Many of the financial fitness gurus have banged the drum ad nauseum—don’t buy lattes, don’t eat out, buy your clothes second hand, clip coupons. Then there’s the other side of the fence—start your own business, make money by investing in (fill in the blanks), etc. Who’s right?
Well, I say only pinch as many pennies as you need to (unless of course you enjoy it). Do you have an emergency fund equal to at least 3 months income? I like six months to a year better, maybe two if you’re really close to retirement, but you’ll have to assess how secure your job is and what other sources of support you can access—like living with a parent, a partner with secure employment, a good side business. Are you saving at least 10% of your income (if you’re younger than 40) or 20% if you didn’t save much before 40? Are you nearing retirement with savings of 20 times your current income? Then don’t bother—buy anything you crave at the grocery store, indulge in that dinner out without an Entertainment book coupon, park at Starbucks. If your financial picture is already in good shape, you’re probably not the type to go wild anyway.
But let’s take it down a step. If you’re carrying a balance on your credit card(s), aren’t saving, don’t have an adequate retirement fund for your age, it’s time to become a frugalista. And I mean that whether you’re making $50K or $500K. Unfortunately, any financial planner can tell you hair-raising tales that prove income has no relationship to savings. But even being frugal has a hierarchy: tackle the big wins first.
Re-evaluate your big bills first—get some new insurance quotes, see if you really need the super premium cell phone service, and (gasp) calculate whether you really can afford your house or if a sale or refinance makes sense. The afternoon spent doing this can easily pay you back $100 or more per month, and that buys a lot of lattes. People who spend all Sunday afternoon clipping and sorting coupons to save $5 often never take a look at their car insurance or their cable plan. Dumb.
Then what? Calculate how much time you spend to make sure the money saving is worth it. Now, I’m my mother’s daughter so I do clip coupons and probably always will because it’s a fun form of shopping for me, from the comfort of my bed on Sunday mornings. But I only clip coupons for stuff I buy anyway, or might be interested in trying. Since there are rarely coupons for fresh fruit or grass fed beef, I don’t make much on this. However, I can usually find enough coupons to pay for the cost of the Sunday paper, making it worthwhile to me. Also, when I use coupons I generally try to get the value back in cash (just ask) and put that cash in the change jar in the kitchen. I like to see it add up and it turns out to be fun (for me) mad money. Even though I’m awed by people who do it, super couponing is not my style—too much effort for too little per-hour return. But if I were really, really broke or simply enjoyed the gaming aspects of it, I’d do it.
Still short on the silver? Then it’s worth evaluating what IS important to you and what’s not. Brown bagging it is almost always worthwhile not only for cost, but also for taste, identifiable ingredients and weight control. But if you can use lunch to network or accomplish something, then grabbing something to go, or eating in the most plush restaurant will be a worthwhile investment of money. Office coffeemaker or Caribou? Again, is it a satisfying luxury or a reflex. I vote for pleasure, but only if it really is a pleasure. Otherwise, save the dough.
Our strong “Protestant ethic” considers frugality a virtue and an end in itself rather than a means to a goal. Not me, I say enjoy life. I can’t enjoy myself if I’m not paying the bills, and opening up banking statements with a hefty balance is more worthwhile to me than a brand new car. I clip coupons but I like to stop at Starbucks. So, I say adjust not only your spending but also your savings to your needs. Decide if you’re getting a good return on any investment involving money, time, or effort.