Frugality is the backbone of building wealth, especially in the early rounds when we’re all trying to get that snowball rolling down the hill. The more frugally we live, the quicker we can achieve the Financial Independence, Retire Early (FIRE) dream.

However, no matter how good you get, there comes a point when frugality has gone too far that it becomes a miserable grind. Life starts to lose its colour before you even get to enjoy it.

So, in this Aussie FIRE episode, we cover our thoughts about extreme frugality and our own brushes with it.

Understandably, not everyone finds it easy to dial down their frugal habits (particularly if they lived with too little growing up). So, we also share our own thought processes that helped us embrace a more sensible concept of frugality. Hopefully, our insights will make spending feel more reassuring and satisfying for the frugal folks.

The benefits of frugality are obvious, but…

We've noticed that frugality often gets a bad rap. You can even say it’s sometimes treated like a dirty word. Frugality is seen as a last resort for the financially desperate rather than a smart financial strategy. It seems to carry a stigma of hardship, which isn't the vibe we're going for at all.

The way we see it, one of the best things about embracing a frugal lifestyle is the peace of mind it brings.

Many of us in the FIRE community have found that, within months of refining our spending habits, we feel a newfound sense of financial security. And it’s hard to argue there’s anything more valuable than feeling confident and stress-free about our financial futures.

With that said, there’s a fine line to walk. As much fun as it is to turn cost-cutting and aggressive saving into a game, it's easy to take frugality too far. When we do, frugality can start to feel restrictive, even a bit obsessive.

When we talk about being frugal, we don’t mean hoarding every cent at the expense of our happiness. That defeats the purpose of achieving Financial Independence in the first place.

We believe frugality should be about being wise and intentional with our spending. It’s about managing our money with care and precision. We focus on what’s necessary and enriching without feeling restricted.

For the rest of the article, you will notice that we often come back to the same idea: that frugality actually means redeploying our money where it enhances our lives (not detract from them) down the road. Yet, it’s a thought worth repeating if you squirm at the idea of living outside the spreadsheet.

Our personal experiences with frugality

Frugality is a lifestyle choice that can start as soon as you move out on your own. However, as you earn more, that choice tends to tilt towards spending more. Personally, we've kept some of our frugal habits from the early days.

As we’ve mentioned, though, while frugality can be a fun game, it can get extreme and start impacting our lives in bizarre ways. In fact, we've gone a bit overboard at times, and we're going to share some of those unusual moments. So, if you’re early in the FIRE journey, there are bits and pieces here that you need to take with caution.

Getting a motorbike instead of a car

First up, transportation is often one of our biggest expenses. Yet, it’s also one of the easiest places to save big if we rethink our needs versus wants.

For example, Hayden has never owned a car since finishing high school. Instead, he's relied on public transport in Sydney. This was a big saver on costs but also kept his life simple and clutter-free. And when distances became a challenge, he opted for a bike and later a motorcycle.

At a glance, it might seem exactly like a lifestyle creep. The major difference here, however, is that Hayden started small and upgraded only when necessary. Even that upgrade was cheaper to buy and maintain than, say, going for a car instead. And he uses the motorcycle only once every couple of weeks or on days when public transport is difficult. In our books, this level of being intentional about spending reflects a frugal mindset.

On the flip side, it’s an entirely different story when you have kids and you bring them to school frequently. Obviously, getting a car makes the most sense in this situation. Again, the keyword is intentional , and you can always adjust the budget elsewhere.

Unplugging appliances and avoiding buying them

If you’re like us when we were just starting out, you may have made some conscious decisions to limit the use of appliances. It just sounds like an obvious and sensible thing to do.

However, we’re not surprised that it always makes it to any lists of “extreme frugal tips and tricks.” Hayden, for instance, has mostly avoided using dryers for years. He has also generally tried to avoid buying and using a typical air conditioner wherever he can. Instead, he went for a portable air con that was on discount at Aldi.

All of these may sound unconventional and slightly restrictive. But, then again, our threshold for what feels like a sacrifice varies from person to person. What's a gentle adjustment for one might be a tough call for another. Ultimately, if you’d feel just as happy going for a cheaper alternative, the savings can be substantial across the board.

Splitting your food budget with housemates and taking free food at work

If you’re lucky like Dave was, saving money on food and groceries gets a bit more…let’s say, creative. When he worked in a dairy factory, he hardly spent a cent on lunch because of the free snacks available – like chocolate milk and yoghurt.

So, in the spirit of frugality, he only had dairy products almost every day at work. And while it’s an extreme example, it really shows how you can leverage what's available to you.

Hayden’s experience in his first share house also pushes the boundaries of frugality. In his case, they had a system where basics like bread and milk were bought with a communal fund.

So, Hayden figured out many ways he could stretch the communal pantry to cover almost all his meals. Obviously, it's a strategy we'd be cautious about recommending unless all housemates are on board with it. Also, nutrition-wise, it's pretty limited.

This leads us to a personal note: we think these stories are fun to share. And they've certainly saved us money, but they come with caveats. At some point, we need to remember the bigger picture, and keep our frugal habits reasonable and responsible. It’s an important thought we’ll explore in the next few sections.

What’s the minimum we could live on? And how did we know when to relax a bit?

As we talk about our experiences with frugality above, you’re probably wondering about the bare minimum. What's the least we could live on? And, eventually, when did we know it was time to loosen the purse strings a bit?

Hayden shared his own experience of living on roughly $18,000 a year at one point. Yes, that covered rent in a shared room, basic food, transport, and essential health costs. Everything else? Not on the ledger.

That’s incredibly lean, considering he lives in a city like Sydney. However, context is key here. Despite Sydney’s high living costs, there are plenty of free events and public spaces that make it possible to do something fun and for free. And Hayden maximised all those opportunities.

Now, a baseline frugality might work for a time, but life evolves – and so do our spending habits. Hayden pointed out that post-COVID, his spending started to inch up as he prioritised "fun things" that cost money, like travel. At the moment, he's estimating closer to $25,000 to $30,000 yearly.

He doesn’t rack up those expenses at a whim, though. There is still careful budgeting and planning involved. But, this time, there’s more emphasis on the value of each line item.

To illustrate our point, let’s look at the two main approaches in budgeting.

One group starts at zero and adds expenses thoughtfully. They make sure each dollar spent gives them real satisfaction and an extra layer in their lives. Others begin with everything they want and trim as needed. Typically, in this scenario, necessities get the budget cut.

Hayden approaches his finances like the first one. He starts modest, spends on needs and sprinkles in the things that enriches his life.

Looking back, Hayden admits there’s a line where frugality can start to feel more like scarcity. Yes, it’s possible to emulate Hayden and survive on $16,200 in his leanest spending year. But, it begs the question: what’s the cost to personal enjoyment and social experiences? Are we still living life? Or are we just enduring it until (hopefully) the day of retirement arrives?

When frugality goes too far

With that said, there’s a thin line where frugality starts to cut into the joy of living. So, when does frugality tip the scales from sensible saving to, well, maybe a bit of self-sabotage?

When it begins to affect your health

We all love a good save – it feels good, right? But when saving starts to interfere with our health, it's worth a second look. For example, if we’re always looking for the cheapest meal option, it inevitably lands us in the fast food line.

Sure, we might be saving cash now. But when you look underneath, you start wondering about the real cost. Is it really a trade-off you really want to make long-term?

Here’s the bottom line: good frugality means keeping our finances in check without sacrificing your biggest asset – your health. After all, what’s the point of all that saving and investing if we’re not healthy enough to enjoy retirement?

When it affects your relationships

Frugality shouldn't make us hermits. Now that we look back, saving a few dollars at the cost of good times with friends hardly sounds like a win. Did skipping every coffee catch-up or cinema trip really make us happier? Probably not.

So, it’s worth reflecting on our spending habits and making sure they’re really serving us. Are we actually living better, or just passing through life? Our relationships and mental health are invaluable, and they're worth the extra expense.

When it diminishes your satisfaction in life

There comes a moment when we need to step back and ask important questions. Are we really making these choices because they make us happy? Or are we just chasing financial goal posts that keep on moving?

Ultimately, we all have different thresholds for what feels like too much sacrifice. After all, if we were happy with our lifestyle choices, that's one thing. But, if we were merely enduring them, perhaps it was a bit too much. We’ve walked this line ourselves, and believe us, it’s fine until it isn’t.

Now, we’re not saying throw caution to the wind and splurge on every whim. Instead, for many of us, it’s better to think about frugality as a spectrum. There are areas where balancing future goals with current desires shouldn’t be a hard decision.

In other words, frugality doesn’t have to be about constantly saying no to everything. It can also be about choosing where to say yes.

And for those among us who’ve been saving for quite some time, it’s time to appreciate how far you’ve come. At this point, you can afford to loosen the reins a bit, especially if you weren’t enjoying life as much as you could have. That’s what we are personally doing now, and we’re enjoying it without regrets.

The habit of saving can be so strong that it starts to control us

Most of us approach financial decisions with a calculator in one hand and a budget plan in the other. It makes sense in some ways – after all, the numbers don’t lie.

For instance, if you opt for a cheaper rental, you could funnel the savings directly into your investment account. Over a few years, these savings could substantially cut down the time it takes to reach early retirement, for example.

From that perspective, it seems a straightforward and grounded approach, which is why many of us stick to it diligently. Ironically, though, when we get really good at the logic of saving, we become emotionally attached to it.

Dave calls it the 'relentless saver syndrome.' Even if we sense it’s the right moment, it feels almost painful to spend our money. We find ourselves in a paradox where our logical financial strategies begin to make no logical sense at all.

We've met plenty of folks who, after years of rigorous saving, find themselves unable to spend money on even the smallest pleasures or necessities. They're trapped by their own success in a way. They’re unable to enjoy the financial freedom they’re supposed to enjoy.

This brings us to a broader point. We often talk about the logic of saving and investing. But, rarely do we discuss the emotional toll of never allowing ourselves to spend.

When spending starts to give us a horrible feeling, it’s usually a sign that money has become a source of fear. Maybe it’s fear of not having enough, fear of uncertainty, or even fear of losing control. And we’ve crossed the zone where financial control is actually controlling us.

How to tame the wild edges of frugality if you struggle with this

So, if there’s a way to fight fire with fire, maybe in this scenario, we need to counter bad logic with good logic. It sounds funny and strange, but hear us out.

We’re actually suggesting a logic of frugality that resonates with our well-being and makes sense in the moment. This way, we are able to spend our money with reassurance that it’s not the end of the world when we do.

Here are some examples of how you can take that logic and run with it:

Set aside some fun money

The number one enemy of frugal folks is guilt. And the easiest way to avoid that feeling is by separating our savings from our spending psychologically. Typically, we might move money to a savings account to protect it from impulsive spending. Here, we’re moving money into a 'fun fund.'

For example, at the start of each year, set aside a fixed sum – say, $2,000 – into a separate bank account. It’s out of sight, out of mind – until you want some new tech or a week-long holiday, that is. Then, it’s right there waiting for you, already budgeted for and completely justified.

Reclaim your identity

Frugality often becomes a part of who we are. If you're known as the saver, for example, spending can feel off-brand. On the other hand, there are folks who may pride themselves on their ability to save 80% of their income.

Both identities have their merits. But they can also box us into behaviours that might not serve us over time. Breaking out of these identities, even slightly, can refresh how we view money and improve our relationships.

If you usually pick up the tab at group outings, it might feel embarrassing to dial it back. Yet, if you get past that feeling, you’ll realise it’s the kindest favor you could do for yourself. Conversely, if you’re the frugal one, treating your friends just once can feel liberating and fulfilling.

Understandably, though, changing our financial habits can feel like altering who we are. That's why it's so important to support each other in these transitions.

If you notice someone spending or saving more intentionally, the best support we can offer is encouragement. Tell them how inspiring it is to see them think carefully about their purchases. Or how they’re still winning financially even as they give themselves the permission to spend purely for joy. The affirmation we give can be incredibly empowering.

Remember the bigger picture

We’re not socking away money now just to count it later. We're building a future where we can live comfortably, handle emergencies, and sail through life on our own terms. That’s the bigger picture of why we joined the FIRE community.

That said, it’s worth reminding ourselves that we're doing all this hard work now because we plan on being around to reap the benefits. Hopefully, we’re still happy, healthy, and ready to enjoy them when that time comes.

And this means sometimes choosing the $300 room because it makes you happier, even if it delays your financial goals slightly. Rather than a huge setback, we can actually look at it as investment toward our satisfaction and longevity.

Final thoughts

We've learned from experience that while many of us could benefit from saving more, there’s always the risk of others taking frugality too far. Sometimes, it reaches the point where the trade-offs they make are unhealthy and starts to pinch their happiness.

So, if you catch yourself overdoing it, don't hesitate to pull back a bit. Life’s too short not to indulge occasionally in the fruits of your hard work.

We encourage you to ask yourself the tough questions about your money mindset and experiment a bit. Find what works best for you. Hopefully, it’s not chasing dopamine hit from new, shiny things. Rather, it should be spending on things that enrich your life and energise you to go further in the FIRE journey.

If you’ve picked up some helpful hints or have strategies of your own to share, we’re all ears. Drop us a line at hello@aussiefirepod.com or connect with us on our socials at Pearler or Strong Money Australia.

Catch you in the next one, and happy (thoughtful) spending!

Dave and Hayden