent of their income. So if someone was making $3000 a month, they would try to save at least $1.500 if not more each month.
Extreme economy
According to Stern magazine, Lars Hattwig achieved this high level of savings using very frugal methods, among other things: no travelling, no going out with friends, quitting smoking, using only a single burning lightbulb in his apartment and instructing visitors to flush the toilet as briefly as possible.
Living off the savings and the dividend
Frugalist Hattwig had set aside 70 percent of his income for several years and now lives off his savings and dividends. In addition, he works independently as a financial advisor — but not for financial reasons, but because he wants to.
Income above the subsistence level required
Hattwig had previously worked as a meteorologist. However, he also says that for a frugal lifestyle, an income above the subsistence level is necessary so that a sufficient proportion can be saved.
Just a small part of society
There are no figures on how many people lead frugal lives or have saved for their financial independence in this way. However, Hattwig estimates that this is only a small part of society.
Frugalism as a disease?
However, as a new trend, frugalism does not only have positive sides. According to the American Psychiatric Association (APA), the US professional association of psychiatrists, extreme saving can also be a symptom of an obsessive-compulsive personality disorder (OCD).
Compulsive or planned behavior
Not only the extreme spending of money, but also extreme money saving can be symptoms of a mental illness. However, it is relevant here whether the extreme saving is a compulsive behavior or whether it is a planned behavior. The latter is the case of frugalism with the goal of financial independence.
Retiring in her early 30s
According to The Guardian, the American Elizabeth Willard Thames made it there even earlier than the German Hattwig: she gave up her career in the city, retired at the age of 32 and now lives in a house in the countryside in Vermont, USA. However, not by accumulating wealth, but through a permanently frugal way of life.
Major lifestyle change
Willard Thames says: “In the beginning it was about saving money, but it was about much more than that. It became a major lifestyle change.”
No break from the frugal life
For Willard Thames and her family, however, this means that they will have to continue their frugal lifestyle in the future because, unlike Hattwig, they cannot fall back on the assets they have saved.
“Don’t tighten your belt”
For Hattwig, however, the permanent frugalism associated with frugalism is not a permanent concept of life: “At some point you get to the point where you can no longer tighten your belt.” Hattwig still lives frugally, but now also allows himself to travel or visit restaurants.
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