When your income is limited and you want to save money, frugality is one of the easiest ways to accomplish that goal without having to earn more money. After all, the less money you spend each month on your basic living expenses and necessities, the more money you'll have left over at the end of the month to do other things with it such as add funds to your investments or simply save the money for a rainy day or summer vacation.
Everyone should be frugal on occasion and in certain areas of their life to build good financial habits. However, it's also quite easy to take frugal spending tactics too far. Don't get blinded by the simple dollar amount that you are saving. Ask yourself what those savings are really costing you in time and effort and whether you could spend your time more wisely to get better results.
My goal for this post is NOT to teach you how to be frugal - instead I want to talk about whether you should be tight with your money or not and where to draw that line in your life when you decide over each purchase.
The Dollar Value of Your Time
Before you start on a campaign to slash all unnecessary expenses from your budget to be as frugal as possible with your spending, I strongly urge you to calculate the value of your time. If you already have a job, what do you make from it and how much time do you invest to make each paycheck? Divide your paycheck amount by the number of hours it took you to earn that check to figure out what your time is worth.
When you know the value of your time, you should consider that you could go work another job to make more money each month. Always keep this in the back of your mind before you decide on whether to be a spendthrift with your next purchase.
A common solution to avoid spending money is to simply do the work yourself, but you should always consider whether your time is well spent doing these activities. Maybe you cut your own grass instead of paying someone else to do it. Figure out how long it takes you to cut the grass and what it would cost to have someone else do it instead. If you could earn more money working than you are saving by cutting the grass yourself, your frugality is actually holding you back from having even more money.
How much you make is really the determining factor here. This is why extremely rich people pay others to do a lot of basic things for them, like grocery shopping or cleaning. They're not trying to be lazy and in fact the truth may be the opposite - they're trying to make the most efficient use of their time and maximize their earnings.
Every person has an hourly work value so they can use this as an easy metric to figure out where to draw the line for their own life when figuring out whether to do a job personally or pay someone else to do it. Keep in mind though, if you pay someone else to do the work and don't use that free time to make money yourself, you didn't actually save anything.
Frugal Stress & Obsession
Worrying about every single penny you're spending and trying to maximize the reach of your money can sometimes do more harm than good. In fact, your mental health can suffer when you obsess about your spending too much. You can also cause strain within your personal relationships because being frugal every waking moment can be hard to handle for those that just want to be around you and have a good time.
The key is to find the right balance that helps you save as much as possible while also still allowing yourself to let go and enjoy the moments in life without obsessing over money. You want to be making the best financial decisions for yourself while also making the best decisions for your personal self, but your personal self should always come first. It's very difficult to stick to strict spending habits when you aren't able to enjoy anything out of life by doing so.
Once you figure out what is important to your daily life to help keep you happy, you can then make expenditure cuts to other areas of your life. As I mentioned before though, don't just think of yourself when deciding these cuts. Make sure you consider other people in your life and how your decisions could affect their happiness. You do not want to destroy your relationships to save a few bucks because that is truly not worth it.
Personally, I like to practice what I call situational frugality. I run businesses and a couple of them have high expense costs. Those costs are either unavoidable or if I do decide to avoid them then it will decrease earnings for my business long-term. Expenses like those are necessary in my opinion and are not the right time to be frugal. Sure, there's nothing wrong with trying to work out a better business deal to spend less, but I shouldn't swap suppliers and provide a cheaper product just to save money because that will cause negative events to occur in the business as a result that can actually lower my future income.
That same situational frugality for my businesses can also be practiced with personal finances. It's okay have a movie night at home instead of at the theaters to save some cash, but you shouldn't make your family suffer through 10 hours of no electricity daily or sleep in a sketchy, nasty hotel just to save some money. That's a pretty extreme example, but if you truly get obsessed with every penny being spent then that razor sharp focus can blind you to the reality of your decisions eventually.
You ultimately have to decide what is important to you and those you are responsible for to figure out when to be frugal and when to do what is best for you and your family. Be as frugal as you want to be but also allow some areas of your life to be exceptions or even off-limits entirely. You can pinch pennies in your daily life but still take an expensive vacation each summer with your family if that is what you enjoy doing with your time and money you've saved. The key is to enjoy life more because you can be thrifty instead of having a miserable life because you must be thrifty.
Your Health vs Money
One final factor that you really need to consider above all else is your health and the health of those you provide for, such as a spouse and kids. No matter what, health should always come first, even if it means crippling your financial future. The suffering or harm of a person is never worth saving any amount of money. On a financial level, if you neglect your health, you can ruin your future earning potential and cause more harm than you were trying to avoid by being cheap.
As much as it may pain you to do so financially, spend proactively on your health. If a problem does occur, take care of it immediately and don't make excuses to delay. In fact, the more you delay seeking help for almost any kind of major health problem, the worse it can get if it goes untreated and that can just cost even more money and time away from work in the end.
Going to doctors' appointments, taking vitamins and especially eating right can be downright expensive. Even worse, the expensive of trying to live a healthy lifestyle just seems to keep rising more and more as time passes. Despite the fact that living a healthy lifestyle can be expensive, you need to view this as situational frugality. This is as necessary of an expense as buying inventory for a business or paying employees - if you save money by avoid the expense then it will catch up to you eventually and do more harm than good.
Being frugal is all about focusing on what is best for your financial health, but if you aren't around anymore because your personal health fails then your financial health doesn't matter, so protect it above anything else.