According to Mirriam-Websters.com, frugal means characterized by, or reflecting economy in the use of resources. Frugal comes from the Latin word frux, which interestingly enough can mean both fruits AND success, as in the fruits of my success. In fact, an old Latin phrase ad bonam frugem se recipere, means to improve oneself.  That sounds successful to me.

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So why the etymology lesson? Because I want to point out the connection between success (frux) and the economic resourcefulness of frugality. Most of us have just lost sight of the beauty of simple living. In fact, there is another Latin word from frux called frugalis, meaning virtuous. This is a philosophy the Puritans subscribed to, living a very simple life which would allow their focus to be more on spirituality, rather than materiality. Get the connection? So why aren’t more of us frugal? Quite simply it is because we’ve been taught to be consumers.

Prior to the 1950s, people understood the idea of frugality. In my short 13 years as a financial advisor I have run across a few frugal types. They may have a net worth of $2.7 million or more, but they look like you and me. The difference is they never bought into the idea of the consumption of “stuff”. (See Annie’s www.thestoryofstuff.com.) When the spending of the government brought the US out of the economic slump left over from the great depression, economists and government officials decided that spending was going to keep this country strong, even if it was at the expense of Americans’ savings. We were going to be a country of consumers.  The rub? The cost of retirement was getting too high. Companies and government got sick of footing the retirement bill for retirees who, with improving health care, were living too long. So what did they do? They shifted the retirement burden to us with 401k and other defined contribution plans. But they never taught us how to save. They’d only taught us how to spend. And the booming stock market of the 80’s and 90’s only hindered our need to save because of their stellar returns, capitulating in 1999 with the technology bubble.

So what do we need to do? We need to learn to save. For further reading on how much we should be saving, read my post How Much Should We Be Saving. In order to get your budget on track, avoid the major pitfalls of spending like constantly driving new cars and refinancing your home every few years. For further reading on car habits and mortgage habits, see Black Hole Car Habits and Mortgage Habits of Millionaires. We need to knuckle down on our spending habits. We can do this using sites like mint.com, Pocketbook, and geezeo.com to track your spending for free.

The good news is that there is some sign that Americans’ are learning to save as the personal savings rate is approaching almost respectable levels (see Bureau of Economic Analysis Personal Savings Rate). But we are far from the 15% to 20% needed to fund most retirements. In order to get there, we’ll need to change our habits from consumption to simple living with good old fashion frugality.