Personal Finance

Be frugal, be rich; there’s no shame in it

Sreekumaran N March 30 | Updated on March 30, 2020 Published on March 31, 2020

It is vital to know where you can penny-pinch without feeling sheepish, and where you can be lavish without guilt

Are you a skinflint? If yes, your skimping and saving might have attracted ridicule more than once. Are you a spendthrift? If yes, chances are high that you landed in debt more than once. Treading the middle path between frugality and splurging requires wisdom in abundance and continuous education in money matters.

No shame in being thrifty. Indians are known for their frugal ways. Asking its readers to look to India for tips on frugality, The New York Times once said: “India is to frugality as Bethlehem is to Jesus.” It goes on to underscore that there is absolutely no shame in being frugal. In fact, the rich and the famous are not shy about their miserly habits. Multi-billionaire Mark Zuckerberg, known for his modest and frugal ways, is reported to have been spotted, along with his wife, at a McDonald’s outlet having breakfast while honeymooning. Examples of the frugal and famous in our own backyard are also aplenty. You only need to observe your immediate surroundings closely. The rich and wealthy in our neighbourhood could be thrifty in more ways than one. Only the wannabe rich feel shy about being frugal and end up making a lot of vanity spendings.

“Frugality is great to increase savings and, when done consistently, it helps accumulate handsome sums,” said Satyen Kothari, founder & CEO, Cube Wealth, an app-based wealth management company. But make no mistake, parsimony alone doesn’t lead to wealth creation. “To create wealth, one must also invest smartly,” Kothari added.

The resultant savings on account of frugal habits can help in wealth creation through investments. Savings could be conveniently invested in mutual funds through the SIP route, or lump sums through the PMS route, said Abhijit Bhave, CEO, Karvy Private Wealth.

Learning thriftiness

Skimping and saving and smart investing help accumulate wealth, but everyone of us may not possess this trait of thriftiness. It can, however, be acquired for sure. One needs to shed inhibitions and misconceptions to learn thriftiness.

“Being frugal is not about settling for cheap products, but about prioritising spending, so that one can have more in the long run; it involves looking for budget spends and using value as a bottom line,” said Bhave.

When asked whether he would advise his clients to be frugal in spendings, Kothari was explicit: “Vanity expenses are the real enemy. Buying fancy cars to impress friends, luxury watches, keeping up with the Shahs. Question yourself on whether these really matter to you or not. More often than not the answer is ‘no’. Aim to be wealthy, more than showing the world that you are wealthy — the two are very different things.”

Careful consideration should be given to transactions related to buying a car, spending on holidays or binge parties, said Bhave. “The reward for responsible and cost-effective living is financial independence and early retirement from work,” he said.

Be mindful of the fact that big spending in most cases — buying a house is an exception — depreciates wealth. A tight control of futile expenses is essential. “Buying a house is a necessity, having lavish interiors is, however, an extravagance; buying a car is essential, while buying a sports car to show off may be unnecessary; while international travel can be a stress buster, exotic locations in the best of hotels may be unwise,” pointed out Bhave.

Whenever a major expense is scheduled, ask yourself whether it is a necessity or a luxury and how it will affect the goal of long-term prosperity. “Know that the value of assets such as cars, mobiles and other gadgets always depreciates, which is why you should think twice before buying your second car and upgrading to the latest iPhone or buying a new home theatre system while your current one is perfectly functional,” said Kothari.

Be frugal, but not always

Wealth managers do not dispute the fact that frugality, accompanied by smart investment, leads to riches. They also advise you to be discreet as mindless miserliness can be harmful. That raises the question of where you can tighten your purse strings without feeling sheepish and where all you can loosen your purse strings without feeling guilty.

“Frugal living is a holistic way of looking at our expenses...In the case of fitness, food, education and safety initiatives, frugality should take a back seat,” said Bhave

Obsession with money can harm relationships. Healthy hobbies, fitness, family and relationship should always take precedence over frugal nature.

“Anything related to health and safety, protecting assets through insurance, and making sure your passions in life are indulged in are the areas where I don’t skimp,” said Kothari.

Bhave explains it further. “Health, wealth and happiness go hand in hand. For example, skipping a gym membership to save money in the short term can actually cost us more in the long run, or buying a pair of low-quality jogging shoes instead of investing in a good pair can actually harm us much more.”

Smart frugality

Frugal ways do not mean giving up the pleasures in life. Money is meaningless if you can’t use it to access things that benefit you or give you happiness. “I have seen young professionals use this (smart frugality) to their advantage. One simple example is of a young investor who realised that her weekly restaurant/bar bills were quite high. Instead of stopping this, she reduced this by one outing per week. And on that day, she opted to entertain at home. Effectively no real change in the quality of life, and yet an immediate unlocking of about 25 per cent more to invest per week. This is smart frugality in action,” said Kothari.

It is, however, naive to believe that frugal ways act as a shield against debt traps. “One can be extremely frugal in how one spends, yet have a massive vanity car loan weighing down on the person,” said Kothari.

Don’t be in such an unhappy situation where all the benefits of your frugal ways are negated by a reckless decision. Let your education in money matters be a continuous process. Use your discretionary wisdom well.

Published on March 31, 2020

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.