It’s tempting to think that a frugal lifestyle is the savviest, smartest way to live, but sometimes it’s not. After all, it feels great to go out to dinner and only order an appetizer instead of an entrée. Or to skip a $4.50 latte and pat yourself on the back, thinking you’re a frugal person.
Not so fast. There are cases in which frugality might cost you more. Let’s look at five examples.
1. You’re a deal hound.
Do you go shopping whenever there’s a 50 percent off holiday sale? Do you line up in front of big box retailers early on Black Friday to score a deal on a new TV? Do you buy things you don’t need just because you have a coupon? If you find yourself being lured in by sales, you might be purchasing more than you need.
We might think we’re saving money when we buy items that are on sale. After all, we’re buying something that’s 30, 60 or even 80 percent off.
However, purchasing an item we don’t need or can’t afford only worsens our financial situation. It doesn’t improve it.
On a radio show, I once talked about how I thought that waiting in line on Black Friday was a waste of time. People shouldn’t spend four hours trying to score $50 off a plasma TV. Instead, they should value their time, using it to earn more money or spend more time with their family.
The radio show host asked me what I would tell somebody who needed that $50 off. If your financial situation is that dire, you shouldn’t be purchasing a plasma TV in the first place, I replied.
Learning the difference between needs and wants will do more for your finances than 50 percent off sales ever will. Nothing is more powerful than scoring an item for 100 percent off because you didn’t buy it.
2. Skimping on your health.
If your health insurance has a high deductible, it might be tempting to skip a doctor’s appointment or forgo getting your teeth cleaned at the dentist. Paying a significant chunk of change for health services might not seem worthwhile.
My health insurance has a $5,000 deductible, so I know how tempting it can be to skimp on your health. But this is “false savings.” In reality, catching an illness or treating an injury early on is better for your net worth and your well-being.
Yes, a medical visit could cause a temporary cash flow crunch within your household. It may not seem like the best option when taking a short-term view of your finances. However, an ounce of prevention is truly worth a pound of cure. Don’t be so frugal you start skimping on your health and well-being.
Visit the doctor and the dentist. Take all of your prescribed medications and update your eyeglass prescription. Don’t wear athletic shoes that are so worn out that they harm the soles of your feet. Your health is worth it.
3. Not taking out enough insurance.
I’ll be the first to concede you can pay for too much unnecessary insurance. On the other hand, there are many frugal people guilty of purchasing too little insurance.
Homeowners, renters, life, health and long-term disability insurance policies are all your friends. If you operate a small business, liability insurance is also paramount.
You might skip paying these premiums because you think the odds will be in your favor (to paraphrase “The Hunger Games”). You’ll regret that decision when the world doesn’t work out as you thought.
Like Goldilocks and the three bears, the optimal insurance is a balance somewhere in the middle of too little and too much. Chat with your fee-only financial advisor to find out how much insurance is ideal for your situation.
4. Not seeking help from professionals.
Have you skipped out on a pre-nuptial agreement to avoid paying a lawyer? Have you hired an unlicensed electrician or plumber to do home repairs? Have you been guilty of trying to file your own taxes when you should have hired a professional tax preparer?
These are all examples of when frugality can lead to bigger problems. Select licensed, qualified professionals who can do a great job at helping you manage the critical aspects of your life and home. The value they’ll give you is worth paying for.
5. Forgetting to enjoy life.
We’ll end this on a soft note. Money exists to serve you and life is meant to be lived.
Don’t be so obsessed with frugality that you skip out on life-changing experiences. If you’re holding yourself back from traveling to foreign countries or attending your friends’ weddings, you might have misplaced priorities.
Assuming you’re not in a precarious financial situation with a load of debt, give yourself permission to enjoy life. Spend $700 to travel across state borders for your friends’ wedding. Take your children on a weekend trip to the beach, mountains or lake, for the price of a few tanks of gas and one night at a hotel room. Make space in your budget for travel. Consider flying to a developing country overseas to gain insight into other cultures.
These life-changing experiences will forever reframe the way you conceptualize work, money and life. They’ll also be some of your most cherished memories in the years to come.
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5 Cases When Frugality Can Cost You Money originally appeared on usnews.com
