The Psychological Benefits of Living Modestly

By: Jeremy Biberdorf

March 12, 2012

The Psychological Benefits of Living Modestly


Rick who blogs at Invest In 2012 is honored to be featured here as a guest blogger!


As media has shown us, the rich don’t necessarily live happier than the poor. I like to think of it like this. “Someone who’s rich might not live happily, but someone who’s poor definitely won’t live happily.” Hence, it is wise to live an in between, modest lifestyle; neither as an ascetic nor a materialistic person. Besides the obvious monetary benefits of living modestly (saving money), there are numerous psychological benefits. Let me draw upon my personal experience.


I have an aunt who lives like a king (or a queen, rather). She and her husband live in this really big house with a ton of antiques, and every time they go out to dinner, she puts on her thousand dollar fur coat and all that expensive stuff. Every time I visit her in her house, I have to tip-toe around, carefully not trying to step on anything or accidentally breaking an antique. Which is why I don’t enjoy my visits to her.


And while she may live like a queen, she’s not happy at all. Her career ended in a failure (her husband brings in the vast amounts of money to support their lifestyle), and now she wanders around with nothing to do other than spend thousands of dollars on celebrity perfume. Sometimes, I think that with the amount of money she’s spent on perfume, she could buy another house or two!


My point is, the rich don’t live happily because often times, money can become a restraint.


A lot of rich people constantly stress about their financial situation, all the while spending like there’s no tomorrow. If you’re making $500,000 this year and spend $400,000, you’d better hope that the economy doesn’t crash because once you’re out of a job, good luck funding that $400,00 a year hole in your pocket. By living modestly, you can relieve your stress and sleep well at night. Ostentatious living creates stress over your bills.



Like the media has mentioned, some people are actually seeing the bright side in this recession. They’re able to turn away from the illusion of happiness (spending money on consumer products) and find what truly makes them happy in their life: their family and friends. While money, to a certain extent, can bring you happiness, ultimately, 90% of happiness in life comes from who you decide to spend the rest of your life with and your friends.


I once told an ex-girlfriend how much I was making, and she said “wow!”. I didn’t really pay attention to her reaction, but when we were having a private dinner with some friends, she shared how much I was making to everyone. Everyone.


It was pretty embarrassing, as I knew what would eventually happen. My friends started hating me. If my mother’s taught me anything, it’s that people (for understandable reasons) hate the “rich” (even if you’re not that rich but just live a better than average life).


Just look at Occupy Wall Street. “Rich” seems to be the dirty word; just to say that you’re rich will seem like you’re showing off (even if you’re not), which others will hate. And if you do try to live an ostentatious lifestyle and show off, then people will have all the more reason to dislike you.


So if you live modestly, people won’t hate you (at least for financial reasons)! I have a friend who acts like she’s pretty poor (when in reality she’s actually insanely wealthy). I asked her “why do you do that? With your money, you could be doing a lot of things.” And she said “because if I live modestly, a lot of people will help me out of sympathy and respect”.


Above all, being frugal and living modestly simply creates a more carefree, spiritually rich lifestyle.


Editor’s Note: Rick approached me to do this guest post last week. Based on the back and forth we had been having and the quality of his blog, I happily obliged. If anyone other bloggers are interested in doing a guest post, please contact me.


On a side note, after scheduling Rick’s post I found out that he made some big mistakes within the personal finance blogging community a little while back. I personally do not condone his previous actions, but we had a good chat about it and he does sound like he is genuinely remorseful. So hopefully others are willing to give him a second chance and allow him to redeem himself.


Photo Source

About the Author:

Jeremy Biberdorf is the founder of Modest Money. After working many years in the website marketing industry, he decided to take on blogging full time and also get his finances headed in the right direction. Also check out his contributions to and Benzinga.

53 thoughts on “The Psychological Benefits of Living Modestly”

  1. Avatar

    My current occupation, when I disclose it to people I meet automatically think that I make more money than I actually do. Although in some situations I get better service over it, in most instances people just expect me to spend more. Or to be careless with money and throw it around.

    1. Avatar

      Maybe that’s a sign that you need to ask for a raise 🙂
      It is interesting how people expect others to be carefree with their money just because they think they have plenty to spare. Unless you really are making a lot of money, you still have to be careful with your spending and keep long term goals in mind.

  2. Avatar

    I agree that living modestly is most likely better. When I tell people what I do, they assume I have money. Friends my age also assume I have a ton of money since I almost have my MBA. It stinks though because some people like to take advantage of me.

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      It sounds like those people are just jealous. Rather than putting in the time and effort to increase their own income, they’d rather ride the coattails of others. Some wealthy people make a point of hiding their financial worth just to prevent situations like that.

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    I get the you must make a lot of money as well. You have an MBA, rental property, nice vehicle. Yeah also student loans too that take right from my pocket every month. A lot of my friends do not have advanced degrees, so I am seen as the rich, financially savvy one and the one looked to spend more money when we go out to dinner. While it is nice to be seen as rich…that is definately not the case.

    1. Avatar

      I used to get those kinds of assumptions. The solution? Make less money lol. No it’s just a matter of changing your friends perspectives about money. The smart ones will realize that to afford the more important things in life, it really helps to be more careful with your money in other areas.

  4. Avatar

    Living modestly is definitely better in terms of personal enjoyment. Sure, being a consumer brings a certain amount of satisfaction, but its short lived and unsustainable.
    I suppose I’m lucky because I’m still riding the wave of “poor entry level employee” so my friends know that there isn’t a lot of extra money to go around. I’m not looking forward to the day I change in their eyes.

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      That’s when you take on a mortgage so that you have a new excuse not to throw around your money. So when they ask for that round of free drinks, you can just say, sorry but I’m working hard to save up for my down payment.

      1. Avatar

        Right now my excuse is “Sorry I’m saving for my wedding” Then it’ll be “Sorry I’m paying down my debt” and then “Sorry I’m saving for a downpayment”. Looks like I’ve got the next 10 years covered.

  5. Avatar

    I definitely agree about the benefits of living modestly.

    The fact is that most “rich” people aren’t really rich, they just earn high incomes and they blow all of their money. The true “rich” people in this country worked hard for a long period of time and built wealth over decades.

    It’s unfortunate that people look down upon the “rich” because they’ve really been misjudged.

    1. Avatar

      I guess that’s the difference between status symbol rich and savings rich. Anybody can blow some money and pretend to be rich. It doesn’t mean that you’re actually well off financially.

      Thanks to the whole Occupy Wall Street movement, suddenly all rich people are looked down upon. It sucks for all the rich who happen to be good people and involved in various charities.

  6. Avatar

    Ya, money really can be a horribly divisive issue. Many times it is best just not to bring it up at all as it is so easy for people to become jealous.

    1. Avatar

      You could avoid bringing it up, but usually people can tell if you have money based on your career or things like your clothing. It’s pretty tough to completely hide.

  7. Avatar

    If your aunt spends that much money on perfume, my guess is that she’s not just unhappy, she’s dealing with a serious emotional breakdown. As far as money and happiness is concerned, I think that money can increase happiness. However, it can’t create happiness. Being happy comes from having inner peace and a meaning for living. Money is essentially the byproduct. Jim Rohn stated that having more money only makes you more of what you already are. If you were unhappy with no money, you would be completely miserable with a lot of it. Great post!

    1. Avatar
      Rick @ Invest In 2012

      Well it’s not that serious (for her) right now at least. She’s always been a pretty heavy spender. But her days can only get worse as she progressively ages.

    2. Avatar

      I don’t necessarily agree with Jim Rohn’s line about money and happiness. In some cases that may be true, but there are also people facing struggles because of lack of money. Those people are bound to be somewhat happier with money.

  8. Avatar

    I’m working really hard on becomeing a working-man’s rich guy. I take a lot of pride in having a solid financial foundation and not a McMansion built upon fancy cars, $1,000 suits and $5,000 watches. I sleep very, very well at night (except for the 6-month-old waking up every 3 hours, of course…).

    1. Avatar

      Glad to hear that you are taking that approach Nick. I’m sure your baby will be happy down the road too. Just don’t make your son drive a Geo Metro too or he may never talk to you again 🙂

  9. Avatar
    azra, readyforzero

    Truer words were never spoken! I remember back when I was a grad student with limited spending capability, budgeting my way through my masters program. On that modest stipend, I was still very happy with the amount of money I made because I had not scaled up my spending and kept it in check. Now, my income is considerably higher but living in San Francisco, the city with the most restaurants per capita, it’s actually quite a bit more difficult to live a modest lifestyle and I actually have to try a harder to live within my means. Still, I find that I’m happiest when I find creative ways to have fun and focus on enjoying people’s company.

    1. Avatar

      I can relate to the temptation of great restaurants. Vancouver has a pretty good selection of restaurants too. So for a while we were trying different places at least a couple times a week. Add in our favorites too and that’s a whole lotta money.

  10. Avatar

    Beyond the happiness of a full belly and a safe place to call home I’m not certain how much additional happiness money will buy you. Sure you can get lots of conveniences and entertainments, but those only provide fleeting pleasure. To be truly happy comes from within, or at least that’s what I am coming to believe.

    1. Avatar

      That’s true to an extent, but that entertainment and other luxuries is sure to help temporarily. The problem is that when you can afford all kinds of peak experiences, the lesser experiences become dull by comparison.

  11. Avatar

    I think money can buy some happiness. Or, better put, money can help you acquire the things or experiences that bring you joy.

    My weekly dine-out nights are so satisfying and delicious–I think my happiness level would be seriously depleted if I had to give them up.

    I do notice, however, that some bigger purchases (like electronics or flashy clothing) don’t really amp up my happiness level at all. It’s just temporary excitement with an eventual fizzle out at my desire to get something else.

    I think it’s the temporary excitement that gets us every time though. It’s a thrill to get something new and, consequently, it’s hard to shake that practice

    1. Avatar

      Yes those kinds of purchases are exciting, but I would think they’d get less exciting if you could afford them much more often. The same goes for fancy meals out. Once it becomes the norm, the excitement wears off.

  12. Avatar

    This is a great post that I can relate with. I go to a University where 90% of the students come from wealthy Connecticut towns. Most of them have famous relatives or their parents have inherited insane amounts of money. However, walking around campus you would think that only 10% or less are wealthy. Most of the students don’t show off their wealth or more importantly they don’t ever mention it. Everyone fits in equally and for this reason there are no separations due to financial status. Sometimes I mistake the wealthy for the poor because of the way they dress and act. Some wealthy people splurge on clothes ans jewelry to show off their wealth but others spend their money on more wise things and don’t care about the materialistic junk.

    1. Avatar

      I wonder if that will become the new trend with wealthy young people. Since they all still want to be ‘cool’, I can see why some would want to avoid the 1% label.

  13. Avatar

    Good story! I think the problem here is that people miss the goal with money. They get caught up in the idea of money itself making them happy rather than what the money can do for them. Buying expensive things or big houses doesn’t make you feel good for long. Even throwing fancy parties to impress your friends won’t last for long. But people who find a passion to keep them occupied will be happy. Find the right hobby and you may not spend much money at all. If you’re truly ambitious, then you’ll figure out how to have more money for the purpose of enhancing your abilities to pursue these passions. For example, I’d love to have enough money to never worry about going to work ever again so I can play my guitar all the time! (A lofty goal, I know) But in reality, this is why I focus so much energy on planning for retirement and generating alternative sources of income. One day my money will take care of me so I can embrace these pursuits of happiness.

    1. Avatar

      Well said. I guess our decisions with money get clouded by peer pressure and the media. You’re lead to believe that once you start making good money, you should live the high life. It isn’t the money that’s really important. It’s what that money can allow you to do to make yourself happy.

      1. Avatar

        What if being me means living the high life?

        Like everything in life, it’s not so black and white. I’m totally cool with people who like spending money modestly, but I also see the benefits of say… a rapper “investing” in a Phantom sports car after getting his first big payday.

        Drake did that and he’s doing pretty well last time I checked. At the end people gotta know themselves 🙂

        1. Avatar

          I think it comes down to priorities and having the income to actually support those luxuries. For celebrities in the public eye, they are benefited by showing off money. It gets the media talking about them and may lead more people to look up to them.

          1. Avatar

            Thank you for the awesome response! I have some thoughts on this.

            What do priorities come from?

            Usually, from how people THINK and FEEL, their HABITS.

            Dude, everybody gets benefited by showing off money, everybody knows money is social value, if I walked into your home and you sold ModestMoney books, what would connect us more and end with more respect? Me listening to you for 3 hours or buying 100 books to share with my friends?

            You would probably put the blog I promote up on your site, instantly, whether or not I spoke anything about ModestMoney on my site.

            And it doesn’t have to go that route, because like you said, it’s the whole media thing.

            But say your sister PAID for anything for you, a drink, a meal whatever whatever in front of you, in an awesome manner. Doesn’t that feel like love? I think demonstrating an awesome use of spending money shows a lot about who a person is and where they are in life… and where they’re going. In small ways and big ways, no matter who you are and what position you are in life whether superstar or bum.

            Love your blog and getting good ideas from it, keep rocking you 🙂

  14. Avatar
    After College Money

    I have talked to people in upper management who have high paying salaries. Some of them feel trapped under a large mortgage and multiple car payments and bills. This does add stress at home and work, but I suppose it is the small price you pay for a lot of money.

    Overall, I think a person should manage this stress so it doesn’t effect their life in a bad way. You make a good point, your friends, family, and relationships are what really matter in life. Personally, I would like a lot of money but I don’t want it to stress me out. Sometimes, modesty is the best policy 🙂

    1. Avatar

      Good point about the different stresses that wealthy people face. With the higher price tag attached to their responsibilities, I could see how it could add extra pressure. You’re right though, it comes down to how they choose to manage their stress.

  15. Avatar

    i don’t know, I think I’d like to see if money bought some happiness. And if not, it may rent it for a while. Really, I think the main things that money brings are the ability to do what you want, should you have that inclination, and to provide experiences that you probably couldn’t get without money, again should that be your inclination. For example, it may be difficult to go and study art in Europe for 6 months without the resources to take that time off, live somewhere, and have the free time to study. Like I said, I’m willing to take one for the team, so send some cash my way, and I’ll let you know the amount of happiness it brings. 🙂 Heck, you don’t know how happy I was when I saw that Adsense was going to give me $.32 eventually!

    1. Avatar

      You’d think money would open up that kind of freedom. Unless you win the lottery though, you inevitably have to be doing something to keep up that income. Of course those opportunities would be more attainable for the rich when they retire. If you did go take that art course in Europe, would you later be satisfied with some local courses? Probably not. You’d probably need more high end things to maintain that rented happiness. It’s like the spoiled kid with so many toys that he wouldn’t want to play with his more basic toys.

  16. Avatar

    Hi Jeremy!
    I’m a high school student currently living in Singapore. In school, the Singapore American School, I’m taking a class about personal finance, and I’ve got to say, you pretty much summed everything up. I think it’s funny how people think how money is correlated to happiness, but it isn’t. The reason why we think that it does is because of the hype of social media. So many people are convinced that more money equates to more freedom and happiness, but like you said, money only restrains them. I found the story about your aunt to be really interesting. It’s unfortunate that her career ended so quickly, but I find it even more unfortunate to hear that she’s caught up in the rip of maintaining her “rich” image. Throughout media, we see that it’s good to be rich, and we are given a portrayal of how we should live our lives: a life filled with materialistic wants and needs. This follows the constant urge in society to conform and appear as rich and glamorous as possible. Maybe the Occupation will be doing the 1% a favor. No longer do they have to keep up with this previously glorified image; they can tone everything down and not be afraid to admit that maybe they are spending too much and maybe they can’t afford the same luxuries anymore. My parents have always told me to live modestly. Even when I’m older and, hopefully, make tons of money, live modestly. In fact, while most rich people have Lamborghini’s, Ferraris, and Mercedes-Benzes, did you know that Toyotas and Hondas are actually favored more by millionaires, like Warren Buffet? See, although millionaires are obviously rich, they live modestly too! So, this is a model I think we should all live by. This was a great read. Thank you!

    1. Avatar

      Thanks for visiting my blog Tamara. I don’t know if the Occupy movement really will change rich people’s perspectives at all. They’ll likely just see those protests as being fueled by jealousy. There will still be richer people they know that they feel pressured to keep up with. There will almost always be someone with a nicer car or bigger house. Their own jealousy will probably lead them to chase those things too.

      It is true that many rich people drive mid level cars, but that may be because they are aware of how much a car depreciates. I’m not sure if it is about living modestly in those cases. It’s probably just a good financial decision.

  17. Avatar

    I’ve learned that the ones appear to have money are really swimming in debt and the ones that look like they are barely getting by are the ones who are like Scrooge McDuck and going swimming in their money.

    I work for a company that deals with high net worth people. When I started working there, I was happy to see that the owners of the company didn’t drive BMW’s or Mercedes. They drove Honda’s and Subaru’s. They don’t get caught up in the image of wealth. I know I can talk to them about money and get good information.

    1. Avatar

      I think I could have benefited from working in an environment like that. One’s views on money get affected a lot by who they work for and with. If they are making smart financial decisions and not flaunting their wealth, that is bound to rub off on you too. The same goes for the opposite where they are showing off their money and luxury purchases.

  18. Avatar

    Hi, I’m a current student of Singapore American School taking a finance class. I read this guest post by Rick, and I just wanted to say that I agree fully with what he said. Living a high-priced lifestyle truly doesn’t make one any happier. Especially since we live in the day and age where perpetual consumerism is extolled and promoted. Many fall into the trap of business company’s ad and constantly want to own more material goods. I can only imagine the insatiable desire for those with a lot of money to spare. However, the short-lived happiness that the idea of ownership of high-end material goods is only relative happiness; it isn’t true happiness. This concept was also mentioned in a short 20 minute video by Anne Leonard called The Story of Stuff, which I find aptly summarizes the problems with the consumerism of today.
    I also found it very interesting because I’ve also just recently written a blog on the relationship between money and happiness.
    Hence, modest lifestyles will get us the farther especially since we won’t be burdened by any high-priced living standards, the constant yearn to earn more goods, nor do we have to worry about being ‘hated’ by those around us for being ‘rich’ or arrogant about it.

    1. Avatar

      It’s surprising that my blog is getting some exposure in Singapore. Not something that I expected anyway.

      The connection between money and happiness is an interesting debate. While some think that you can buy happiness to some degree, it is not true happiness and will likely quickly fade. By changing our attitudes towards money, we can be happy regardless of how much money we have.

  19. Avatar

    I am a finance student living in Singapore and I found your blog post interesting. I agree with the psychological benefits that you talked about in your post. More wealth definitely doesn’t always mean more happiness. This doesn’t mean that we shouldn’t strive to acquire wealth but that we should avoid living an extravagant lifestyle and showing off our wealth. I can definitely relate to the example of your aunt, as I go to an international school and there are many wealthy families that live here. My extended family is less wealthy than these families but I can definitely see that some of the richest people I know aren’t happy while my grandparents are happy. I also found what you said about rich people stressing about their financial situation relevant to some of the things that my finance teacher talks about. Many people who want to have the appearance of being wealthy and live extravagant lifestyles often spend more than they should rather than saving and investing. This means that they probably rely on their month to month salary to cover all their expenses and without their income, they probably wouldn’t be able to sustain their current lifestyle. By living modestly and using smart finance, you can enjoy financial security, even in rough economic times. My teacher talks about people who try to be wealthy and people who are truly wealthy. You usually can’t tell if a person is truly wealthy just by looking at them because they tend to live a modest lifestyle. I also agree that people tend to dislike people who show off their wealth while they respect people who are modest. Therefore, you can lead a happier life while at the same time, spending less.

    1. Avatar

      Hmmm mentioning the S word must’ve got me more exposure over there. Do you by chance all know each other? All 3 posts from Singapore start out pretty much the same way stating where they are from and that they are a student.

      Anyways, thanks for visiting my blog and sharing your thoughts on the subject. People’s true wealth can be deceptive with how some rich people choose to live a more modest lifestyle.

  20. Avatar
    Lena @ WhatMommyDoes

    Loved this post. For me, another big reason to live modestly is if your family and friends don’t have the means to “keep up” with you. Whether they simply can’t or won’t, doing things they can’t afford to do will only alienate you. For instance, if you go on a lavish vacation while they all go camping this summer, you would miss out on that experience. And if you live in a mansion across town while they all live in a working class neighborhood, you won’t see them as often.

    1. Avatar

      Yep it is definitely a lot more enjoyable to live a similar level lifestyle as friends and family. You wouldn’t see them as often and jealousy issues could develop between you.

  21. Avatar

    I have two things to concern. First, aren’t good friends (and true friends) supposed to be loving you for whoever you are (and how much money you make)? And second, being modest is good but does pretend like you are poor to get support from others sound like lying or cheating?

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