Retirement Budgeting Cash Flow Investments

Is Being Frugal Really the Key to Paying for Retirement?

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Frugality is, in general, a good idea, but it can be taken to extremes. A good approach to money is “spend some, live, and give,” so you can enjoy your life now and in retirement. None of us know how long we will live, so suffering now for a potential long future can backfire. The important thing to keep in mind is “balance.”

The opposite of frugality is spending outside your means, which is not a good approach to life either. With housing prices so high now, and very few houses on the market, some young people are making crazy decisions, buying beyond their means and beyond what the homes will even be worth once this frenzied market is over.

What good is a huge house you can’t even afford to furnish? It might make more sense to wait and keep renting for now. The question becomes, “What do you want long-term?” Having enjoyed your life, or being house-poor?

If you choose to live in a less-expensive area to save money, there may be fewer job opportunities than in a more expensive area. Or you may have a crushing commute. 

Quality of life is as important as having money for retirement. You can be conservative in your spending without sacrificing the life you want now.

For many, preparing for retirement means spending strictly and limiting unnecessary expenses during their working years. Saving money is important, and people at every income level vary in their ability to be frugal.

Can a Nickel Here and a Dime There Lead to Big Savings?

Simply avoiding small expenses - such as eliminating your daily trips to the coffee shop - can lead to big savings over time. But is skipping small expenses really the key to reaching your retirement goals?

Let's say you stop buying coffee during the week, saving $5 a day or $25 a week. In a year, you would (in theory) have saved $1,200. Considering that the average savings account has an interest rate of 0.05 percent, according to the Federal Deposit Insurance Corporation, $1,200 a year even with interest would likely not be enough for retirement.1

Better Ways to Build Wealth

If retirement is your goal, then building wealth a number of different ways is necessary. Read on to learn what else you can do—besides counting every penny--to reach your retirement goals. 

Savings Accounts

There are certainly benefits to saving. But for some, this means keeping their money under the mattress. Not using a savings account is counterproductive, as the value of your savings will only diminish with inflation. Instead, start by placing the money in a savings account or other investment vehicle. 


Retirement savings accounts, such as a 401(k) or IRA, are a great way to save for retirement without greatly reducing your quality of life today. If you choose to have money withdrawn automatically, you’re saving money every paycheck without even thinking about it, and your employer may match a portion of your contributions. By the time retirement arrives, you will have made money from your savings and the extra contributions accumulated from your employer. 


Investing can be an effective way to accrue wealth over time. But investing should be done in accordance with your personal tolerance for risk, as reaching your retirement goals shouldn’t risk your lifestyle and financial standing today.

Staying Focused

Whether focusing on your career, or a side job, continually improving will help prevent stagnation. By continuing to grow, you can expand your skillset and professional value, which ultimately can impact your career satisfaction and income. 

Maintaining a Healthy Mindset

In addition to being ineffective, excessive frugality can increase stress. Instead, building wealth will help you prepare for retirement and help limit money anxiety.

Saving is an important aspect of wealth, but extreme frugality can be detrimental, especially when it is your only method of retirement preparation. Keep these tips in mind and consult a financial advisor as soon as possible to start building your wealth and securing your retirement.


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This content is developed from sources believed to be providing accurate information, and provided by Kelly Financial Planning. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.