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Redefining Frugality

Are rewards programs destroying your finances? All those points might be killing your budget and making you poorer. There is a better way. #rewards #miles #points #budget #travel #bonuses

Frugality has changed from a few decades ago.

Growing up in the backwoods of Nowhere, Wisconsin frugality was a necessity of life. Rural communities once had strong emotions started during the Great Depression. My grandmother spoke of having one egg per week (and we were farmers—the rest were sold) which the man of the house ate because he did more physical work and needed the strength.

We also heard stories of eating lard sandwiches and “learning to like it, too”, as Grandma Accountant used to put it. Things were hard in those days; harder than anything experienced in these parts by anyone under 100 years of age.

Frugality was an ingrained part of life. Debt was to be avoided like rabies. Old-timers knew it was impossible to survive either. A lot of good men met their end back in those days when things turned sour and the lessons were never forgotten.

Frugality was more than just not spending or bragging rights for a blogger. Spending on anything not an absolute necessity was akin to sin. And it was hard to look up at the cross on Sunday morning if you committed such an egregious sin.

Those days are long gone. Only a few with a long memory remember grandparents warning of the perils of frivolous spending.

It was easy to define frugality in those days. Frugality meant saving a very large percentage of your income and sacrificing at least some necessities. Frugality also meant industriousness. Flaunting of wealth was as bad or worse than foolish spending and nobody wants to be the fool.

The lines have blurred in the last decade. Frugality is easier because it is easier to game the system. We even brag about it—a social crime in the not so distant past.

Now we can travel the world on someone else’s dime and still claim the trophy of frugalism. Websites and blogs abound in strategies to shift your spending to another’s financial statement. Gaming credit cards is all the rage. And credit cards are not the only game. There are so many moving parts in the financial system now you can drive a truck through it without hitting a frugality checkpoint.

But is this really frugal? Not by any definition from the past. Our grandparents would not consider the current state of affairs frugal. They would actually be appalled at modern behavior passing as financially responsible behavior.

With new rules and a new world order it is time for a better definition of frugality. It is unacceptable to claim current spend thrifty behavior as actually frugal behavior. This has always led to disaster in the past and there are no indications the laws of economics have changed.

So today we will attempt to redefine frugality for a modern world with options to game true frugal living.

Measuring Frugality

The problem stems from what we measure. In the past we measured frugality by spending levels, or better yet, by the savings rate. In the backwoods it was common to see 50% savings rates and higher, emphasis on “was”. People just did not spend what they earned.

Money is no longer an accurate gauge of frugal behavior. A few quick financial maneuvers can provide points from whatever source good for cash, prizes and/or travel. The tax-free cash doesn’t count as spending in most people’s minds. That is an unfortunate belief to have.

Travel is the worst offender. Free and semi-free travel is all the rage. It has even affected business and first-class travel as so many can now achieve such levels at very low cost. First-class isn’t what it used to be according to what I have read.

The damage to the environment is all the same. The climate doesn’t care if you think you are frugal as you dump a few more tons (or tonnes for my non-American readers) of carbon into the atmosphere without personal financial cost because you cashed in some points. Earth thinks you still did the spending; Earth thinks you are less than frugal regardless what you exclude from your budget.

Redefining frugality in a world or rewards points, bonuses and free handouts. All that unrecorded consumption affects the planet and environment while exposing your finances to new risks. #risks #finances# #frugal #frugality #spending #rewards #rewardsprograms Measuring “earned income spending” is not the truth. Your impact on the planet is still very high if you engage in off-balance sheet spending. (Yes, this is a twist of words. I know spending goes on the P&L. I used this analogy as a twist on the questionable behavior of public corporations that use off-balance sheet debt to mask their true financial condition.)

All spending counts. Better yet, all consumption counts!

Because the claims of frugality are so easy to fraudulently (an ethical crime only) acquire today a better way to assess frugal behavior is by measuring consumption.

I’m guilty of the same crime. I avoid travel as much as possible, but have no problem if people travel to me. How is that different from a blogger taking a free trip to a conference just because they are a blogger? The environmental damage is all the same; the resources still consumed.

I’ve gone a step further (and hence have committed a higher crime). My home (and water) is heated and cooled by a geothermal heat pump. Very energy efficient. Then I plow said savings into a 3,000 square foot home with a hot tub, Jacuzzi and a two acre pond. (Save the “hypocrite” catcalls for later.)

Odds are my next vehicle will be electric or some hybrid of such. The miles will be driven with a lower environmental impact. Yet, the massive consumption of an auto purchase is present.

My carbon contribution to the atmosphere is smaller than most Americans and probably on par with a typical European. This puts me well above levels of African nations and most nations, for that matter, outside Western Europe and North America. I have to be careful how loudly I proclaim my innocence.

And the free gifts keep coming. Over my adult life I received plenty of free promotional items as enticements. Blogging is no different. They even have laws now where bloggers have to disclose if they received compensation or free use of the item or service they blog about.

On The Wealthy Accountant Facebook group I have asked people what they consider spending. The vast majority confess they don’t consider credit card rewards as spending. Well, it is tax-free income so it shouldn’t count as spending then either, should it?

But it is spending! Consumption, too!

Measuring frugality is extremely difficult due to all the changes in modern society. Spending has been distorted and even CO2 emissions are an inaccurate way to measure frugal behavior. Each method can be gamed. A good start might be to track your CO2 emissions or equivalents with a basic calculator from the EPA. It isn’t a perfect solution, but better than mere spending as a frugality gauge.

Greenhouse gas emissions are also a problematic measuring tool. That electric vehicle might spill less pollutants into the air as you drive, but the contribution from production might be tremendously high. At best it is hard to measure.

And not all costs are included in the environmental equation. The polluting of the land, water and air extracting oil is not included in the price of a gallon of gasoline. We act as if dumping pollution into the environment is a free ride. The tragedy of the commons is in full swing.

Building a Better Frugal Human

If spending and CO2 emissions do not accurately reflect frugal behavior, what does? It all circles back to consumption.

Asking you, kind readers, to track your greenhouse gas emissions would be too much. Even the accountant in me would not stay true to that course for very long.

A better way to determine your level of frugality is to measure consumption and its equivalents. If you get a better price you are considered more frugal. An electric vehicle is still better for the environment than an internal combustion engine (ICE). If you reduce costs by utilizing technology you are still frugal.

But you also must include all the free rides from gaming the system. Using points to fly around the world first-class is still something like $30,000 or more in consumption equivalents.

This is different from taxes, by the way. Business owners can shift personal spending to the business ledger legally. It doesn’t mean you (or I) were frugal. Deducting my travel expenses to FinCon or other financial or tax conferences, while a deductible business expense, is really a personal expenditure to be added to the frugality thermometer since their is an element of personal pleasure.

If you are not brutal in your assessment of consumption you will inevitably game the system to your favor, skewing the results and fooling yourself into believing you are really frugal when you are actually not.

I have been known to brag about spending only about $20,000 per year to live. This is true. But. . .

But that is not a true picture. What is the cost—and continuing costs—of maintaining 3,000 square feet of home? The pond? Hot tub? And what about the stuff from the business? Do I acknowledge business meals as also a part of personal consumption? I had better if I want a true picture. Thousands in annual credit card cash rewards used for books for my personal library are personal consumption, even if they are business related! I would buy and read them even if not in business because I enjoy my work.

I see bloggers all the time claim serious levels of frugality. It does not take a deep dive to determine this is smoke and mirrors. Their social media feeds are filled with travel tales that paint anything but frugality. Add the actual cost of the free airline tickets as real consumption to the expenditure column and the consumption level starts to look quite hedonistic.

Why Does It Matter

Why do I or should you care about frugality? Does it really matter if we don’t count the freebies of life in our frugal measurements?

Actually it does if you consider your impact on the climate and the world at large. The impact on the environment is your concern as it does affect quality of life. If you dump pollutants into the air with reckless abandon you by default give permission to others to do the same. When the herd of lemmings run off the cliff in synchronized fashion it makes a splatter spot at the foot of the cliff noticeable to all.

Keeping spending low by pushing the cost on somebody else is a bit rude, but acceptable in our modern world. The spending shift is sometimes by design of those doing the paying; those without any real frugality concerns. These gifts are nothing more than inducements to get you—or others in your sphere of influence—to take up the additional consumption.

Overcome spending, consumption, debt and financial problems. Rewards programs are designed to get you to spend more and keep you in debt. Break the cycle with these secret tips. #secret #tips #spending #consumption #rewards #debt #financialproblemsYou are better than that. Gaming the system is not a bad thing and no worse than gaming the Tax Code to reduce your tax liability (a really good thing). I am 100% for using credit card rewards and still accept the benefits of business ownership. If my meal or travel is paid by someone else it is still an acceptable behavior as long as I acknowledge I engaged a level of consumption.

But when it comes to consumption I have to admit I am less frugal than I pretend. As I grow this blog and other business projects I find I am on the road more often. I can call it whatever I want as long as I am honest in admitting my personal consumption is really personal consumption. It is hard to be truly frugal as a business owner of any size. Businesses spend to survive.

My personal spending is low. When I bow out of the business life a few business expenses will end up on the personal financial statement it was really on all along and some expenditures will cease. Travel and other consumption will stop or be severely curtailed. Then I may regain my badge of frugality. True frugality

Until then I need a serious reality check and so do you. You are consuming more than you admit and if you want to really be frugal that has to stop because the planet can’t take anymore. And shady personal accounting will not lower environmental pollutants anymore than shady accounting made Enron a profitable company.


Saturday 16th of November 2019

A very true post. I admittedly game the system by not counting travel to volontary work related conferences as ”my” CO2 emissions. You are of course correct in that the Earth doesn’t care. I need to rethink my travels.


Friday 8th of November 2019

Couldn't even read the post. AGW is a total scam to rape the first world. Sadly, so few people are science literate that they easily fall for the lies despite the evidence right in front of them. TWA should stick to the topics of accounting and taxes and not venture into what he doesn't know. You always make a fool of yourself when you stray. Had you edited out the GW baloney, you might have has a halfway decent blog post.

Peter English

Tuesday 5th of November 2019

Environmental impact is a great way to measure true cost of “upstream” actions/habits/culture. When I was twenty I decided to live in a way that minimized my environmental impact.

Now, fifty-five years later: 1. I haven’t used ANY heating/air conditioning for fifty years! 2. Average daily water usage is twenty gallons. 3. Average annual gasoline gallons is eighty gallons. 4. Number of cars owed: one. 5. Average miles driven per year 2,500. 6. Number of bikes owed: one. 7. Average miles bikes per year 9,000 (appropriately 25miles/day). 8. Number of televisions owed: 0. 9. Number of refrigerators owed: 0. 10. Number of washing machines owed: 0. 11. Number of clothes dryers owed: 0.

And I did this while working a full-time job in Silicon Valley. It wasn’t difficult but did require thinking about the why and how of everything.


Friday 8th of November 2019

No heating or air conditioning in SillyCon Valley, and this is supposed to show virtue? Big deal. Move to Houston or Duluth and see what happens.

Might I inquire, were you hopping one of this sleazy tech giant's shuttle buses for free?

Keith Taxguy

Tuesday 5th of November 2019

Now you, my friend, are frugal by any measure I can conceive! That is awesome, Peter.

The Social Capitalist

Tuesday 5th of November 2019

Great post TWA. Some disagree but equating frugality with the environmental impact is spot on! When Native Americans killed an animal they used almost every part -frugality; today we go to a restaurant or grocery store and throw away up to 40% of our food, not thinking about the seen waste (Loss of valuable commodity) or unseen wastes- driving to establishment, food production, picked, cleaned, containerized, refrigerated and transported, etc. and all with attendant pollution.

Frugality has become some personal measuring stick-I agree that it needs to be a socially conscious, environmentally aware one as well. But more importantly it needs to be truly frugal.

And no, I am not a frugal person but most people would define me as one (Perception = Reality?) despite having all the trappings of upper middle class life.

Keith Taxguy

Tuesday 5th of November 2019

Social Capitalist, I expected some push-back on this post. If everyone agrees with me, not much has been learned.

It is also okay to not be frugal. My goal was never to convince any reader they must be frugal by some yardstick. The intention was to get people thinking about their spending in a different way. At some level I succeeded.


Tuesday 5th of November 2019

I fly regularly, and maybe needlessly, for various reasons, and don't give it too much thought as long as my cost-conscious mind can justify the price. I admit I stopped in my tracks when my friend pointed out how a young Swedish girl was making news for protesting "the climate crisis" by sailing to NY for a climate conference, instead of flying. After hearing about her privileged parents, I remembered how some airlines offer carbon-offsetting flights, but quickly dismissed not-flying as a practical option for myself. Thanks for making me think about this issue again.