Frugal people have a reputation for not spending money. At its core, this reputation harbors much truth, but it’s not always the case. Being frugal doesn’t mean pinching as many pennies as possible, it’s also a longterm strategy to save money. If you see a frugal person making a big purchase, you should be sure they’ve given it much thought.
If you’ve earned money once, you can likely earn it again. This also gives you perspective, and it makes blowing money a lot less fun. Fortunately, some expenses that hurt in the moment prevent more money from coming out of your pocket in the future.
It’s possible to be both frugal and rational. This means you’ll have to let go of some money. It also means you’ll see a return in the future. After a while you’ll be glad you made certain purchases. These money saving habits aren’t just reserved for frugal people, they’re the things smart people do.
1. They Buy Insurance
Not every state requires car insurance, and not every product is worthy of an insurance plan. When it comes to repairs on certain products, the risk of damage is greater than the risk of not having insurance. Smart people invest in insurance for big products like their smartphone or computer, because the replacement or repair could be far more expensive. If the insurance is never used, $200 might be lost. If you shatter your laptop’s screen, it might cost $600 for one incident.
They’d never even think about forgoing car insurance. The thought of major car repairs is enough to cause nightmares, but the thought of dealing with another person’s car after an accident is even worse. Car insurance is one of those things you hope to never use. If you use it once, you’ll be glad you had it.
2. They Buy Quality Where It Matters
Saving money requires you to know your own habits. If you wear articles of clothing a few times, there’s no need to spend big. A frugal person will invest in quality if it means replacing an item fewer times. A shirt for work is worth spending a few extra dollars if it means less maintenance and more wears without replacement.
In 2010 I bought a pair of Ray Ban sunglasses. The frame is strong, and after 10 years they still hold up. They’re wayfarers, so the style is pretty timeless even if they’re not the trendiest right now. I could have gone through 20 $15 pairs of sunglasses at this point: forgetting them at the beach or leaving them on restaurant tables. Instead, I take care of my Ray Bans, keep them protected and I’ve never had to replace them.
3. They Buy in Bulk.
When most people make a purchase, they look at the price tag. Frugal people look at the cost per unit to find the best deal. They know not to spend $3.99 on a four pack of toilet paper when a twelve pack costs $8.99. Essential items like that will get used and never go bad, so the cost per sheet is more important than the single transaction.
Shopping in bulk is a rich person’s sport. Dollar stores make a killing off by selling single units for higher mark-ups. Even though the price tag is low, $1.49 for one roll of toilet paper means the store gets a higher percentage of the profit. Frugal people would rather make fewer transactions and allow the store to get a lower profit.
4. They Address Problems Quickly
Some products are designed to be replaced, but others are designed to get repaired. Money savers know not to let problems linger because a small issue can easily transform into a bigger one. If you can prevent a bigger repair, or even a replacement, it’s best to bite the bullet and fix problems quickly.
Imagine never getting an oil change when your car gives you a warning. The oil change costs about $34.99 if you’re not doing it yourself. Replacing your engine costs a lot more. Other products experience issues that can expand, whether it’s a problem with your washing machine or your health. Taking care of it quickly will save money in the long run.
5. They Get Things Done Right
Some people think they can solve small problems by themselves. With the power of the internet and YouTube, you can get a tutorial for almost anything. That doesn’t make you an expert and soon you’ll be causing more damage than repair. Smart spenders stick to what they’re good at and leave the rest to the pros.
Perhaps you have a leaky pipe under the sink. You can try to fix it by yourself, but you might not address the real issue. You get some tools, but the leak just becomes worse. Now, you need to get a plumber to do more repair work and you wasted your own time and money.
6. They Invest in Education and Motivation
If you’re looking to increase your employment potential, you might invest in eduction. Even if it’s just a single course or a certificate, having increased credentials can help you earn a promotion or raise. Perhaps your newly acquired skills can translate to a secondary source of income or new career prospects.
Even books can motivate people and guide the learning process. These resources are an investment in personal development, and if it leads to more money then there’s more to save. The costs of a degree looks extreme up front, but the long term benefits can exceed the initial investment.
7. They Invest in Their Future
While saving money technically isn’t spending it, there are certain contributions that will allow you to save money in the future. These often mean you won’t have limitless access to money in the present, but eventually you’ll see a benefit. I recently spoke about the importance of having a Health Savings Account. This fund allows for pre-tax contributions and never taxes you when using the funds for medical expenses.
For some people, this could mean investing in stocks, for others it may be a Roth IRA. The financially savvy know not to pay taxes when they don’t have to. If they’re not spending their money, they want it to grow. It might not be accessible this very moment, but in the future you’ll be happy with the savings and growth.
Spend to Save
The smartest people view money as a longterm game. Certain moves mean you have less in your pocket right now, but will put you in a great position years down the road. It can be hard to let go of money without instant gratification, but it’s worth it when the rewards come.
Next time you’re given a choice, think of the ways your future will be impacted. Holding onto $500 is nice, but if you can lose it in a single incident it might not be worthwhile. Rather, think of the ways that money can turn into more money. It might mean taking a loss in the moment, but sometimes you need to spend money to save it.
Originally published at https://www.michaelbeausoleil.com on August 16, 2020.