Frugality is the practice of being wise with money and avoiding wastefulness. It’s a virtue that many people admire. It fosters responsible financial habits and can lead to a more sustainable life. But there’s a darker side to frugality that can be detrimental to our quality of life. This is known as “toxic frugality.”
This is a mindset that causes many people to slip into extreme types of behaviors. Such behaviors can lead to their own financial problems, but also relational ones too.
Let’s discuss what toxic frugality is, its potential negative consequences, and how to overcome it to achieve a healthier financial lifestyle.
What is Toxic Frugality?
Toxic frugality is an extreme and obsessive approach to saving money. This practice can have adverse effects on a person’s physical and mental health, relationships, and overall quality of life.
While being mindful of expenses is prudent, toxic frugality takes it to an unhealthy extreme.
It manifests in various ways. Here are some of the common things that happen with this mentality.
Compulsive penny-pinching: People dealing with toxic frugality may go to great lengths to save even the smallest amounts of money. They may constantly cut corners and deprive themselves of even basic things.
Hoarding: There can be hoarding of many items due to a belief that they may be useful someday. This leads to to cluttered living spaces and difficulties in letting go of possessions, even long after they have outlived their usefulness. It’s not always a situation like you see on the show Hoarders. But a cluttered space leads to a cluttered mind.
Neglecting health: Toxic frugality can cause people to refuse to spend on healthcare, nutrition, or self-care to save money. They can even do so when such a tight-fisted approach jeopardizes their own or their family’s well-being. (For example, a parent who refuses to bring a child with a 104 fever to a doctor).
Insistence on DIY instead of working with professionals: Certain types of matters in life really need professional assistance. Healthcare is one, but so are legal affairs. A person with toxic frugality may try to cut corners here and DIY these matters instead of seeking skilled help. But this can have devastating consequences if something goes wrong.
Strained marriages and relationships: Toxic frugality can cause tension in romantic relationships when one partner’s frugal habits become overly restrictive and affect shared experiences. The other partner may be highly restricted in what he or she is “allowed” to do, or even kept out of financial decision-making altogether.
Fear of spending: There may also be great fear of spending money on anything beyond absolute necessities. This can cause one to experience a joyless, restricted life. Social isolation is common because of the unwillingness to ever spend on lifestyle or entertainment.
Reluctance to practice generosity: There is also hesitancy to give and be generous. The toxic frugality mentality says that everything has to be kept to one’s self, which rarely leaves room to bless others.
Where Does It Come From?
At the root of toxic frugality is a fear- and scarcity-based mindset. There is an incessant fear of there never being enough, which leads to the closed-hand approach to money and life.
There isn’t one singular origin for toxic frugality. But in my professional experience as financial coach, I find that a common root is childhood financial difficulties childhood.
Take for example a past client I worked with. She is a single mother of two children and has a net worth over $100,000 before she has even hit age 30.
In a coaching session, I asked her why there wasn’t any sort of fun money in her budget. She’s debt-free and has plenty extra money to work with. As we dove deeper into how she processes financial decisions, we discussed some of her money experiences growing up.
Her parents were paycheck-to-paycheck all the time. There wasn’t really any entertainment or social spending. The conversations she overheard almost always involved a concern that bills would go unpaid.
Even several decades later, this experience still affects how she makes financial decisions. She admitted that toxic frugality is her default mentality on money and that this will hold her back from thriving.
Awareness is curative. By exploring why we process money decisions the way we do, we are more equipped to make better ones in the future. This is true whether we struggle with overspending, or not knowing how to spend at all.
Overcoming Toxic Frugality
The first step in overcoming toxic frugality is to acknowledge what’s going on. Reflect on your spending habits and their impact on your life and well-being.
Here are some concrete practices you can start implementing now to grow into a healthier mindset.
Set realistic budgets: Create a budget that allows you to save while also having some money for enjoying life, socializing, and giving. We can do three things with money: give, save, and spend. We need to do all three of them in proper proportions depending on our season of life.
Practice mindfulness: Learn to distinguish between needs and wants. Mindfulness can help you make more deliberate spending choices. We obviously have to take care of the needs, but we should also have some of our wants, too.
Cultivate a positive relationship with money: Shift your mindset from scarcity to abundance. Understand that money is a tool for improving your life and other’s lives. Wealth is created in a market economy. By serving others, we have the ability to earn more and establish ourselves on more solid financial ground.
Prioritize experiences: Instead of hoarding possessions, focus on accumulating experiences and memories that enrich your life.
Declutter your living space: Look through the items you have been holding onto and ask yourself if they are adding value to your life. If it’s been 3 years since you’ve used something, odds are you don’t need it anymore. Working with an organization specialist may also be a worthwhile investment.
Seek professional help: Consider meeting with a financial coach or therapist. While I am not formally trained as a therapist, many of the conversations I have with my coaching clients can feel like therapy. Sometimes just having the accountability and sounding board can be a game-changer for developing a new money mindset.
Final Thoughts on Toxic Frugality
Frugality, when practiced responsibly, is valuable financial skill. But taken to extremes, it becomes toxic and detrimental to our well-being. It’s essential to strike a balance between saving money and living a fulfilling life.
By recognizing the signs of toxic frugality and taking steps to overcome it, we can enjoy a healthier relationship with money and a higher quality of life. Remember, money is a means to an end, not the end itself.
To discuss your money mindset and how to overcome toxic frugality, book your free Discovery Session today!