Stay Off the Frugal Path to Disaster

Photo: Philip Brewer

Frugality is a great tool. But if your approach to frugality is to pare away everything non-essential, you're setting yourself up for failure. (See also: Ruthless Frugality)

If you're already living at the lowest acceptable standard of living, what happens when you suffer a negative event — an injury or an illness or a recession or a theft or a natural disaster?

The capacity to tolerate negative event is resilience, and for an economic unit, the key enabling factor for resilience is to use inputs no faster than the environment supplies them.

You already know a form of that rule — live within your means. But that's a simplistic version of the rule, one suited to the decades between the New Deal and the Great Society, but now rapidly becoming obsolete. In a world where no job is secure, it's no longer safe to take the view that you're okay as long as your spending is well under your take-home pay.

The environment doesn't provide inputs at a steady rate, so you can't just assume that your current income is reliable. You need additional tools.


Frugality is a useful tactic for dealing with variability, as long as you avoid the trap of targeting the lowest-acceptable lifestyle. Through frugality, you produce a gap between your income and your spending. Especially if, like most people, you spend all you earn (or, like a lot of people, spend more than you earn), it's a starting point for accumulating a bit of a surplus.

An accumulated surplus makes your household more resilient. It's not the only source of resilience, and it has definite limits, but a household with no accumulated surplus is very fragile.


On the face of it, self-sufficiency would be the perfect tactic for insulating your household from the vagaries of economics or politics. In practice, of course, self-sufficiency is much too hard a way to live. It takes capital, skills you probably don't have, and long hours of difficult, dirty, and often dangerous work, all to produce a standard of living lower than minimum wage.

But strategic partial self-sufficiency is a great idea. If you can cover at least a fraction of your household's most essential needs — water, food, shelter — outside the money economy, then you can tolerate those negative events, as long as they're transitory.


The downside of self-sufficiency comes from the "self" part. The more you try to do for yourself, the less you're able to benefit from specialization. That's why living in the global economy produces a much higher a standard of living than living as a subsistence farmer.

But the downsides of living in the global economy have been made abundantly clear over the past few years.

The safe strategy is to aim for the middle — localization. Don't try to produce everything you need yourself, but live someplace where the community can produce at least the essentials.

I've been following the work of John Robb on resilient communities. (In fact, it was his post on the difference between thrift and frugality that started me thinking about these issues this way.) I think he goes awry in suggesting that frugality is at root an unsuccessful attempt to get by on nothing. As I said above, I view frugality as a tactic for matching your resource demand with the resource supply provided by the environment in a world where the resource supply is highly variable.

But despite that misstep, Robb is clearly right that a resilient community is the right strategy if you want to have a high standard of living without being terribly vulnerable to negative events. There are lot of ways to start making your community more resilient. Shop locally. Share things with your neighbors. Make common cause with the people around you.

Those sorts of tactics, together with some frugality to match your resource demands to the reliable supply and some strategic partial self-sufficiency to buffer your household from external shocks, will make your household a lot less vulnerable.

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Guest's picture


I usually love your stuff. Did someone else write this article under your name? It seems all off kilter. You start by suggesting that frugal living might be a path to disaster. Next you state:

"If you're already living at the lowest acceptable standard of living, what happens when you suffer a negative event — an injury or an illness or a recession or a theft or a natural disaster?"

Well I'll tell you, you live off of all of the savings you've accumulated by living frugally. What is the alternative to living frugally that you would like to suggest that would make this better? Purposely blowing a percent of my income so that when I have to I can tighten my belt more? Living prodigally? Keeping up with the Joneses as a path to happiness and stability? You seem to understand frugal living to build surplus in the rest of the article, but purposely ignore it in the intro.

I'll chalk it all up to you not knowing how to introduce your new topic of interest - Communial living. So you set up an obscenely false dichotomy: Frugality vs. savings (and/or efficient use of one's productive resources?). They are in no way opposites.

Philip Brewer's picture

Thanks for your thoughtful comments.

As I say in the post, this is partially a response to John Robb, who argues that frugality is the wrong path, because at the limit you're trying to get by on nothing, which is impossible.

I think he's wrong. As I try to say, frugality is a tool—a tool for matching your resource demand with your resource supply.

Yes, saving your surplus is one way to bridge changes in resource supply, but it's not perfect either. In an environment where the supply just keeps dropping, eventually no amount of savings can bridge the gap. (This is especially true when your savings are also threatened, such as by inflation or panics.)

I'm sorry if it sounded like I was trying to claim that frugality was always a path to disaster—that wasn't my intent. Most frugal paths are great. I'm just warning against that one frugal path—the one where you target the lowest acceptable standard of living and then try to stay there.

Guest's picture

Philip, I think for some time now you have been struggling with the fact that individuals, even ones who follow standard advice for budgeting can get wiped out in this bad economy. For a half year or so it seems like you are looking for a big picture solution to stability. I guess that is a rational thing to do in today's world.

But I would suggest it is leading you to some places I just can't get onboard with. You state multiple times something along the lines of: "Most frugal paths are great. I'm just warning against that one frugal path—the one where you target the lowest acceptable standard of living and then try to stay there."

I will argue that everyone should do exactly what you call a danger. Especially in uncertain times. Everyone *should* target the lowest acceptable standard of living. It IS acceptable right? For me that may be only 50% of my net income. The other 50% is going to targeted savings: Retirement, Vehicle Replacement, Emergency Fund, even savings for a minor vacation (no vacation might be OK for some but for me its right on that acceptable border). How can I as an individual improve my stability by deciding that I should start to be less frugal and spend more? I could get cable back, I could move into a bigger place, I could have someone else prepare my meals for me. I could pay someone else to mow my lawn. If that leads to less in my savings accounts, how am I in less danger facing an uncertain future?

I think you have trouble accepting that lots of families are scrimping and cutting to the bone living like that for a year or more and then getting their hours cut or laid off and then ending up in bankruptcy. It does not seem fair. At the macro level we could wish for a better system. But what at the individual level should be different? Should they have been going out for martinis?

The best argument I have heard for not following the frugal path is put all effort into earning more. I think that argument has its merits - its not for me.

Thanks for listening and thanks for all the great articles over the years.

Philip Brewer's picture

All fair commentary and very sensible.

I guess I agree with you, to the extent that targeting that "lowest acceptable lifestyle" is cost-free. To the extent that you're being extra-frugal by just not buying stuff you don't need, it's all good.

But there are many things where being a little more frugal costs time or effort. For someone who's lost a job, time and effort may be something that they have plenty of. But sometimes it makes more sense to put that time and effort somewhere besides spending less. And sometimes spending a little more is the right choice.

These are all going to be special cases, so it's hard to come up with a general rule. But once you've got a good emergency fund, rather than socking yet more money into it, maybe you'd be better off putting some of that money into tools. And once you've ensured that you're getting good prices on your major purchases, maybe it makes more sense to take the time and effort you might spend looking for deals on minor purchases and instead take a community college class to learn how to use those tools.

I'm all for frugality. Most people are not nearly frugal enough. I'm just saying that at some point the time and effort you could spend on being a little more frugal might be better spent making your household more resilient in some aspect other than boosting your savings a little further.

Thanks for listening—and contributing!

Guest's picture

Phillip, are you talking about a point where the returns on frugality start to diminish? I found myself confused by the article, too, but reading through this discussion in the comments has led me to think perhaps that's what you're getting at.

I'm hitting such a wall myself. My old car, much repaired, may soon begin to hurt my chances at improving my life because I've accepted a promotion that will require some travel, and that car will, inevitably, die on some long trip. Probably one that's mission-critical because that's just how these things tend to go.

I can keep repairing the car. Did this weekend, in fact. But the time for frugality is coming to an end even though I could continue to get by for a while yet. I am fast approaching the point where I need a more reliable car as insurance against a future loss.

So, soon, I must choose the less frugal path of buying another vehicle. This makes me uncomfortable. But this particular least acceptable standard is not acceptable for the higher standard of longer trips at highway speeds.

Philip Brewer's picture

Yes, that's a lot of it: At some point, the effort it would take to be a little more frugal would be better spent on other ways to make your standard of living higher and your household more secure.

Frugality is great as one tool with which to improve your life. For most people—at least, most people in rich countries—it's probably the first tool they should pick up. But once you've used tool for a while, you've probably gotten yourself to a place where other tools (acquiring skills, building connections in your community, etc.) are likely to offer a better payoff.