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Living the frugal life


Benjamin Franklin preached frugality. Have we forgotten the message?


Lorilee Craker was a self-confessed spendaholic. Those magazines at the checkout line? In her cart they went. A “30 percent off everything!” sale (as long as you sign up for and use the store credit card) had her gleefully getting deals that were soon eroded by interest charges when she didn’t pay the bill in full. She was, a friend told her, “a knucklehead” when it came to money.

To Craker, frugality wasn’t fun. The idea of delayed gratification— of living within her means—were ideals she strived for but rarely achieved. But then she started hanging out with the Amish, the definitive examples of American thrift.

For her book, Money Secrets of the Amish, Craker learned the crucial lesson of frugality: It’s not about doing without, but about making the best use of what you have. “The Amish live very, very carefully,” says Craker of Grand Rapids, Michigan. “The concept of an impulse buy at the checkout—that’s totally foreign to them. ‘Use it up, make do and do without’ is an old-fashioned maxim that the Amish swear by.”

Benjamin Franklin, known as much for his quips on frugal living as his legacy as an inventor and Founding Father, would have lauded the Amish mindset. “Rather go to bed without dinner than to rise in debt,” he said. Billionaire Warren Buffett, who still lives in the same home he purchased more than 50 years ago and long before he became one of the world’s wealthiest men, is a living testament to the financial power of frugality.

But seeing how epic lines form outside Apple stores whenever the company releases its latest $500 iPad or $200 iPhone, despite unemployment levels around 9 percent, is it possible America has forgotten how to be frugal?

Forgotten? No, say experts on frugal living. But we’re definitely out of practice.


Why we love a bargain

Stephanie Nelson, aka The Coupon Mom, says in the 12 years since she’s been teaching what she calls “strategic shopping,” she’s seen an increasing interest in belt-tightening combined with an equal thirst for education on how exactly to cut costs.

“The driving force for couponing is necessity,” says Nelson. “Medical insurance premiums go up. Your mortgage, your car payments are fixed. So there aren’t many places you can squeeze your budget. Food spending is one place.”

But there are two types of bargain hunters. Those who truly need to stretch their dollar and those who do it for the thrill. “The strategic shopper says, ‘Look I’m buying microwave popcorn for 83 percent off,’” says Nelson. “The strategic person says, ‘I can pop my own popcorn for less than 50 cents a serving.’ The frugal person says, ‘I don’t need that.’”

Most people, however, possess both qualities—they need a bargain and get a thrill out of it, Nelson says. And while she has seen interest in coupon cutting and other savings measures increase through the recession, few people expect the drive toward thrift to last. As the economy improves, consumer confidence does too. That’s when people start spending again, and they don’t always spend with budgets in mind. That’s where frugality goes out the window, says Kevin Gallegos, BSB/A ’97, vice president of Phoenix operations for Freedom Financial Network.

To be frugal, you must budget “We are often penny wise and pound foolish,” says Gallegos, borrowing a Franklin-ism. “We impulse shop. We buy this thing because it’s on sale and it’s too good a deal to pass up. But do you actually need it? Do you need it today? Can you wait a few months?”

Impulsivity and the urge toward instant gratification— both antithetical to frugality—are also contrary to the framework on which frugality rests: a household budget. The Amish, Craker says, make saving 20 percent of their earnings as routine as breathing— something they do without question because it is the basis of their financial survival.

“The Amish are long-term thinkers,” says Craker. “And because of it, they have a lot of peace where I have anxiety. I often worry about money. The Amish, they sleep well at night.” Craker tells the story of Amos, an Amish farmer with 14 children. By age 45, he had finally saved up the money he needed to buy his own farm: $400,000 paid in cash. “Over the course of 20 years, of paying $1,800 a month to rent his farm, plus feeding his 14 children, he was able to save that much money,”

Craker says. How? The family grows much of its own food. They shop second-hand and buy in bulk. And they never spend needlessly. Or, as Franklin said: “Beware of little expenses. A small leak will sink a great ship.”

This frugality not only helps the Amish meet their financial goals; it also prepares them for tough economic times. “When property values went down, when construction workers lost their jobs, they held strong,” Craker says. “They were prepared. Meanwhile, the money I should have been saving for a rainy day, I frittered away on magazines and pizza and lattes.”


As the economy strengthens, frugality fades

The overabundance of credit—which the Amish have a “holy terror of,” says Craker—means that any swing toward frugality we’ve seen during the Great Recession will likely fade as the economy improves, says Gallegos. For several years now, credit cards have been harder to get, both because of tightened lending rules and job losses. But once people get back to work and consumer confidence continues to grow, those credit card offers will return.

“When people feel the economy in general is good, and they’re employed and able to pay their debts, that’s when they take on more debts and spend money,” says Gallegos. “But what people really need to do is be realistic about their income and income potential. Set financial goals. Create a budget. And then make that a priority in your life. That’s the path to long-term financial freedom.”

And, as Ben Franklin, the man who coined “The American Dream,” said, “If you know how to spend less than you get, you have the philosopher’s stone.”


Cash is king but credit is queen

The true fan of frugality has no need for credit. But unless you’re driving buggies and avoiding electricity, it’s hard to live without plastic. After all, how else do you book an airline ticket or buy those concert tickets?

The key to winning the credit game is using it for your benefit and not letting the bank make money off of you, says Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network. “Credit is a tool. It’s not a crutch,” he says. “It’s something you use to build, not something you rely on to get through your life.”

Gallegos has a couple of credit cards and uses them liberally to pay bills and buy groceries, but he pays the balance in full each month. That way, he never pays finance charges but still gets the perks of card ownership, such as airline miles and cash back on his purchases. Maintaining good credit—by paying your bills on time and keeping your account balances low or nonexistent—is crucial for your financial health.

If you ever need a home loan or a car loan, the bank will look at your credit score. And banks are not the only ones judging you by your credit. Some employers are checking credit scores of potential hires, and auto insurance companies use the numbers to determine how responsible you are, says Gallegos. “You need to maintain good credit, but you need to use that credit to your benefit,” says Gallegos.


Cynthia Ramnarace is an independent journalist based in Rockaway Beach, N.Y. She specializes in personal finance, health and older adult issues. Find out more at