When you are trying to get your financial life in order, it is very easy to become cheap. It’s very easy to become someone who doesn’t want to spend money on anything regardless of if it is a need or if it is going to bring you value. In our last post, we talked about the difference between being frugal and being cheap. But we really didn’t have a chance to go over how you become frugal and guard against becoming cheap.
Whether you are frugal or cheap, both are based on mindset. And a lot of mindset is based on emotion. When I was desperately trying to get out of the restaurant industry, I became very cheap because of wanting to do anything to get out. To make matters worse, I would spend money on things I didn’t need instead so being cheap really was a double edged sword.
Being frugal is a much better mindset because it is much more sustainable as a financial lifestyle. And in order to be frugal, rather than cheap, there is one thing that is very important to do.
You have to determine what you value.
Determining what you value is the very essence of being frugal. It is the conscious decision to not spending money on certain things so you can spend money on other things. But how exactly do you do that? You have to know you yourself and what you do and do not like. And that could change over time. Here are two things to consider to help you figure out if you value something enough to spend money on.
Do you TRULY value it
A perfect example in my own life I can give you is video games because it has changed so drastically in my life. At one point in my life, video games were very important. I literally used to stay up late into the night and play one every night. Then another point in time came where video games weren’t important anymore, but I was still buying them like they were. Now I’ve come to the point where I only buy a video game if I’m thoroughly convinced it will be worth my time. How did I determine that?
There are a couple of things I did, and that you can do also, to determine if something is truly important to you. Here are some questions to ask yourself:
1. How much time am I going to be spending on this?
With video games, I noticed a significant drop in the amount of time available and the amount of time I was willing to commit to playing them. When I was a restaurant manager especially, I simply did not have the time to play video games. Even now, I have plenty of other things that I want to do instead so I cannot realistically get lost for hours in a video game like I used to. I’ve even tried that fairly recently. You know what happened? I feel like I missed out on doing something important. It wasn’t worth it. Why spend money on something you aren’t going to have time to do?
2. How much fun do I have doing this?
Over the course of a few years, I started to really pay attention to how much fun I was having when playing video games. It was starting to be less and less. A lot of games I picked up were very similar to old ones I use to play, but they were not as well done or didn’t have as good of a story to keep me engaged. It came to the point where instead of buying a new video game, I just played an old one I had that was similar. It was easier and cheaper. And if I didn’t have time to play, or didn’t have fun playing, I didn’t have to worry about the money I wasted.
You have to really pay attention to what you feel when trying to determine your fun level. One thing that I’ve noticed is, if I’m doing something and it makes me long for something similar I used to do rather, than I’m not having a lot of fun. It’s not worth spending money on something that I know I’m not going to have fun.
3. Is this something I enjoying sharing with others?
There are experiences and things I used to do that were fun to talk about with other people. It gave us shared interests. Take video games again for instance.
Back quite a few years ago, when I was really in to video games, my friends and I used to have Video Game Nights fairly often. We would gather around a couple of TVs, eat a lot of pizza, and play video games for a few hours. We used to do this at least once a month, and it was a blast!
Now, instead of getting together to play video games, we find it more valuable to go out to eat and sit around a table to talk. Sure, we reminisce about the old days (when we were ALL younger, but we’d rather talk about them instead of trying to recreate something we don’t find as valuable in our lives anymore.
Which leads to the second thing you can do to help you determine if something is valuable to you…
Does it Create Value
Another thing to consider is if the things you are spending money on are continuing to create value for you. You’ve heard it suggested before to spending money on experiences (or giving experiences as gifts). This is because experiences tend to continue to create value.
How? By creating memories and strengthening relationships or yourself. Memories are something that you can relive in your mind. Relationships are strengthened when you spend time with someone. And hobbies like reading or other things you may enjoy improve your mind and relax you.
Like in question 3 above, getting together with my friends for dinner is something I am more than willing to spend money on because it continues to create value. It cultivates and strengthens the relationships with each one of them. It creates memories we can enjoy. I have a very good friend of mine with whom I enjoy Saturday morning breakfast with about once a month. It’s a great time and well worth it.
Another thing I like to spend money on is Disney World vacations. I love the experience there. I love the food, the atmosphere. Everything about it is enjoyable to me. It not only is a great experience but it forms great memories that I can relive in my mind. It creates stronger relationships through being able to spend time with my family there and make memories with them. It is something I value and it also creates value in my life.
One thing I do not value is going to a local amusement park. It is not my idea of a good time to wait in line for hours all day and in the end only having time to go on 4 rides. Not to mention, most amusement parks do not have anything to do in line. Some might argue that it’s a great time to chat with your family, but there’s only so much to talk about after hours of seeing each other. Maybe it’s just me but I get bored easily waiting in line.
This is another reason I value Disney World vacations so much. They’ve excelled at giving you atmosphere and experience even while you’re waiting in line. Their newest rides (and some of the older, updated rides) now have games and activities you can do while waiting in line, furthering the memory creation.
So what’s next?
What’s next is the fun part. Putting that money toward something you love to do or be a part of. I encourage you to use the same tips above to determine what you really value, and then go all in. Don’t be afraid to set aside and budget money for it.
The nice thing about this process is two-fold. First, you have more money to do what you love! Who doesn’t want that?! Second, it allows you to not feel bad for spending money on the things you love.
When you set aside money for the things that you truly value, there is no longer any reason to feel guilty about doing it. After all, that’s what it’s there for!
Despite getting a bad wrap as being part of penny pinching, being frugal is a great next step (and a necessary step) in being financially free. Being frugal is sometimes choosing value over price, but that’s ok. When you determine what you value, and subsequently stop spending money on the things you don’t, you have that extra money to spend on value. It’s not cheap, or penny pinching.
Being frugal is freedom.