Everybody wants to cut costs and save money. There’s absolutely nothing wrong with that. However, problems can start to appear when you try and be too careful with your money. Sometimes trying to save a few bucks—buying the cheaper set of tires or not paying up for the better quality item—could actually cost you more money in the end.
This article is going to explain why being overly-frugal can be a bad idea.
You Have to Spend Money to Make Money
I’m sure you’ve heard this famous phrase uttered before. It’s nice to look into your bank account and see that you’ve saved $5 using a coupon or not getting McDonald’s on the way home from work because you can’t be bothered to cook. Depending on your lifestyle and circumstances, it can be detrimental to use the frugal mindset.
Maybe you don’t want to go to college because you’re worried about the constant debt repayments, maybe you don’t want to start investing in the stock market because it’s too risky, etc. Something like a college degree could get you a job in the financial sector, for example, where you’re getting paid $80,000 rather than the $30,000 you’re making right now.
So, the point here is…When you spend money, think about long-term benefits. A college degree, like in the example above, may put some debt on your budget, but you might earn it all back in two years at a good job.
You Won’t Enjoy Things
If you’re spending money on TV dinners and ramen every week, you might be saving money, but that’s no way to live, is it? Research shows that microwaved food and a poor diet can lead to depression—not to mention health issues.
That’s potentially thousands of dollars spent on medical bills, which will destroy the objective of your frugality.
Maybe you want to go on vacation but decide the plane ticket and hotel is too expensive, and you won’t bother. Again, memories and experiences are often worth more than saving a few extra dollars.
Go out there and try new things even if it will eat into your budget a little bit. You don’t have to go on holiday every few months or even every year; just be prepared to treat yourself if your earnings allow it. No point saving all this money over your lifetime just for it all to have amounted to nothing.
Focus on Other Opportunities
Instead of being happy with what you have, focus on getting more. Don’t be satisfied with saving $200 a week, but instead be satisfied with earning $200 more a week. This point ties in with the last one about enjoying life.
If you strive to go on that expensive holiday, earn more so that you can comfortably do it. Being frugal can mean adding some new skills to your repertoire like learn to speak another language or learn to code. All these things put you on a path to have the opportunity to gain a higher income.
A higher-income equals the ability to invest more and buy new things.
A Simple Equation to Decide If You Should Be Frugal
So far, this article seems pretty skewed towards being anti-frugal…And that is not the point. The point is that being frugal is about seeing value, not just costs.
Frugality is about finding the best value for the lowest price.
Here’s a very simple equation for you to use on deciding your frugality (< means less than, > means greater than—in case you forgot your elementary math):
If Money Saved* < Potential Money Earned** = Don’t Be Frugal
If Money Saved > Potential Money Earned = Be Frugal
*In this equation, money saved simply means the amount of money you’d save by being frugal.
**Potential money earned just means how much money you could have earned in the same amount of time, using the same amount of work and effort.
If you follow this equation, it can be a very easy way to balance your spending versus your saving. I know some of the metrics of this equation can be quite hard to judge, so you need to trust yourself to make the right decision when using this formula in your head. Check out this article for additional information by MakingSenseofCents.
Don’t go away having read this article thinking you need to shove everything into your 401(k) or buy a whole lot of Apple stock …Or even that you need to splurge money on an expensive holiday or you’re going to die without any memories.
Wrong. The point is that trying to save every last penny can leave you poorer—bank account-wise and spiritually so. Frugality is great when you do it correctly.
Your sole goal when it comes to financial health should be a fine balancing act. Use the formula above, and you’ll be on a path in the right direction.
To conclude, don’t be afraid of spending money in an attempt to make more money, but don’t start spending your money willy-nilly. Remember: think about long-term value rather than the price tag in front of you! Best of luck on your path away from mindless frugality!