Saturday, November 8, 2008

When Frugality is Cool!

How much is enough?
Lately there has been a lot of press on frugality. Times are tough and even the wealthy and rich are jumping on the frugality back-wagon. Good for them and maybe good for us. So what exactly is frugality and how does one choose to walk on this path? Here are some personal reflections.

Drawing the line
To a large extend frugality is the line you draw between spend and keep. More thrift means more frugal or conversely more expenditure means less frugal. At the end of the day – it a personal decision as to what balance you seek between spending and conserving.

In other words, it is about supply and demand or pricing power to be specific. If something is readily available and it is cheap – you will probably not value it too much. Increase the price or reduce supply (which will also increase price) and suddenly you pay more attention to your usage. Take gasoline as an example. At less than a dollar/gallon – you did not care about hybrids and public transportation. At $4/gallon – that perspective changed. The question is will be go back to the old ways or have we made a permanent change against gas guzzlers?

A corollary, although an important one is about conservation. Frugality means forgoing or limiting your consumption which can translate into conservation. The less we use – the better for all of us.

Smart Saving
If I can clip a coupon and save a few bucks or feign time constraints and spend more for the same thing – which approach is smarter? The answer lies in how I manage my time. I can pay someone $20 to mow my lawn and save myself 2 hours of time which I can use to cut coupons and drive the extra mile to the discount store and save $50 - now that is smart usage of time and money. Frugality is about smart usage of money.

And finally – frugality is about living your life in a financially prudent fashion. Money is an enabler and not the destination. Use it wisely and enjoy the outcome.

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