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When Does Frugal Become Cheap?

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The all-popular theme, “it’s not how much you make, it’s how much you save,” suggests that a hard dose of discipline coupled with a decent financial IQ leads to security and, what’s more important, peace of mind. Still, for many people, things like pets, multiple cars, and dearly loved hobbies can be worth debt, little to no savings, and less financial security.

Now crisis situations like home foreclosures or loss of a job usually eliminate some of these “necessities.” However, there is a chunk of people who aren’t in dire circumstances, and who are looking for a better relationship with their money, but are unwilling to change their behavior for it. Maybe they have some debt, don’t really budget, or have minimal savings, but nothing that pushes them into crisis mode. Granted, many of these people would consider their situations to be financially unstable. For them though, lifestyle and material comfort are worth financial insecurity.

Consider for example, the thirty-two-year-old who is unwilling to forgo luxury expenses (cell phone, cable, car, restaurants) to max out his 401K. Or the twenty-seven-year-old who chooses some debt and depletes her hard-earned savings to travel. While ideally we would pay off our credit cards each month, fully contribute to retirement, and have a six-month emergency fund, there seems to be a decent number of people who are pretty responsible with their money but sacrifice some degree of financial security for more enjoyable day-to-day experiences.

As community manager at Wesabe, a free money management tool and community, I frequently get asked which topics cause the most controversy in Wesabe’s group discussions. Though no one subject is responsible for igniting debate, the most common clashes are ones like these, debates between the very frugal and the not-so-frugal.

As personal finance is, well, personal, and reflects what an individual wants out of their life, I am interested in where you draw the line between lifestyle and experience, and total financial security.

Where does frugal become cheap? Or, on the flipside, where does carefree become careless?


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