Are you a saver or a miser? Read this to judge yourself
Posted by: Uma Shashikant on May 15, 2017, 01.18 PM IST
By Uma Shashikant
We have heard enough strictures about living within our means. Every lesson on personal finance begins with the need to spend less, save more, and trade current pleasures for future comfort. Focus on the goals, we are told. But then, where does one draw the line? Does our quest for financial security lead us to becoming cheap and miserly? Frugality is a virtue, but stingy people are shunned by society. What is the difference between being frugal and being stingy?
We may not know if we are being virtuously frugal or abhorrently cheap, but everyone else can tell. Misers hardly have friends, and typically dislike most people around them too. If you find a tight group of people always bound in their own principles about spending, blissfully unaware of being shunned by everyone else, you know that they have taken it too far. A frugal person would reciprocate the dinner invitation of friends, but a miser would take advantage of other's invitation but almost never call anyone over for a meal he would host. The unwillingness to spend is different from unwillingness to waste, and society tends to identify the difference quite well.
Many of us have friends and relatives who will always converse with warmth and invite us to their homes, except that they would not firm up a date or time, ever. When an occasion to act on their professed intent arises, we will find them making excuses. They are the stingy and cheap lot who have no intention of spending any of their money on others. They are likely to be keeping accounts even with their siblings and making a virtue out of it. We also have friends who would create a lavish spread when we go over to dine at their homes, only to impress us with their wealth and perceived position in society. These are the spendthrifts who put their spending ahead of their ability to do so. The frugal are the realists who stand between these two extremes.
Frugal people find ways and means to get creative about spending. Remember how our aunts and uncles would visit us with homemade goodies? They were unwilling to spend on a box of store-bought chocolates, but substituted it with something they made with their hands, with love and care. The value of what they do is what matters to the frugal, and they focus on maximizing that quality. The stingy would focus on the price, and be willing to buy something only because it is cheap. They lack the creativity to think through their decisions about money and choose something of value, given their obsession about price. You will typically find them compromising quality for price, only because they feel good about saving some money and getting themselves a good deal, over everything else.
The objective behind being careful with spending is quite clear to the frugal-minded. They have a goal in mind and they know why they are sacrificing a pleasure in the present. They motivate themselves and their families in pursuit of frugality, given the need to allocate money to the goal, which is a shared aspiration of the household. Mothers who urge children to eat at home, rather than buy expensive food outside, so that money is available for higher education, are inculcating careful spending habits, so that the limited money in the household can go farther. The stingy save for the sake of saving. To them not spending but setting that money aside instead, is a goal in itself. The frugal are generous and give within their means. The stingy are wily takers from the world, and their giving is a calculation of underlying future benefit.
Those who choose a frugal lifestyle are not too worried about how they may be perceived by society or how they may fall short in the eyes of their friends or relatives. There is an inevitable pride in the decisions that they make, and they end up being strong advocates of the choices they make, the honour in being minimalistic, the virtues of reducing consumption, and the ability to differentiate between need and want. The stingy on the other hand are quite aware of their tendency to be cheap and therefore work hard to cover it up. They put up an act of generosity in words, tend to be dishonest in their preferences and choices, and do not like to own up to their tendency to be cheap. They extract the benefits out of a situation rather shamelessly, telling themselves that they are smart to be doing so.
Even those who choose frugality do not push the envelope so much that it compromises the quality of their lives. They do not deny themselves things that they enjoy, only to be able to save some money. They take their time to make the decision, they consider the choices, they seek information, but they are willing to spend where it matters. The stingy on the other hand fully know that the expenditure on hand is an important one, or that it can bring them joy. But they are unwilling to spend and instead settle for a lower quality of experience, only because they dislike spending. They begin with “no” when it comes to spending and it is rare that they find a consistent line of reasoning before they can make than a "yes".
When frugal people choose a simple lunch, they are satisfied that their choice meets their need. The stingy would go hungry and make a virtue out of skipping lunch. When we find them piling up their plate in a buffet hosted by someone else, we know that their game is up.
Money is a limited resource and we are all quite aware of the need to make money decisions carefully. However, the choices we make and the lessons we teach our children about money reveal our attitude towards how we allocate that money. Being stingy and a cheap-stake reduces the quality of our life as we deny ourselves things that we enjoy doing, and suffer needlessly. Being frugal means we value what money can buy and use it optimally and we remain proud of those decisions. If our focus remains on the money in an absolute sense, no amount would be enough to make us comfortable. Instead if our focus is on what we like our money to do, viewing it as a means to an end, we may have better money lives.
(The author is Chairperson, Centre for Investment Education and Learning) This article appeared in Economic Times dated May 15, 2017, 01.18 PM IST