Smart Frugality: Be Frugal Only Where It Matters

If you don’t really care about the philosophical aspect of frugality, and only care about the dollars and numbers, simply being mindful of the following 6 areas of your life (in decreasing order of impact) can easily get you 80% of the way to a fairly frugal life. You won’t quite become a guru of frugality, but it’s a very good start for people who want to see firsthand for themselves how much frugality can benefit their lives right away.

Smart frugality isn’t so much about using a reusable cloth towel to wipe a spill instead of a paper towel, although that would be pretty nice. It isn’t about turning off all the lights when you leave home, although that would be pretty environmentally friendly as well. It’s about putting your effort into what matters the most. It’s also about setting things up to work on auto-pilot so you don’t have to think about it every day or every week. Making it easy to make good decisions everyday will automatically set you up for success. Automation is a key component of that.


Your housing expenses have the largest impact on your savings rate. This is because most people spend the largest slice of their take-home money on rent. Housing therefore offers you the largest leverage to reducing your total expenses. This is one of those decisions where you make the right decision once and enjoy the benefits of that financial decision for at least a few years. Especially in a city like San Francisco where I live, living just a few blocks away from the core of the city can easily make a big step-function dent in your rent. Same goes with getting a few roommates. You then get to enjoy the benefits of the new lower rent for at least a year to until you move out.

People generally ask what percentage of their net after-tax income they should be spending on housing. There’s no right answer here and it depends a lot on the city you live in and whether you’re renting or own your place. Naturally, the lower the percentage you spend on housing, the bigger your savings rate. A lot of people I know spend around 33% in San Francisco which is normal here. If you’re at 40%, that’s probably too high. I’m personally at 22% which I’m very happy with (16% if you assume I get all my current principal payments back sometime in the future). I’d be able to go down even more pretty easily, but would probably have to endure a longer commute or a smaller space.

Potential savings: $700-$1200 every single month.

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