Fri 13 Jun 2008
Repost – Forget Frugalism and Embrace Capitalism
Posted by RichSlick under Money Management
[5] Comments
This is the grand daddy of posts that has spawned so many other discussions regarding frugalism vs. capitalism and some people have been recently trying to straddle the fence by calling themselves “frugal capitalist” which is complete bull, in my opinion, but that’s a post for another day. Originally posted in December 2006.
A frugalist will spend his time searching the web, newspaper, and speaking with his friends to find that next great bargain basement deal. Upon finding the lowest price for a product or service he’ll triumphantly cheer as he reaches for his wallet to fork over cash to pay for that item.
A capitalist will spend his time searching the web, newspaper, and speaking with his friends to find that next great money making opportunity. Upon finding the highest return on an investment, he’ll triumphantly cheer as he reaches for his investment portfolio and adds that extra capital that he’s just earned to his books.
A frugalist will live his life loathing people who pay (gasp) full retail price for a product or service. He’ll buy second hand, dinged or refurbished items to save a few bucks.
A capitalist will live his life enjoying the fruits of his labor. He won’t concern himself too much with the cost of an item because he knows he earned the income to enjoy it.
A frugalist will congratulate himself at his ability to pull one over on a corporation by taking advantage of rebates, discounts, sales and other tricks so that a retailer doesn’t achieve full profitability on their sale – a win-lose proposition.
A capitalist will improve the economy by helping create new jobs, corporate expansions, product development and a slew of other activities because of his investment capital. He’ll also improve the economy because he uses his returns to invest further or uses his excess capital to buy products and services -a win-win proposition.
A frugalist will deride you for not following his ways.
A capitalist will try to teach you how to achieve superior returns but will not ridicule you, he’ll simply sigh, shrug his shoulders and move on to teach others willing to learn.
A frugalist will never buy a new car and will advise you to do the same but doesn’t quite understand that used cars have to come from somewhere.
A capitalist may or may not buy a new car but he carefully considers his options because he knows that buying new cars helps keep people employed and keeps the economy growing.
A frugalist will condition himself his whole life not to spend a penny.
A capitalist will condition himself his whole life to earn an extra penny.
A frugalist will squander the most valuable commodity (time) doing all of the frugalist things above.
A capitalist will invest the most valuable commodity (time) doing all of the capitalist things above.
5 Responses to “ Repost – Forget Frugalism and Embrace Capitalism ”
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[…] Rich Slick has a great post contrasting those who are capitalistic and those who are frugal. In it he points out all the advantages of capitalism and all the negatives of being frugal. There […]
I think you take it a step too far. If I save a dollar on an item, I save the local sales tax on the item which is approximately 6 cents around here. Therefore I have saved $1.06 already.
To make another $1.06 to enjoy the fruits of my labor, I have to pay state and federal taxes on the money I earned. If I were in the 28% federal and 7% state tax brackets, I would have to make $1.63 to spend $1.06 for a $1.00 purchase.
So am I really better off if the effort to save $1 is less than the effort to make $1.63?
You’ve created a false dichotomy.
Being frugal means spending money wisely to maximize value. Being a capitalist means leveraging money/resources to maximize profit. The two are not antagonistic! If anything, they are cumulative.
Maybe our interpretations of the term “frugal” differ. I am frugal, but not “cheap.”
I agree with the above two posts.
I am frugal. That doesn’t mean that I spend my time combing through the newspaper for coupons; that just isn’t worth my time.
To me, being frugal means buying a modest compact car instead of a luxury sports car, even though I could have afforded the latter. I put that extra $60,000 into savings instead. And, when buying that car, it means I spent a few extra hours negotiating to save about $5000 off the price that many others are paying.
I am also a capitalist. As a capitalist, I’d rather create products that others overextend themselves to purchase. I’ll take their cash and save it for a rainy day.
#1 above also hit a very important nail right on the head. The implications of this are very interesting to anyone who values quality of life.
Here is why I think people that call themselves frugal capitalist are full of crap.
In any given day, there are 24 (and ONLY 24) hours. Presumably, we each need 8 hours of sleep and, presumably, we each work 8 hours to earn a living which leaves 8 hours free for you to do with as you please (we’ll leave weekends for another post).
So there are 8 “free” hours in the work week for you to conduct various activities. Being frugal takes time. Anyone that argues otherwise is full of crap. I know BECAUSE I WAS THERE!
I’ve done the couple clipping bit, I’ve done the FatWallet.com & SlickDeals.Net searches, I’ve done the make your own [insert whatever] at home to save money. Too many people are assuming I was born with a silver spoon in my mouth. Poverty sucks and relying on coupons or frugality to get you rich will leave you sorely disappointed.
My personal experience with frugality is that it is a colossal waste of time. It is even more so when you have high income and your time is better spent researching investments that can return 10 pct, 20 pct, or 50 pct on the capital you invest.
If I have 200k in my brokerage account and I can earn an easy 4% then that’s 8k that I didn’t have before through a click of a mouse. If I can replicate this four or five times I can buy the Mercedes without debating about whether I should buy a Ford instead.
It’s all about volume and capital. I have a disclaimer at the top of every post that this site is intended for those in the 105k+ net bracket and someone making 30k will likely never understand my capitalist philosophy. It’s one of those things that you just have to be there to understand.