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Frugality Is Back

Posted on | March 14, 2009 | No Comments

Before the advent of the current economic meltdown, frugality seemed to be a dirty word consigned to the world of personal financial planning. Easy credit meant folks were living on tomorrows earnings. Tomorrow will take care of itself. The snag is, tomorrow came calling earlier than planned. With the credit crunch and banks calling in their funds, involuntary frugality is in.

For us in Nigeria, consumer credit is new to our lexicon. We are used to paying cash for our purchases. However, the global economic crisis has imposed frugality on everyone, be it the credit junkie or normal frugal folks. The economic crisis cuts across the globe, although the meltdown started from the United States. Countries that China, home to the world’s largest foreign reserve (in trillions) is in deep crisis, with tens of millions thrown out of jobs due to weak demand from abroad.

A time of crisis is hardly the time to start pointing fingers. The reality is that economic crisis or downturn is normal. Every human that lives to be 80 will see at least one in his lifetime. It visits every generation. It dates back to biblical times. Famines, as it was then referred to, visited many times, trigering a mass exodus and people migrated in search of food. Nations that prepared for famine in time of plenty always weathered the storms.

FrugalityA time of economic crisis is a good time to return to basics, to learn the lessons from our recent mistakes and come out stronger. Financial principles are global, and as stated in the classic by George Classon “The Richest Man in Babylon” – a part of all you earn is yours to keep. This entails building a strong financial foundation to withstand future economic storms. In the world of personal financial planning, the recommendation is to maintain a reserve of 6 months worth of living expenses. This may not tide one over in a prolonged economic downturn and unemployment beyond a period of one year, but it does act as a buffer from the immediate financial shock that comes with sudden job loss.

If you still have a job, although it is rather late in the day, it is not too late to put your financial house together. Rather than live in denial, now is a good time to cut out non necessities and start building a solid cash reserve by living frugally. Cut out expenditure that are not absolutely necessary. A good book in personal finance is a good place to start, to get a good financial work out.



Repay your debts as soon as you can, especially the credit card variety that creeps up on fast you before you know what hit you. Draw up a budget that aligns with your financial objectives, and agree with your wife and stakeholders (as many that help you spend your hard earned money). Live with what is left over, rather than the other way round, saving and investing left overs, which hardly amounts to anything due to the elastic nature of human demand which is insatiable. Cut your coat according to your cloth. Eat the humble pie for a season and forget about your size, as big boy concerned.

Track your cash flow, inspect receipts on the spot, and file them for accounting purposes. Despise not “change”, they add up. Take a look at the liabilities you have accumulated over the years, some of then can be converted to new streams of income. Redundant cars (you can start a car hire), freezers (you can supply ice blocks), TV sets (you can start a premiership viewing centre), vacant lots (you can start an events centre of parking lot depending on location), etc etc.

You are in a bad shape if you depend solely on your job as your only source of income. If you are downsized, you are helpless. Keep your day job and use your savings via frugality to start another business (I have listed quite a few). Forget about the folks that you used to impress with your flashy lifestyle. What they think of you will not tide you over this economic crisis nor put food on the table. Be yourself for once, and repair your faulty financial foundation.

By the time your foundation is sure, the good times will be back. It is only a matter of time.

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