The importance of staying frugal
One of the most important traits for achieving financial freedom is frugality.
While the concept sounds simple, staying frugal is not easy. It requires sacrifice, like drinking instant coffee instead of buying from Starbucks, cutting down on shopping or eating out, and saying “no” to expensive vacations.
What makes staying frugal harder is knowing that you can technically afford to spend more, and yet you choose not to, while others who earn less appear to live more lavishly.
But remind yourself: frugality has lasting benefits. First, a frugal lifestyle costs less to maintain. This is important because it means you can invest a larger portion of your income instead of spending it.
Take this example. If someone earns P50,000 a month but spends P45,000, they can only invest P5,000. In contrast, someone who lives on P40,000—perhaps by bringing baon instead of eating out—can invest P10,000 a month. That’s double the amount, even though both earn the same salary.
Frugality also prepares you for the unexpected. You’ll have extra funds during emergencies, reducing the need to borrow money. And perhaps most importantly, you won’t feel trapped in a high-paying job that you hate just to keep up with your lifestyle.
It also means you’ll need less to retire comfortably. According to the “4 percent rule,” you can retire when your investment portfolio is 25 times your annual expenses, assuming a 4-percent annual withdrawal rate.
For instance, if someone spends P45,000 a month (P540,000 annually), they need P13.5 million to retire. But if they can live on P40,000 a month, they only need P12 million. That’s a significant difference!
And because frugal people save more regularly, they’re likely to hit their retirement goal much faster.
Even if you love to work, reaching your retirement target early is a plus, because it gives you flexibility and the freedom to do what you love without worrying about how much it pays.
How to stay frugal
One practical way to stay frugal is to create a budget that prioritizes investing.
Most people follow a “spend first, save later” model. Unsurprisingly, many end up spending everything, or even more than they earn. A better approach is to pay yourself first: set aside your investment amount before allocating funds for anything else.
A good starting point is the “50/30/20 rule”: 50 percent of your income goes to necessities (e.g., food, rent, utilities); 30 percent to wants (e.g., travel, hobbies, gadgets), 20 percent to savings and investments.
If you want to retire early, aim to invest 50 percent to 70 percent of your income.
This might seem daunting, but it becomes manageable when you keep your lifestyle modest even as your income grows. This means resisting the urge to upgrade your wardrobe, gadgets, car or vacations just because you can.
The more consistent you are with your lifestyle, the more of your salary can go toward investments.
To stay disciplined, automate the process.
Open a separate bank account for investing and set up an automatic transfer from your payroll every payday. Then enroll that account in a mutual fund or UITF (unit investment trust fund) with a regular investment plan.
Automation removes temptation and builds consistency, two key ingredients in long-term wealth building.
Final thoughts
If you’re still worried about the sacrifices that come with frugality, keep this in mind: frugality isn’t about depriving yourself, it’s about being intentional. It’s choosing to spend on what truly matters so you can build a future with more options and less stress.
In the end, it’s not about how much you earn, it’s how much you keep, invest and grow over time. Frugality gives you control over your money, your time and ultimately, your life.
That’s the kind of freedom worth saving for.
