The Pros and Cons of Cutting Back on Frugality

Americans are a strange breed, and all it takes is a glance into the checkbook of many to see that this is true. According to CNBC, an All-American economic survey shows that Americans are, in fact, being more frugal in the current economic climate, and that’s a relief. However, it’s what Americans are being frugal about that really tells just what a materialistic and strange group of people we really are. Rather than cutting back on unnecessary items, Americans are now spending more than ever on technology at the cost of their health care and diet. According to the report published by CNBC, nearly 49 percent of Americans spend more on technology than ever before; 10 percent of those Americans are cutting back on the cost of their health care and 11 percent on the cost of their grocery bills each month to afford it.

What this means is simple; we are spending less on a healthy diet and health care so we are significantly less healthy. But that’s cool because this Apple iWatch and matching iPhone 6 Plus are totally worth it (for the next 6 months until the next and newest ones are released and we spend thousands on those since our currents will become obsolete). That leads us to wonder this; when is it all right to cut back on frugality? When is it all right to splurge and spend more money and when is it better to stick with the frugal lifestyle? It’s fine to cut back on your frugality, but only at the right time.

ANTI Frugality

Being frugal is, mistakenly, not always the most cost-effective decision you can make. What do we mean? There are certain instances in which saving money is actually going to cost you more money in the long run. For example, when it comes to shopping for a mattress for your bed, furniture for your home or a car that will work well for your family, being frugal might not be the best bet. A mattress, for example, needs to be a good one with plenty of support and longevity. It’s your sleep that’s affected, and that can affect your overall health. Furniture for your home should work with your family, and it should last a long time. This means it’s better to pay more upfront for strong, better quality material and the additional services such as protecting your furniture than it is to cheap out and buy what’s on sale even though it is lesser quality.

Even vehicle shopping can be an issue. For example, convincing yourself that buying a sedan and sticking three car seats in the back seat will work even though you know that you will not be able to use your car to travel as there is limited room for luggage, strollers and other needs for a family your size. In this instance, it would be far better to spend the money on a larger SUV or minivan that will work with your family as it grows rather than something that works ‘for now.’

Spending more up front is sometimes the best way to save money. Americans tend to look at the immediate picture, however, and ignore the fact that it’s what happens in the long run that makes the most difference. I say this all the time when it comes to my closet basics. In fact, a girlfriend and I just had a lengthy discussion about this a few weeks ago. She mentioned she was on her 4^th pair of classic black heels this year because hers just fall apart continuously because she wears them so much, and at $50 a pair, she’s already spent $200 this year on the same shoe over and over. I mentioned to her that I’ve had the same pair of classic black heels for 8 or 9 years, but that I paid more like $800 for them. I wear them all the time and they still look brand new.

We debated over the fact that she’d never spend that kind of money on a pair of shoes and I pointed out that I spent $800 8 or 9 years ago and still wear them regularly and they still look amazing. That means I’ve spent around $100 a year if you average that out. She’s already spent twice that this year alone, and at this rate she will have purchased 64 pairs of black heels at $50 a pair over the course of 8 years to my one. That means I spent $800 and she’ll spend $3200. Who made the better frugal choice?

PRO Frugality

Sure, technology is nice – if you can afford it. But downgrading your diet and your health care to do so is probably not the wisest financial decision you could make. What do we mean? Well, what we mean is this; when you die because you don’t have proper health care and you don’t eat well, all that technology in your home isn’t going to matter, is it? Exactly.

Another great example of the wrong time to throw frugality out the window is on a new car. So you want to drive something you love, and you need something reliable. Understandable; there is nothing wrong with wanting to invest in a car that you enjoy driving that has all that you need to accommodate your needs. But deciding that a brand new Escalade is a great idea and financing $80k to have it is not the best idea. You’re not driving that car forever. Chances are good you’re going to be tired of it in 3 years and want something different, and you’re going to be significantly upside down.

Instead, let your inner frugal diva out and buy a certified pre-owned large SUV that has a different label on it. The Suburban or Yukon XL are both just as nice with just as many features, but both have a significantly lower price tag. And if you buy used, someone else already took that depreciation hit for you. And always put a down payment on a new car to keep your payments low and to keep you from being overwhelmed with the depreciation.

I’ll tell you a quick story about an acquaintance of ours who once joined us for dinner at our home and confided in us that while her husband wasn’t working and she was caring for the family, they were reduced to going to her parents house that day to get toilet paper because they had $15 to their name until their next check, and they were barely surviving. That weekend, she posted photos of herself at a car dealership with her brand new luxury sedan. She couldn’t afford toilet paper or groceries, but she financed a brand new car. It’s decisions like these that should have never been made.

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