The Other Side of the Frugality Fence

In a recent post at Get Rich Slowly, J.D. defined the “basic law of frugality” as this: “Decide what’s important to you. Give yourself permission to spend on these things. Pinch pennies on everything else.” That’s a pretty spot-on definition, in my opinion.

The more I thought about it, though, the more I realized that it speaks to the problems that both overspenders and cheapskates have.

Overspenders?

In most situations, it is easily possible for a person to spend substantially less than they earn. So what causes a person to spend more than they earn?

The answer is hidden in that phrase. Overspenders stretch their definition of what’s important to them to cover a lot of things.

I’ll use myself as an example. Back in my overspending days, there were a lot of optional things in my life that I defined as being important enough to throw my money at. I went golfing a lot. I bought gadgets by the truckload. I bought more video games than I could ever possibly play. I bought carts full of books.

The end result was twofold. First, I often didn’t have time to actually enjoy all of the stuff I had bought. Second, because of all of the spending, my life was in a rough place.

My definition of what was important in my life was skewed. I had elevated too many things to the threshold of “permission to spend freely.” Because of that, I spent much more than I needed to spend, but I had too many things in my life to actually thoroughly enjoy the things I was spending money on.

The solution? Cut back. Ask yourself what things you most enjoy doing and toss the rest of it. Look for ways of minimizing the costs of the things you do enjoy.

Frugality is often said to be miserable because you have to give up so much. In reality, frugality means not giving up the things that are actually important to you. The trick is stepping back, looking at your life, and figuring out what things are important and what things are not.

Cheapskates?

On the other side of the coin are cheapskates, a role that I’ve almost fallen into a time or two over the past few years.

Cheapskates apply principles of penny-pinching to every aspect of their life, even the important ones. Although they have financial stability in their lives, they do it at the expense of other elements of their life that could add a great deal of value.

Here’s an example from my own life. I love to read books. I read several books a month beyond what I review on The Simple Dollar.

For the better part of a year, I refused to buy a single book. Instead, I just reserved books that interested me at my local library and patiently waited for them.

Several titles came out that I was eagerly anticipating. I was able to read some of them fairly quickly (within three months) of their release. Others? I’m still waiting.

Even more noteworthy is that at least two of the books I checked out and read during that period were books that I strongly fell in love with and wanted to read again (and I was quite sure I would read them many times in the future, as I love returning to books that really make me think).

But I was cheap. I didn’t buy these books. I resolved to just check them out at the library when they became available again.

One Saturday afternoon, I was sitting at home, having just finished a book. I looked at my unread books and realized that the book I most wanted to read wasn’t there – a book I had read before and returned to the library after thoroughly enjoying it. The library didn’t have it, either. I checked on Amazon and realized I could have the book for just $7. And I talked myself out of buying it.

That’s when I realized I was being a cheapskate. I was avoiding spending $7 on something that I knew would give me many hours of enjoyment now and quite a few hours of enjoyment later on, plus it would be a book that I could recommend to friends and loan to them while they loaned me books as well. To not spend $7 on something I cared so deeply about – and it was a $7 I could easily afford – was pure cheapness.

It’s okay to spend money on things that are truly important to you. In fact, it’s good, because spending money specifically on things truly important in your life directly raises your quality of life much more than any other way you could spend your money.

Reading is important to me, so I’m no longer afraid to spend money on it. Yes, if I see a book I want to read, I’ll check to see if the library has it and read it from them first. Yes, I use PaperBackSwap religiously. But if those outlets don’t connect me with a book I’m passionate about, I’m no longer scared to go to the bookstore and pick up that book that I want. Doing so raises my quality of life quite a lot.

The Winners Are in the Middle

The best place to be is at that place between the overspenders and the cheapskates. People who know what’s truly important to them and aren’t afraid to spend money on it enjoy a higher quality of life than people who spend themselves into debt (adding a lot of stress and challenge to their lives) and people who never spend a dime (missing out on things that they truly value in life).

What are your central values? What’s really, truly important to you? Give yourself some permission to spend in those areas without worry – but then lock down the ship in the other areas of your life.

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  1. DivaJean says:

    For me, the term “cheapskate” tends to led itself towards “penny wise, pound foolish.” For instance- the type of person who will spend HOURS turning two ply toilet paper into one.. when really the first thing anyone does after taking their share of toilet paper is wadding or folding it all up anyways. The hours spent could easily be used on something more significant that would save more money- like tackling house repairs oneself, cooking from scratch, etc. The phrase “penny wise and pound foolish” also lends itself towards buying things of better quality that last longer- rather than just the cheapest you can find (ie- buying shoes that would last 5 years rather than cheapies that barely survive one season of use).

    My main goal for 2010 is to remain clear in my goals of frugality and not become foolish in the pursuit of cheapness.

  2. I heard a good example of a cheapskate the other day. This guy buys all his clothes from thrift stores. That works for him, because he works from home and just wants to be comfy. He marries a woman who works as a hostess for a nice restaurant. He tries to impose his “thrift store only” policy onto her future clothes purchases. Obviously this fails terribly, and she has to explain to him that she NEEDS to look presentable and business-like for her job. Yes, you can get some good deals and find some okay clothes at a thrift store, but that doesn’t match the LEVEL of sharpness required by her job.
    Now THAT in my mind is a cheapskate. If she’d followed his model of money-spending, she likely would’ve lost her job simply because her closet wouldn’t be able to support the guidelines established.

  3. Adam says:

    Happy New Years to you and your family Trent. Good year end summary post!

    I’m totally a born overspender, it frustrates me to no end when cheapskate-ism rears its ugly head among people I know who use it as an excuse to pirate songs/movies or not tip or wear socks with holes in them etc. (tacky examples of cheapskate-ism I know).

    Luckily I’ve always been well paid since graduating and been able to save (pay yourself first) and just spend what’s left. I’m extravagant yes, but still keeping out of any debt and meeting my savings goals. Some might say that’s a balance but, for instance, I spent $2300 at the outlets over December between myself and presents for Xmas. I think I’d be in for a rude awakening if I lost my job or had to take a low paying one!

  4. Daniel says:

    This was one of your best posts. It really resonated with me, so thanks!

    I was on the cheapskate side for awhile, and I knew it. I knew I wanted stuff but couldn’t justify the purchases enough in my mind. Finally, I agreed to make myself pay for experiences, which was fantastic and made me really happy. I think I am moving more towards the middle, which makes me feel much more comfortable with my situation.

  5. Johanna says:

    This is not intended as a criticism, just a different point of view:

    As I recall, Trent, your “no new books for a year” experiment was intended to get yourself out of the habit of buying books just for the sake of buying books – to stop thinking of books as gazingus pins. And it sounds like it worked, in that you now have a better sense of which books you really want to buy new, and which ones you’re content to acquire from other sources or maybe not read at all.

    Even if something is important to you, it can still be possible to have too much of it, and to push yourself past the peak of the fulfillment curve. Just because books in general are important to you doesn’t mean that every individual book is important to you, or that it’s a good idea to buy them all.

  6. Vicky says:

    Over Christmas holiday, I went to visit my uncle leaving my pets in the care of my husband.

    When I was on the way home, he called me telling me the dog was ill. On a Saturday, at 10 PM, the day after Christmas.

    I told him to take her to the emergency vet, where she was put on IV’s, Oxygen, and had to have an X-ray taken of her chest – she had pneumonia (For the second time since I’ve had her, too).

    When I got there they gave me the estimate – $446. I balked at first, and quickly read over the receipt wondering if there was anything I could do to make it cheaper – but all it consisted of was the treatment already given, and antibiotics which she was going to need.

    Then it hit me – I could lose the most important thing in my life because I was being a cheapskate? No. I had an account of money set aside for veterinary emergencies just like this – so I whipped out that special card and paid the vet.

    Being cheap most of the time allows me to set aside money to build that vet fund. Knowing what is important to me lets me spend it.

  7. George says:

    The true cheapskate is the one who won’t share their wallet.

    Thanks, Trent, for a nice article.

  8. Jane says:

    To piggyback on George’s comment, I think there are different types of cheapskates. For instance, my parents refuse to spend money on themselves and in essence can’t enjoy nice things. Yet, they have never been stingy with other people and tend to give more than they spend on themselves. While I wish they would be able to enjoy nice things for themselves, I find this an acceptable type of cheapskate. What is more egregious are those who are able to spend on themselves yet won’t display the same type of generosity towards others. That is a particularly distasteful form of the cheapskate.

    Regarding books, and this is coming from someone who has bought tons of books in the past, I think that you really have no idea what books you will value in the future. I bought tons of books thinking they would be ones I would refer to for years, and they sit unused on the shelf. In general, as I get older I tend to view knowledge as priceless but books as expendable. This might come from having a small home now with a growing family, but I see the public library as MY library. I don’t need those books at home taking up space. I would rather take it off their (a.k.a. my) shelf when I need it and then put it back there when I am done.

    And I also don’t really relate to Trent’s need for high end cooking ware. I also love to cook and value nice things, but honestly, I don’t see that much difference in use between the All-Clad pots I have and the cheaper pots we have leftover from college. They both work. Just because you love something doesn’t mean that you have to buy the best of everything. I guess in that way I will always be a “cheapskate”, because I just don’t think the higher cost always translates into true value.

  9. chacha1 says:

    Happy New Year, Trent! I liked this post a lot.

    I read both your site and GRS, and the difference in the commenting community is really remarkable. Not necessarily in a good way. But the posts themselves are often complementary, and the difference in point-of-view (and you’re both very different from me) means I get an interesting set of new insights.

    Re: books: That is one thing I know I will never risk being a cheapskate about! Oh gracious, it probably should be. I guess I make up for it by mostly buying cheap clothes. :-)

  10. Saagar says:

    The major problem that I face is not knowing what is really important for me. Nothing interests me to an extent that I really want to do it. I got an xbox 360 as a gift and played some games religiously for some time but then do I want to play it every week, no. Similarly I am yet to find something that is really important to me. I do all these personal finance things spend less than earn etc. but fact is I dont know why I save money after an extent. I am not excited about traveling or gadgets or the like, so it probably is gonna take time to figure out whats really important to me…

  11. Steven says:

    #8 Jane

    Good cookware is only useful if you have a certain amount of skill. The best pots and pans won’t make you a better cook unless you know how to use it.

    Another example are sushi knives. Those are high carbon steel (which is not stainless steel and will rust in presence of moisture) knives, and will rust if not taken care of properly, which Consumer Reports COMPLETELY screwed up a review on. High carbon steel knives are also very brittle, and easily chip without the proper skill to use the knives because the honed edge is so fine. To the uninitiated, you won’t notice a difference. But if you regularly chop/slice/prep with a knife, you will be amazed at how well is cuts.

    I make a big deal about cooking because I’m passionate about it. On the other hand, I really can’t tell too much difference between high end clothing, so I don’t put much money into designer clothes. I had the assistant and a friend of mine choose a few dress shirts, slacks, and got a nice pair of leather shoes for semi-formal occasions and a suit for formal occasions. Other wise, I’m in a generic polo shirt and jeans.

    Figure out where the money will make a difference to you, and that’s what it should be spent on.

  12. Amateur says:

    After many years on earth, I’ve concluded that people are weird about money. I’ve known people to burn cash on everything and anything because they just feel like they can afford to, no sweat, no worries, but a ton of debt. Then I’ve met people who treat every dollar like the sands of time where they may actually live a little less because they’ve spent a resource known for survival. I do agree people in the middle are the happiest because they seem to be able to rationalize the important things and work towards getting what they really want out of their dollars.

    Buying books is a bit of a struggle for city dwellers like myself with limited space. It’s so easy for us to buy the books and end up having them stacked along walls, corners and living in a bit of a mess. I just purchased another bookshelf to store the books I have acquired over the last year. Due to the lack of space, I had to give away or toss out some books (the library does toss out your donations as well). I pretty much narrow my purchases by getting them from the library first, and if I know I want to bend it up, underline and remember the pages, I’ll get my own copy.

  13. Little House says:

    A great post. I agree it’s difficult to find that happy medium. My parents are a good example of cheapskates. They live like paupers, yet have invested $21,000 into my brother’s beat up 1967 Mustang that runs 6-months out of every year. They complain incessantly about his car, but keep throwing money at it. Yet, their own cars are over 20 years old and they are getting into their late 60’s and 70’s. They’d be better off taking the money they’ve given my brother, and investing it in a reliable car for when they hit their 70’s and 80’s. Living like paupers over the last 30 years has skewed their ideas of what’s important.

    Have a wonderful New Year!

  14. Jane says:

    @Steven
    Oh, I totally agree about knives that you get what you pay for. And I know that the All-Clad pans will last forever, whereas the others will not. I also don’t pretend to be a chef – just someone who likes to cook. I guess my point is that you can love something and still not feel the need to invest that much money into all the gadgets and high end things. I understand WHY people do, however.

  15. MoneyReasons says:

    It truly is a self defined financial balancing act. The key is to define a loose budget and stick to it as much as possible.

    For example, most days I only spend 60 cents on breakfast and lunch, but I went to Disney World and stayed in a Disney resort this year too. I’m very frugal (cheap) with my lunches, but spend more that I typically would on a great vacation!

    It all balances out in the end for me!

  16. kristine says:

    You can get faux LeCrueset at Marshalls. We own both (the Le being gifts), and we find no difference, after 10 years of nightly cooking. A quarter of the price.

    #3Adam- why in the world would you care if someone else had a hole in their socks? Your own, sure… but someone else?

    I must admit that I have the hardest time spending money on gifts for small children who already have a million toys. Cheap? I don’t know. Maybe just not wanting to contribute to the ridiculous excess.

  17. almost there says:

    #6 Vicky, We have spent over $5K on our old lab this year and he is worth every penny. Some folks go on vacation, others go to the vet.

  18. almost there says:

    #6 Vicky, We have spent over $5K on our old lab this past year and he is worth every penny. Some folks go on vacation, others go to the vet.

  19. George, I agree. I’ve always thought that a key component of cheapskate-ness is a lack of generosity. Really, just selfishness, I suppose.

  20. Kathy says:

    You can get a set of Tramontina 18/10 Tri-Ply Stainless steel cookware at Wal-Mart that is comparable to All-Clad for a fraction of what you’d pay for the All-Clad. I discovered this from Cooks Illustrated.com, which rated the former as a best buy. Their only “con” was that it was sold at Wal-Mart. I wanted a set of All-Clad and my goal was to save up to buy one someday, but when I saw the CI review, I went with the Tramontina instead.

    As far as the difference between the higher end pots and pans and the ones you had in college are in how they are constructed and how they hold and distribute heat. I wouldn’t recommend buying the higher end type unless you are really passionate about cooking.

  21. Valeria says:

    Got to say, Trent that if you are going on three kids and you want them to be readers and not vidiots, you need to be making WEEKLY trips to the library. When I was a child, The library was the last-but-one stop on the parental errands – last being the grocery so things wouldn’t melt. And there were plenty of times the Saturday afternoon trip was also supplemented by a Wednesday evening trip for school purposes – the Internet may be useful, but a lot of schools still require (and rightly so) physical references too.
    Secondly, if you are only using Amazon to shop for new or used books, you need to consider Abebooks.com. My experience is that very often Amazon used prices can be beaten hard on abebooks and sometimes ebay as well.

    And fainally, Trent – two things. When you speak of people or a group of perople, use “who”, not “that”. As in being the type of person WHO, tho the type of person THAT. That is for things.
    And, as was pointed out to me many years ago by my university president’s widow – time passes, gas passes, but people and dogs die. “Passing on” is an undertaker euphemism and like most euphemisms is trite and poor writing.

  22. Beth says:

    I’m not so sure about pots, but my good quality knives have made a big difference. I eat a LOT of vegetables, so ease of use and cutting down on prep time make a big difference to me. I started with three, and did some research to find out what brands and types were the best. Then I waited for the sales…

  23. You could say that frugality is knowing the difference between price and value. The price is apparent, but it is common both to think that price and value are identical or even not knowing what value is. Knowing value allows the statement you and JD have above.

    A broader way of looking at frugality is the minimization of waste. Wasted money and wasted effort. This is a more ecological way of looking at it whereas price-value is the economical understanding.

  24. Caroline says:

    I particularly like the idea that overspenders think everything is important, thereby making nothing important. I’ve been reading a lot about how keeping too many sentimental things lessens their impact, whereas if you only kept a few really important sentimental things they become much more special. I like this parallel.

    O, books… I justify book purchases by only buying them at the library’s used book store ($.50 to $3/each). I think of it as an extended loan, then I either give them away of re-donate them. Doesn’t feel bad at all to support a cause and a reading habit at the same time. And I’ve managed to come very close to reducing my collection to less than 100 books! Feels awesome!

  25. Diane says:

    Someone gave me that advice years ago to spend your money on the things that truly enhance your life and save it elsewhere. After hiking with cotton socks and complaining about blisters he gave me that advice and I took it and went out and got good socks. Later I bought other things that made hiking even more pleasurable. And eventually I loved hiking so much I made a web site about it which pays for itself and sends me a tiny bit of money every now and then. And then I saved up my money and took two summers off and hiked 3000 miles and had the time of my life. It is good advice to follow because what we really want out of life is to actually LIVE it.

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