9 Mar 2015
Frugal, not cheap, but frugal is an important trait in those who are working toward becoming debt free and living in financial freedom to build wealth. I have always promoted frugality to my clients. It is important to price shop, use coupons, buy generic, etc.
There is a time however, when being frugal turns into being cheap and it starts to cost you money. Like the old saying goes, “the bitterness of poor quality remains long after the sweetness of low price is forgotten.” With that said, it is important to know where that line in the sand is between frugal and cheap.
For example, I have a friend who will drive 15 miles out of her way to save three cents per gallon of gas, now when you think about it, that extra 30 miles round trip to save .51 cents on a 17 gallon tank of gas. The trip most likely used up and extra 2 to 2.5 gallons of gas assuming she gets 12 to 15 miles to the gallon. So that savings of .51 cents for the cheaper gas cost an extra $5.80 if gas is $2.90 per gallon. That is an example of frugal turning cheap and costing you money.
Another thing to take into consideration when being frugal is the value of your time. Many times referred to as soft dollars. Sadly, many people do not actually put a value on their time. But your time is valuable and must be used wisely just as money must be spent wisely.
How do you put a value on your time? One way is to take your gross (before taxes) annual income and divide that by 2080 (number of working hours in a year based on a 40 hour work week) this will give you your hourly rate of pay from your job, so that hourly rate is a good starting point for a value on an hour of your time.
But I am a stay at home mom how to I put a dollar amount to that? Well, it is near impossible to put a value on stay at home moms because your service to the home and family is priceless, non-the-less, your time is of value and must be used wisely. It is important not to take away from the kids, and other duties around the home, so you must determine what it would cost if you had a sitter watch the kids for an hour as well as the hourly rate of someone cleaning the house, add those two amounts up and that is a good starting place of your personal hourly value (of course you are worth much more because you do so much more.)
Using this thought process will help you to insure you are actually being frugal and wise with both money and time, verses being cheap and just looking at the dollars involved in spending rather than the whole savings picture.
So next time you are trying to be frugal, make sure you are not costing yourself extra money by being cheap..