Too broke to be frugal?

Photo: Philip Brewer

The first few years after I got out of college my finances were seriously out of control. I was making pretty good money, but I was spending all of it. Worse, I wasn't keeping track, so I didn't even really know whether I was getting ahead or falling behind. During that period I more than once made some seriously unfrugal choices, simply because I didn't have cash on hand.

The specific example I'm thinking of is a time I went to a nice restaurant where I could use a credit card, because I didn't have enough cash to go to a cheaper restaurant. (In those days, cheap restaurants often didn't take credit cards.)

I knew it was stupid at the time, and I must admit that I did it with a certain amount of conscious irony--the same kind that makes people call a lifestyle based on ever-increasing levels of debt the American way--but I expect that everyone who wasn't born rich has memories of choices like this:

  • Postponing needed auto or home maintenance, even though they knew it would mean expensive repairs later
  • Missing a chance to stock up at a great price, because they didn't have the cash
  • Paying more for a low deductible on insurance, because they couldn't take the risk of a cheaper high-deductible policy
  • Buying the small package, even though the big package was a better deal
  • Paying more for heat, because they couldn't afford to buy weatherstripping
  • Dropping out of school, because they couldn't afford tuition
  • Missing out on decades of investment returns, because they couldn't afford to fund their 401(k)
  • Or, as in my case, paying more to buy something from someone who would offer credit, because the best deal required cash they didn't have.

I would argue, though, that the underlying problem isn't being broke. The underlying problem is having out-of-control finances.

Although it's true that a little capital can make frugal choices a lot easier, the fact is that most of these problems don't stem from being broke. If you can't pay for weatherstripping, how are you going to pay the heating bill? If you can't afford an extra can of tomato paste at 39 cents today, how are you going to afford one next week at 49 cents?

The right way to address this sort of issue is not to hope for a magical injection of extra money, but rather to take control of your finances. Start with the basics, like creating a budget and tracking your spending. (Here's some tips on creating a budget, on choosing budget categories, and on tracking spending.)

Once your finances are under control, many of these expensive problems simply solve themselves. If you have a grocery budget--no matter how small--you can allocate the money to take advantage of sales and buy the package that offers the best deal. If you have a utility budget, you can make a smart decision about weatherstripping. Once you're spending less than you take in, you can quickly build up a small emergency fund--and once you have that you can start increasing your deductible to save money on insurance.

The point is not that having a little capital leads to cost savings (although it does), the point is that having your finances under control leads to having a little capital.

It's true that it's tougher to be frugal when you're broke, but the way out is to take control of your finances.

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Guest's picture

Amen, amen, amen! Not many people discuss this. So glad you did. I know there truly are people who are in dire financial situations right now, but this article speaks to them as well. It's just like people who don't coupon shop because their excuse is that it's not worth it - or people who can't afford to buy a $3 double bundle of Sunday papers. They don't realize that those papers will way more than pay for themselves. We're all living and learning, right?

Guest's picture

Too broke to be frugal? Man, that hits home. Another example I've often heard of (thankfully not experienced first-hand) is getting shafted by enormous interest on paycheck advance loans.

It seems like some of these needs requiring short-term capital could be met with low-interest microloan services - I mean hey, if it works in the 3rd world, why not here? It might be easier to be disciplined with microloans than it is with a credit card.

Guest's picture

I too have been to broke to be frugal. A good current example is I pay for Car insurance monthly because I caanot "afford" the lump sum payment for six months.

Guest's picture

Jim, shop around insurance companies to make sure you are getting the best deal. Not every company penalizes you for not being able to pay six months in full and even the billing fees vary widely depending on the company.

Guest's picture

Just like "living below your means" can be starving yourself

Philip Brewer's picture

@ Linda:

It can be, but it's really kind of surprising just how low you can push your expenses, on an emergency basis, as long as you don't have debts that you need to service.  The amount of money that it takes to put a healthy diet on the table is really quite small.  The problem for most people trying to spend less than they earn is not the cost of food, but rather the whole cost structure of their household finances.

Guest's picture

You have hit on the "domino effect" of poor financial choices . . . good post!

Guest's picture

Great post and some food for thought!

Guest's picture

A few more examples:

--Paying a $2 ATM service charge on a $20 withdrawl (10%) because you don't have enough money in your account to withdraw larger amounts at a time.

--Paying higher rates for an SRO or motel because you can't afford a security deposit on a real apartment.

--Getting a root canal because you put off simple dental work.

--Buying a single bus pass instead of a 10-ride or commuter pass.

Guest's picture
pam munro

Here are frugal solutions to the above problems:
1) use your credit card for a meal at a fast food place to eat under $10 (Most of the major chains accept them nowadays.)
2) see if you can put a bandaid on car repairs before a major outlay - Like putting additives into your radiator (stopleak)/transmission (goop)/oil/gasoline (fuel injection cleaner) - You would be surprised that these will give you a bit more time before a major repair - I had an automatic transmission that would get clogged up a few times a year (on a new car!)& adding transmission cleaner would clear out whatever dirt was catching in it & save me oodles!) Can you do an adequate fix on those house repairs yourself? (We put a board on top of a weak part of our flooring & covered it with a rug & forget it's there.) Learn to do things yourself!
3) shop at the dollar store for rockbottom values on household good & lots of other things - save lots of $ from reg. prices.
4) weatherstrip your house yourself with newspaper under rugs for leaky cold floors/make "snakes" to put on leaky windows/and doors - (fill tubes with stuffing). Have heavy winter curtains. - put black paper on windows to absorb heat.
5) it's not too bad to pay a higher deductible on health ins. or car ins. - because ONE accident or incident will pay for it ALL (esp. when you are broke!)
6) DIY & learn to live superfrugally. Even if you can't save - you can get along on what you earn, which is better than most folks.
7)Think about less expensive schooling. Maybe you can get a degree online? Go to a community college for 2 yrs. & transfer - get good grades & GET A SCHOLARSHIP. (My father went to Brooklyn College in NYC because if was FREE then.) Consider how much it will mean in the long run. Best to go to an ivy if you can afford it - want to pursue a certain career - or if you can get help with TUITION.

Just a few hints on how you can manage EVEN when BROKE. I have been doing it for YEARS.

Guest's picture

Best example of this is "too broke to buy condoms". Everyone can guess the outcome of that one.

Guest's picture

How about paying exorbitant "insufficient funds" fees because you made a purchase while broke?

I've been there. Now that I am no longer there, the best advice I received was "Live like a college kid, even after college". Even as an adult, I love the dollar theater and the clearance rack. I save money by remaking all of my "college foods" like curry with rice and baked penne. Once you are under control, it is not an excuse to get back out of control. Don't think of it as deprivation, think like a college kid and "consume creatively".

Guest's picture
Rick Bouchard

39 or Even 49 cents for a can of tomato paste? What decade are you living in? I pay double that for a small 6oz. can unless it is on sale and then it might be 69 or 79 cents each. The price of food has gone way up in the last 4 years. I can only get about 2/3 of what I could in 2010.

Philip Brewer's picture

If you check the date on the post, you'll see that it's from 2009. But you're right—I might well have been remembering tomato paste prices from a decade or two before that.