Frugalism: Financial Freedom For Better Living

Frugalism is a response to consumerism. Frugalists fall under the F.I.R.E. Movement.

Frugalism is a response to consumerism. The idea is that happiness does not come from consumption. Frugalists advocate to live a simple and frugal life. Here is a look at frugalism as a strategy to achieve financial freedom for better living!

What Is Frugalism?

Frugalism rejects consumerism and the need always to buy the latest gadgets. Fruglaism advocates for a simpler life by leaving the hyper-connected modern world. It wants to solve mental health problems from working, which comes with money.

In short, simplicity is the virtue that frugalism advocates for. There is no reason to have lots of things. There is no reason to make life overly complicated. Frugalism breaks life down to the bare necessities.

Stop making everything too complicated. Discover the bare necessities of life with frugalism.

Fulfillment That Doesn’t Come From Consumption

Frugalists believe that contentment does not come from consumption. Fulfillment comes from knowing oneself, relationships with people, and the pursuit to better oneself.

These may be simple concepts. But in an age where people are focused on social media, following celebrities, or the latest new way to get rich quickly, frugalism advocates for a simple life is counter-cultural.

Frugalism And The FIRE Movement

Frugalism is an umbrella of the FIRE Movement. It is part of the FIRE Movement because many frugalists want to save enough money to retire by 40. A frugalist may be part of the FIRE Movement by saving money rather than spending it.

When combined with the FIRE Movement, a frugalist aims to save twenty-five times more than one spends annually. After achieving that threshold, a person can begin to invest money in the stock market. One of the final goals of the FIRE Movement is to live off of withdrawals from the stock market at a rate of roughly 4% a year for the rest of a person’s lifetime.

Problems With The FIRE Movement

A core problem with the FIRE Movement is that it says that a person can save enough money and then they can retire early.

Another problem with the FIRE Movement is that it is only possible to save so much money. High-yield savings accounts will still give a lower return rate than other investments. This is especially true if the Federal Reserve returns to a zero-interest rate policy (ZIRP). Interest rates are then kept at or close to zero with ZIRP. Only as long as saving rates stay relatively high, compared to ZIRP, can the FIRE Movement’s financial philosophy make some sense.

Another issue arises once a person reaches a certain financial threshold. The money is then better invested in financial assets. Financial assets such as the stock market, real estate, or business ownership can generate higher returns than just putting money away in a savings account.

High-yield savings accounts cannot beat the actual rate of inflation. A person who keeps their money in a savings account loses to inflation. And that is the biggest problem with the FIRE Movement.