"Decide what's important to you. Give yourself permission to spend on these things. Pinch pennies on everything else." That's a pretty spot-on definition, in my opinion.
The more I thought about it, though, the more I realized that it speaks to the problems that both over spenders and cheapskates have.
Dollar diary: tracking your spending habits helps keep you out of debt.(your money): An article from: Scholastic Choices
In most situations, it is easily possible for a person to spend substantially less than they earn. So what causes a person to spend more than they earn?
The answer is hidden in that phrase. Over spenders stretch their definition of what's important to them to cover a lot of things.
I'll use myself as an example. Back in my overspending days, there were a lot of optional things in my life that I defined as being important enough to throw my money at. I went golfing a lot. I bought gadgets by the truckload. I bought more video games than I could ever possibly play. I bought carts full of books.
The end result was twofold. First, I often didn't have time to actually enjoy all of the stuff I had bought. Second, because of all of the spending, my life was in a rough place.
My definition of what was important in my life was skewed. I had elevated too many things to the threshold of "permission to spend freely." Because of that, I spent much more than I needed to spend, but I had too many things in my life to actually thoroughly enjoy the things I was spending money on.
The solution? Cut back. Ask yourself what things you most enjoy doing and toss the rest of it. Look for ways of minimizing the costs of the things you do enjoy.
Frugality is often said to be miserable because you have to give up so much. In reality, frugality means not giving up the things that are actually important to you. The trick is stepping back, looking at your life, and figuring out what things are important and what things are not.
On the other side of the coin are cheapskates, a role that I've almost fallen into a time or two over the past few years.
Cheapskates apply principles of penny-pinching to every aspect of their life, even the important ones. Although they have financial stability in their lives, they do it at the expense of other elements of their life that could add a great deal of value.
Here's an example from my own life. I love to read books. I read several books a month beyond what I review on Being Broke Sucks.
For the better part of a year, I refused to buy a single book. Instead, I just reserved books that interested me at my local library and patiently waited for them.
Several titles came out that I was eagerly anticipating. I was able to read some of them fairly quickly (within three months) of their release. Others? I'm still waiting.
Even more noteworthy is that at least two of the books I checked out and read during that period were books that I strongly fell in love with and wanted to read again (and I was quite sure I would read them many times in the future, as I love returning to books that really make me think).
But I was cheap. I didn't buy these books. I resolved to just check them out at the library when they became available again.
One Saturday afternoon, I was sitting at home, having just finished a book. I looked at my unread books and realized that the book I most wanted to read wasn't there – a book I had read before and returned to the library after thoroughly enjoying it. The library didn't have it, either. I checked on Amazon and realized I could have the book for just $7. And I talked myself out of buying it.
That's when I realized I was being a cheapskate. I was avoiding spending $7 on something that I knew would give me many hours of enjoyment now and quite a few hours of enjoyment later on, plus it would be a book that I could recommend to friends and loan to them while they loaned me books as well. To not spend $7 on something I cared so deeply about – and it was a $7 I could easily afford – was pure cheapness.
It's okay to spend money on things that are truly important to you. In fact, it's good, because spending money specifically on things truly important in your life directly raises your quality of life much more than any other way you could spend your money.
Reading is important to me, so I'm no longer afraid to spend money on it. Yes, if I see a book I want to read, I'll check to see if the library has it and read it from them first. Yes, I use PaperBackSwap religiously. But if those outlets don't connect me with a book I'm passionate about, I'm no longer scared to go to the bookstore and pick up that book that I want. Doing so raises my quality of life quite a lot.
The Winners Are in the Middle
The best place to be is at that place between the overspenders and the cheapskates. People who know what's truly important to them and aren't afraid to spend money on it enjoy a higher quality of life than people who spend themselves into debt (adding a lot of stress and challenge to their lives) and people who never spend a dime (missing out on things that they truly value in life).
What are your central values? What's really, truly important to you? Give yourself some permission to spend in those areas without worry – but then lock down the ship in the other areas of your life.
Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages www.beingbrokesuckstoday.com and is the author of "A Dangerfield Manifesto" and co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment SMG Publishing and Taboo Dangerfield Publishing Follow me on twitter