The Real Meaning of “Frugality”

January 3rd, 2010 Admin Leave a comment Go to comments

The word “budget” has a tendency to make people grimace, and “frugal” is no different. But that’s perhaps because people often forget that the whole point of budgeting or frugality is to maximize the value of your money—by saving money where it doesn’t matter to you so you can spend it where it does.

A Lesson in Dollar Value

In his recent book Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays, professor Joel Waldfogel reveals a thought-provoking statistic: on average, people value gifts they receive at 20 percent less than the price the giver paid.

This illustrates the concept of dollar value: something that’s worth ten dollars to one person may be worth only eight (or less) to another.

Maximize Your Dollar Power

The point of being frugal, then, is making the most of the dollars you have, which consists of two smaller steps:

Spending less where you won’t miss it. We all have areas where we can cut back on expenses without feeling the pinch – whether it’s in opting for second-hand clothing or cutting back on eating out, we encounter chances every day for saving money (see below).
Spending more where it will make you happy. Some people savor their wine. Others love nice purses. And some people wouldn’t be happy without their book or music collection. You know what’s important to your happiness. Remember that the point of saving money is not just to eliminate debt, but to have it around for buying what you truly love.

Here’s a list of everyday opportunities for saving money to put toward purchases that are important to you:

Unplug and shut down. Turn off any new gadgets when you aren’t using them to save electricity.
Lower the heat or opt out of air conditioning. Check out these tips for staying warm without spending much money.
Go generic. If you aren’t a foodie, choose store brands at the grocery store to shrink your food bill.
Buy secondhand. Amazon and Craig’s List offer great online options for buying used items, and so do the old standbys like garage sales and secondhand shops.
Patch it up. It’s often less expensive to fix old clothes and gadgets than to buy new ones, so look up numbers for repair shops or fabric outlets (where clothing patches are sold).
Cook. Unless eating in restaurants is essential to your wellbeing, save money by eating at home.

Remember: “frugal” does not mean cheap. Frugality is a sort of financial wisdom that involves allocating your resources to maximize the pleasure they give you.

Financial Freedom Expert