Habit 8: Frugal, Giving, & Humble from The “Habits for Well-Being” Series
Money makes the world go round. So they say. There is certainly some truth to that. But don’t be fooled into thinking that it’s all about having more, spending more, and definitely not about flaunting what you have.
Financial success is just as much about being frugal, giving away your money and time with humility, and recognizing how luck plays a role in your success. Finding the balance between earning, saving, and giving is a key element of our well-being.
I make no claims to being a financial expert. I am looking to both learn and share as I research to write this post. I want to remind myself of what I know I “should” be doing while also learning new tips and tricks to raising the bar in my financial planning and hopefully sharing helpful information with you.
Let’s learn together about ways to balance practicality with generosity so that we can all live our best lives.
(side note – as I researched for this post I was finally able to access OpenAI’s ChatGPT with some astounding responses and feedback. Throughout this post, you will find deeper detail linked in separate attachments that are attributed directly to ChatGPT. I believe this will give you an opportunity to dive deeper into any subtopic of interest without turning this into a book rather than a blog post. I must admit I was amazed and, might I say, proud of how much the AI response aligned with my writing. And YES, I wrote first and then ask ChatGPT. 🙂 )
Why Frugality is Key to Successful Financial Plans
Frugality does not mean finding your inner “Scrooge.” It doesn’t mean depriving yourself of joyful activities or even possessions even though minimizing possessions is certainly an opportunity to improve your well-being.
How many possessions did you “just have to have” that now sit idle in your closet or garage? Have you ever considered the opportunity costs of hanging on to those items both in space consumption, maintenance, and psyche drain from cluttered personal space?
Frugality is not about being a tight-fisted grouch, but rather it’s about maximizing the value of your hard-earned money. It’s a way to be more mindful and intentional in spending and planning for the future, considering both short and long-term goals. Within both those short and long-term goals I hope sharing your wealth with those less fortunate or a cause that is important to you is front and center.
Here are four key elements to implement frugality into a balanced lifestyle:
1 – Save For An Emergency (Emergency Fund)
This would actually come after you set a budget (discussed below) but I want to plant the seed in your mind upfront in this conversation. Nearly every source out there will say you should have at least 3-6 months’ worth of living expenses in an emergency fund – saving for economic hardships such as job loss or health issues impacting your income.
This can sound daunting. Just as Joysetting is about finding balance and focusing on the journey rather than the goal – saving is a journey, not a destination.
- Start small – shoot for one month to get started and build from there.
- Make regular contributions to your fund – Even if it’s only $5/week – build the habit and momentum and increase from there. I bet you can find something in your budget that can be eliminated and trimmed to be redirected into regular contributions to your Emergency Fund.
- Automate your contributions – Most banks offer an automated deposit from your checking into a savings account. Once you determine which item to eliminate and the amount to redirect then set up an auto-deposit either from your checking or directly from your payroll direct deposit.
- Don’t use credit to fund it! – Spending on a credit card so that you can put cash in this account is counterproductive. Have you looked at the interest charges you are paying on that card? I guarantee it is far greater than the interest you are receiving on the emergency fund if any at all. If you can’t pay your credit card balance off every month then you need to review your budget and adjust.
- Don’t over-save! – Stop at 6 months’ worth of living expenses in the Emergency Fund. By definition, this fund should be cash that you can access quickly in an emergency which most likely means you will have to store it in a low-yield account. If you are fortunate enough to build savings beyond the 6 months it should be placed in higher yielding accounts like your retirement account.
- Don’t spend it! – This is not saving for a new car or a new pair of shoes. This is only for emergencies! If you must – you can dip into it for that unexpected expenses outside your budget like a home or car repair after you have scrutinized if the repair is actually necessary or your Ego. If it’s your Ego, it should be funded from something other than your emergency fund.
2 – Set A Budget
“Expect what you Inspect.” or “Inspect what you Expect”
“Measure what Matters.”
“What gets Measured gets Done.”
“You get what you Measure.”
You have most likely heard them all before. Quite honestly, you could most likely catch me rolling my eyes internally or literally when someone says them. Not because they are wrong but because they are cliche very often overused and applied to create red tape vs. productive action.
But there is no denying that if you don’t measure your money it will disappear. Here is a favorite quote of mine that isn’t used as often I feel explains the “Why” behind budgeting perfectly.
There is tons of content out there on setting a personal budget (763 million google results) so I am not going to go into a ton of detail. The first step is to simply agree to do it and do it! Here is the simplest breakdown of the steps to get started.
- Step 1: Calculate Your Monthly Income
- Step 2: List Your Monthly Expenses
- Include what I like to call the “Nonsense bucket” – the stuff you probably shouldn’t spend money on each week but we all do it so plan for it. Sometimes we need a little nonsense in order to not become too rigid. This can be the first bucket you look to reduce in order to increase your savings.
- Step 3: Reduce Expenses (maybe some of that nonsense) and Assign Spending Targets
- Step 4: Make Savings Goals – starting with that Emergency Fund
- Step 5: Have Budget Review Sessions – schedule time every week to review your actual spending compared to the plan and course correct when things are not going to plan.
Even if you are fortunate enough to not have to worry about paying your bills each month you still need a budget or you are most likely not saving enough and even worse – not giving enough!
3 – Invest to Grow Your Wealth
I am not a financial advisor so I am not going to spend too much time on this. Hell, I am afraid to look at my 401K balance at the moment given all the turmoil in the markets but you simply need to save for the future. Stuffing money in your mattress is not going to grow that savings. The best thing you can do is find a financial advisor and ensure they are a fiduciary who has a duty to make investment recommendations that are in your best interest and not simply on the size of the commission they will make.
4 – Scrutinize Your Spending
Now that you can “describe what you are doing as a process” with your money and review that process and results in each week you will know where your money is going. Now you can start scrutinizing and challenging yourself to make better choices. Again, this is not about finding your inner scrooge or becoming so rigid that you suck the JOY out of your journey. We all enjoy a little “nonsense” in our lives. The key is knowing how much that NONSENSE is costing you. Do what works for you and brings you JOY. Here are a few things you can consider to shift some of that nonsense to better use:
- Pay down debt – The cost of interest is definitely NONSENSE in its own way.
- Sell or GIVE away things you don’t need
- Buy Used
- Shop around for Insurance
- Swap out your lightbulbs for LED-based bulbs
- Check out the Library – This is coming from a bookworm who loves filling his shelves with books. There are certainly a few that I read over and over and want handy but there are plenty that could have been checked out from the library and returned.
- Evaluate your Subscriptions – Do you really need every streaming service out there?
- Have date nights at home
- Buy in Bulk
- Travel Frugally
- Make gifts instead of buying
- Grow your own Vegetables
- Cut expensive Coffee
- Fitness at Home – eliminate that gym membership. You would be amazed at what you can do with a set of adjustable dumbbells and some resistance bands at home saving you time and money.
- Stop impulse buying – sleep on it before clicking that “buy button.”
- Empty that Storage Unit – Storage units are absolute NONSENSE!
Charitable Giving Helps Others and You!
I really hope you will consider making “Giving” a line on your budget. It is easy to think you first need to pay down your debt and finish that Emergency Fund before giving to others but what most don’t realize is how much giving back brings a wealth of benefits to their own well-being as well as that of others. Giving can provide numerous benefits to you. ChatGPT did a better job explaining this than my initial writing so here are the results.
MWG: What are the benefits of charitable giving to your well-being?
ChatGPT: Charitable giving can provide numerous benefits to one’s well-being, including:
- Increased happiness: Giving to others has been shown to increase happiness levels in the giver. This is due to the release of endorphins in the brain, which are associated with feelings of pleasure and satisfaction.
- Reduced stress: Charitable giving can also reduce stress levels. Studies have shown that people who give to charity experience lower levels of the stress hormone cortisol.
- Sense of purpose: Giving to a cause or organization can give individuals a sense of purpose and fulfillment. This can help combat feelings of emptiness or meaninglessness.
- Improved physical health: Giving to charity has also been linked to improved physical health. This is likely due to the fact that giving can reduce stress levels, which in turn can lead to better immune function and overall health.
- Increased social connections: Charitable giving can also increase social connections. When people give to a cause, they often become part of a community of like-minded individuals who share their values and goals.
Overall, charitable giving can have a positive impact on both mental and physical well-being. It can increase happiness, reduce stress, provide a sense of purpose, improve physical health, and help build social connections.
Humility and the Role Luck has played in Financial Well-Being
Financial success doesn’t come easy, and behind every successful individual is often a great deal of hard work and dedication. However, it’s important to acknowledge how much luck has also played a role in that success. It takes humility to recognize this fact and realize that the same opportunities may not have been afforded to everyone. Being humble enough to realize that you’ve had a certain amount of good luck can be incredibly liberating. With this realization comes gratitude for what you have and an increased focus on helping others get ahead as well. Be sure to simply “get over yourself” when comparing your status to others in either direction.
Finding balance in the Financial and Giving bucket of life requires discipline, generosity, and humility. Without any one of these three key elements, this area will go out of balance with undesirable impacts on your well-being as well as others.