Recently, several readers sent me this interesting article from The Outline entitled . The article criticizes a handful of recent personal finance books, particularly one entitled , and seems to make the argument that frugal strategies only lead to strong financial success such as debt freedom or early retirement if you’re making a very large income or are already wealthy. Here’s one of the core arguments of the article:
“So the Frugalwoods appear to be doing pretty well for themselves. And if their story carries a whiff of déjà vu, that’s probably [because] it slots neatly into a classist myth that millions of adults in this country still believe: the story of the American Millennial.
It goes like this. The 2008 recession may have cratered the wages and employment prospects for people just entering the job market, but according to the myth of the American Millennial, the real problem young people have today is themselves. Nearly a decade after the crash, the mainstream media still seems hell-bent on portraying people born between 1982 and 2004 as a bunch of decadent and “fun-employed” narcissists who [waste] their parents’ money away on matcha green tea lattes, spend too much time Instagramming their pets, and are thus responsible for the economic rut they’re stuck in.
This myth — which scrubs millions of underprivileged Millennials from the picture — is crucial to understanding why the media is swooning over the Frugalwoods right now. What’s remarkable about them is how they’ve managed to offer the public a kind of Millennial redemption story: a tale of two Millennials taking the time and responsibility to learn about money, rein in their spending impulses, and achieve financial security. But how realistic is that narrative?
Not very. Millennials have been caricatured as affluent liberal-arts majors with no career plans, but the reality is most Millennials don’t even have a college degree. And last year, the advocacy group Young Invincibles used Federal Reserve data to determine that Millennials as a whole earn about 20 percent less than Baby Boomers did during their formative years, and amass roughly half the net wealth.
The Bureau of Labor Statistics puts the median weekly income for Millennials with a high school diploma at $692, which amounts to barely $36,000 for a full-time annual salary. Meanwhile, the minority of Millennials with associate’s and bachelor’s degrees earn median weekly incomes of $819 and $1,156, which respectively add up to $42,588 and $60,112 annually. That’s before their paychecks are flattened by rent, utilities, and exorbitant health insurance premiums and deductibles. And for the millions of Millennial freelancers toiling away in the “gig economy” — which is growing larger each year — benefits like 401K plans and employer-paid insurance slide further out of reach.
Then, of course, there’s student loan debt. According to the Federal Reserve, Millennials in their twenties carried an average debt of $22,135 last summer. This is one of the most integral metrics of the Millennial experience because of its implications for how much money a young person can save. A recent study by ApartmentList claims that the rarefied minority of debt-free Millennials are putting away twice as much money as their counterparts who are still paying off balances. This makes it easier to put a down payment on a house, build a portfolio, and — if you’re lucky — retire early, Frugalwoods-style.”
I have a ton of responses to all of this, so let’s break them down bit by bit, starting with my own background.
So Where Did ‘Money360’ Come From?
I grew up without much money, as I’ve alluded to many times on here. There were times when there was very little money growing up and there were aspects of my childhood that would probably shock many of you in terms of how well they matched the pop culture vision that people have of poverty. I never really thought of us as “poor,” but looking back, there were some very lean times and some elements of my childhood that really stand out. For example, I remember going on exactly two “family vacations” during the entirety of my childhood, and both were three days or less and were in states adjacent to where I grew up.
My father was a bit of a jack of all trades and always had some kind of side business going on to make sure we had food on the table because his main employer was less than reliable and often laid off employees for extended periods before hiring them back. (He finally escaped that cycle by cleverly steering himself into a crucial job, but by then I had already left home.)
I went off to college in the late 1990s, the first person in my family to do so. I was aided by scholarships, but still incurred a fair amount of student debt during my studies. Honestly, I was like a fish out of water in college, especially at first. I knew no one there, as there was literally no one in my home county that was attending college alongside me, and I really struggled to fit in where virtually everyone else was from a substantially more affluent background than me.
It turns out that I had learned a lot from his “jack of all trades” attitude. I started in on that from almost the first day I was at college, as I jumped in to help fix a wiring problem in a public computer lab on campus which led directly to a job managing that lab (I was studying genetics at the time and the lab I was using serviced a lot of genetics students). This led to getting to know a lot of professors and a few odd jobs in various research labs until I really found a nice home in one particular lab that was combining genetics and computer science in interesting ways.
That job ended up landing me several summer internships and, eventually, a promising job after college. It offered some spectacular opportunities for growth, but it didn’t pay a whole lot and was on an annual contract basis. This was during the early 2000s job market downturn, so I was happy to get it.
I got married shortly after that, and in 2006, after lots of side hustles and a few job switches, I launched Money360. It didn’t make much money at first – it took a few years before any real income came in. By the time I was earning any real income from the site, we had paid off all of our debts from our work income.
That entire process of paying off all of our credit cards, student loans, and auto loans was done on a household income of substantially less than $100,000 a year. I don’t know what the national average household income was in that timeframe, but we were pretty close to it.
We pulled it off by being extremely tight with our spending and making a number of tough choices. We found that as we were knocking down debts, it became easier to pay off the next one – the classic debt snowball – and we found a lot of nice little tactics along the way. I wanted to write about it and share it with my friends, so I started Money360 on a whim. I had tried blogging in the past and it never really took off. Money360 did, though it took a little while for it to start humming.
By the time 2008 rolled around, I had to make a decision. I was burning the candle at both ends trying to keep up with Money360 and with my career. Sarah and I sat down, looked at our financial state at that moment, looked at some of my career challenges, looked at the potential of Money360, and decided that the right move was for me to try to do it full-time for a while.
To that point, I had never made $100,000 in a year before. It’s not as if the site made us wealthy; in fact, it mostly just ended up replacing my salary from my other job (though with a very painful salary hit at first).
Over the next few years, I did all I could building the site into something that would sustain for a while. This involved hiring a few people to help out with technical aspects and backend administration for the site while I focused mostly on writing, but I found that as time went on, I was spending so much time managing people and putting out fires and still trying to keep up with writing that I wasn’t enjoying it any more and I was literally burning out with all of the invested hours. As a result, I sold the site in late 2011 and signed a very long-term agreement to remain as the primary writer so that I could focus more on writing and on being available to take care of some ongoing family issues and medical care.
During this entire process, our household annual income bumped above $100,000 twice, and both times it was well after our consumer debt had been paid off thanks to frugality. Almost every year during all of this, our household income was fairly close to the national average. The reality is that you don’t get rich from blogging without having a pretty sizable marketing team working with you – and you never really could. There are always a few exceptions, of course, but even those are rare ones.
I started Money360 because I love to write, and I managed to build the site to the point where ad support could enable me to have a semi-healthy income, one that was sustainable due to our relatively low-spending life. That’s why I still write here – I love writing this stuff, learning and trying new things, and reading reader comments and interacting with readers.
I 100% guarantee you I would be making a bigger income if I had stuck with my previous field. I know people that stuck with it and… yeah, they’re making more than I am. I chose Money360 because I love writing this stuff, our frugal practices enable us to make ends meet, and it affords me a great deal of time flexibility which has helped greatly with having three young children (I get to be here when they get off the bus each day) and also having a few background life issues (not really relevant to the site) that required a lot of extra time and attention.
Trust me – if I were in this for the money, I wouldn’t be writing this article. I’d be in my previous career path, crunching numbers somewhere and making a much nicer paycheck. However, I’m doubtful that I would enjoy it as much, and there would be a very different set of demands on my time.
The Average American and Frugality
My belief is that the reason Money360 became popular is because, in a lot of ways, Sarah and I are the average American family. We aren’t wealthy and never have been. Neither one of us came from wealthy families; I’d describe Sarah’s as middle class and I described mine above. Neither one of us makes a mountain of money – in fact, some of our choices intentionally turned us away from making as much as we could. Sarah and I have joked that we both made career and life choices that really hurt our income potential over the years, and it’s absolutely true.
Our average annual household income since Sarah and I graduated has been a little higher than the American average, but not stupendously so. We don’t live in a high tax bracket, and we have three children to take care of. We didn’t get rich because of Money360 – in a lot of ways, it’s just a pretty normal job, with some perks and some challenges. We’re pretty typical.
Given all of that, we’re both in our thirties. We have zero debt. We fully own both of our vehicles, a 2009 Prius and a 2014 Sienna. We fully own our home. We have no student debt, no credit card debt, and no consumer debt. We are well above the pace we would need to be at to have a healthy retirement at age 65, and we’re actually anticipating retiring much earlier than that, perhaps when our youngest child leaves home, though we understand that a lot of things can change along the way. We’ve done this all with three kids in tow on what amounts to little more than the average American household income.
How did we do it? I strongly attribute frugal living to the financial success we’ve found along the way. I think that simply getting a grip on our spending and learning how to make spending decisions that get us most of the value we want in life for a much smaller portion of the price is the biggest reason we’ve found this success. We could have achieved similar success with a strong career focus, but other aspects of our life led us to chose a path where our careers aren’t going to provide us with a lot of wealth, so we found it in being frugal.
I am firmly of the belief that most of the frugal strategies we use will help families and individuals at almost every income level, though I fully understand that they begin to be less helpful when you start to approach the poverty line, and that’s a topic that I directly address from time to time in articles like this and this.
A bit of an aside: From my own life experience, part of the challenge is that, when you don’t have much money, frugality is essentially forced upon you. You often don’t have an option – you have to be super-creative with every dollar or else you don’t eat. Being in that situation for a long period of time alters one’s relationship with money; it’s often not seen as a resource to help build one’s future, but something that needs to be spent now before it disappears because it will disappear. Rather than building a foundation, you’re running from fire to fire in your life, seemingly everything slurps away what little money you have, and you sometimes find yourself spending a little in a foolish way just to feel like there’s something more to your life than crisis mode and you have some sense of control over things. Everything feels beyond your control, and that can be quite scary and it can definitely alter your attitudes toward money. Because of that, I think that people in this position, where everything is in crisis mode, often roll their eyes at the financial advice of people for whom frugality is a choice. That’s an attitude I understand in a very fundamental and personal way.
This touches upon a very important point: For most Americans, frugality is a choice. The average American income does afford a pretty wide range of options about how to live one’s life – even incomes notably below that level still offer a range of choices. You can afford to buy Tide, or the store brand laundry soap, or you can make your own – you have a choice. You can decide which is the right option for you. When money gets tight, that choice gets somewhat wrenched out of your hand – if you buy Tide, you’re probably eating something utterly dirt cheap for supper tonight, for example, or you’re possibly even going without supper. What if your kid needs an instrument for his or her band class? Everything gets super tight and the choices become few and difficult.
This is where I believe the idea of “frugality is for the rich” is based. Many Americans find themselves in a position where some of the choices they’d like to have control over are wrenched out of their hands by financial demands. They’re sitting on huge student loans and by simply making the minimum payments, they’re not left with a whole lot. Once you start covering things like basic utilities, rent, basic food, and transportation to get to a job, even with a pretty decent income, there’s not much left on the vine.
For people in that boat – and it’s the boat that a lot of people my age and younger, down to college age, find themselves in – the choice isn’t between laundry soap and supper, but the choice often comes down to choosing one or two lifestyle choices out of the 10 that they see their friends and peers enjoying, and it doesn’t feel very good.
If you compare the hand that most millennials have been dealt compared to their grandparents (and even their parents) at the same age, it’s not a very good hand, and it’s not one that’s fun to be playing in the game of life. They’re often pushed into having to make frugal decisions and life calls that their parents and grandparents never had to make.
And, as I said above, frugality is often perceived to be about actually having a choice in the matter; when it’s forced on you, it’s not empowering and it just helps you to survive, not to get ahead.
Frugality and Choice
My perspective, having lived near the poverty line and near the average American income and, at times, a little above it, is that sometimes frugality is a choice and sometimes it isn’t, but knowing how to do it well is helpful in both situations.
I don’t have a magic answer to the situation that many Americans find themselves in, where they simply don’t have the resources or the opportunities that previous generations have. That’s a broader economic and political question that’s outside the scope of Money360.
All I can say is this: a lot of the best strategies I’ve used to help myself stay afloat and get ahead in life worked (in some form) whether I was dirt poor or doing well. The big difference was in the results – sometimes it was needed to keep us afloat; other times it was useful to help us get ahead.
The core skillset and mindset of getting the most bang for the buck for everything and knowing how to cut corners has been helpful whether or not we were struggling to survive until the next paycheck or we were trying to stretch a moderate income to cover a lot of bills or we were trying to overcome a big pile of debt on a decent income or we were leveraging ourselves toward complete financial independence and early income on a debt-free life with a solid income. The same strategies worked.
My parents bought a lot of store brand items when I was a kid, when we didn’t have much money. I buy a lot of store brand items now and I can use that difference to make sure we don’t ever go back into debt and are able to contribute nicely to retirement. The strategy is the same, but the benefit is just being used differently.
When I was in college, part of my dirt-cheap diet was to eat rice out of a rice cooker with a fried egg chopped up in it and some soy sauce on top for a super cheap regular supper. Knowing I could eat a reasonably healthy supper for a couple of dimes made it easier to keep making ends meet. Do you want to guess what we had for supper last night? Yep, rice with a fried egg (and some sautéed vegetables) chopped up in it, with some soy sauce on top. We’ll feed the whole family for a dollar while eating fairly nutritious food, and the extra money helps us with the myriad of expenses of having three kids. Again, the strategy is the same, but the benefit is being used differently.
I could go on and on with examples like this.
Now, as I mentioned earlier, this is a lot less fun when you’re forced into strategies like this due to a lack of income. Here’s the thing, though: If you stick with these strategies, they do give you some semblance of a light at the end of the tunnel. It might be far off, but it’s there. If you spend every dime you bring in every paycheck, there is no light at the end of the tunnel. If you figure out how to set aside a few bucks every paycheck by figuring out just a few more tricks, and then you do something smart with those few bucks like building an emergency fund or making an extra debt payment, there’s a little light at the end of the tunnel, even if it’s far off.
Does that solve the broader problems facing people in financial crunches today? Of course it doesn’t. I’m not going to pretend that frugal tactics are a magical wand that fixes all financial problems in individual lives or in society. It’s not.
Instead, think of frugality as a basic tool. It’s a claw hammer or a flat screwdriver. It’s something that can be used in a lot of different situations. Sure, some people will have much better tools for some jobs, but the reality is that frugality is an effective tool in a lot of situations. Like a flat-head screwdriver can open a bucket of paint or repair a bike or install a thermostat, frugality can step up whether you’re struggling to afford a basic grocery list or you’re just trying to figure out how to take the edge off of your $200,000 a year lifestyle.
In both cases, the principle is the same. You stop, look at a situation, and ask yourself if there is a way to get similar results or most of the results at a much cheaper price than what you initially thought. It always helps, even if you’re pushed up against the wall and the number of choices available to you is pretty small. You can always stop for a moment and look at the situation a little more carefully, and that’s really the heart of frugality.
So, in the sense that “frugality” means “choosing one of the less expensive options when you have twenty choices,” sure, frugality is for the rich. But in the broader sense, where “frugality” simply means “looking at a situation for more than just a second’s glance and finding the most value for the penny,” frugality always helps.
Still, it is just a tool. A flat head screwdriver is useful in a lot of situations, but it doesn’t solve all of your problems. Personal finance really is a toolbox, of which frugality is a useful and well-worn option that I often grab, but it’s far from the only tool. Psychology. Social networks and friendships. Self-learning. Self-control. Discipline. Hard work. Self confidence. They’re all in the tool box, and all together, that tool box can solve a lot of problems.
Don’t ever let yourself think that your personal finance issues can’t be helped by frugality, or that frugality is for the rich. Frugality is only for the rich in the sense that a flat head screwdriver is only for opening paint cans; sure, it does have that use, but it’s far more than that. At the same time, don’t ever believe that all you need is frugality. It is a helpful tool, no more, no less. Use it to help yourself up a little, but don’t expect it to fix everything. You’ve got to use other tools as well, and different people in different situations are going to need different tools. Stick around, and we’ll talk about them.