Thursday, November 15, 2007

Income versus Frugality...

If your income suddenly doubled would you keep the same money habits or would they change? If your income suddenly decreased by 50% would you change your money habits?

This question came to mind last night over dinner. I mentioned buying the Entertainment Book to our roomie. I suggested giving it away to friends as a Christmas Gift. It's $30 and a great deal for couples to go out to eat because most of the coupons are for Buy One Get One Free meals.

Anyway, roomie says most of his friends aren't frugal. They would never use a coupon. They aren't concerned about money. The average income for where live is $100k. Thus most people can easily afford a very nice lifestyle.

Truth is does your income affect your frugality? I think that it does a little, in the sense that you worry less about money. However, I think naturally frugal people still pay attention to spending more than they need to. These frugal people would never pay full price for an item they can get on sale. However, the increased income would allow them to buy a better quality shirt, car, or item than they previously would have. That I think is a trait of frugal people, buying the best quality they can afford.

Unfortunately not all people who are frugal do so by choice. And not all people who spend lavishly can afford to do so.

Hence do you think you're frugal for your income? Or not?

4 comments:

Angie said...

I think income usually does effect your frugality. When DH and I married (fresh out of college) we had two car payments, one student loan and a total monthly income of $1500 per month. 950 was spent before we even thought about rent, utilities and food. We lived in a studio aprtment and ate lots of pasta. We had to be frugal. Then we got "real" jobs and spent like maniacs. 10 years later, I'm a SAHM, he's making 100k per year, and we are choosing to be frugal, but frugal now looks very different then it did as newlyweds. Now it means we pay off our c.c.'s every month, pre-pay on our minivan, faithfully tithe to our church and save 12% of our pre-tax income. I shop with coupons and look for the best deals but I have the time to spend with our kids and we have the money to send them to a good preschool. We have the luxury of being frugal by choice, and will be able to retire in the lifestyle WE choose.

MEG said...

I think the definition of frugal changes as your income goes up. It's all about spending less than you make in order to maximize savings and/or minimize debt.

If you're fresh out of college and making $30,000 a year, frugal might mean sleeping on a futon from college, having 2 roommates, and eating Ramen Noodles for dinner on a regular basis.

On the other hand if you are earning $50,000 a year, frugal might mean clipping coupons for groceries (not Top Ramen necessarily though), buying used furniture, and living in a less expensive apartment than you can technically afford.

Then once you are earning $100,000, you may not clip coupons anymore, but you might vacation in Destin as opposed to Hawaii and you might send your kids to public school rather than private.

Anonymous said...

I definitely think there are trade-offs to having a higher income that can restrict how frugal you can be. For instance, most people with a high income work long hours. This can make it difficult to cook at home and brown-bag it, resulting in higher food bills due to take-out and purchased lunches. Also, when it is dark out when you leave in the morning and dark when you return home, it may be unsafe to exercise outside, so a gym membership makes sense. These types of examples could go on and on...

Another thing is that in some industries, it's expected that you wear fashionable clothes (resulting in higher purchase costs + tailoring + dry cleaning) or even drive a fancy car.

Then there is the question of what to do with the extra income. I think a lot of people feel that as long as they are working so hard, they may as well do something they like with the money. I think this is a healthy attitude as long as their debt repayment, savings, and investment goals are being met at the same time.

moneyramble said...

I earn quite a bit more than 100k and still use coupons. When you are saving for retirement, college tuition for multiple kids, and assisting senior relatives,a 100k+ in income is really not that much. Using coupons for things that I would buy anyway provides me additional resources to meet my long term goals and help others. And who knows, that 100k income I have today may disappear tomorrow...