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Wednesday’s need-to-know money news

Nov 20, 2013 | | Comments Comments Off

Today’s top story: How to avoid charity scams. Also in the news: Money lessons from retirees, money-saving tips for travelers, and how a grandparents’ gift for college could ruin a student’s financial aid.

4 Ways to Avoid Charity Scams
Protecting your empathy from being preyed upon.

5 Financial Lessons from Retirees
Voices of experience.

3 Smart Money-Saving Tips For Your Travels
More money for souvenirs!

Grandparents’ 529 College Distributions Can Be a Ticking Time Bomb
A loving gesture which could ruin a student’s financial aid.

Laid Off? 5 Tips To Get Back On Your Feet
How not to become complacent during a layoff.

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Can frugality be a cult?

Aug 16, 2011 | | Comments Comments Off

My MSN column “Rev. Billy: High priest of frugality” discusses the idea of consumerism as a religion. But can frugality be a religion, too? Can it be a cult?

It’s certainly not a mainstream lifestyle, even after the recession supposedly made it chic. And I’ve noticed some people can get a bit fundamentalist about frugality, as if spending money were a sin.

So I posed the question–”Is frugality a cult?”–to three writers about money: Donna Freedman of Surviving and Thriving, Ramit Sethi of I Will Teach You to Be Rich and J.D. Roth of Get Rich Slowly. They’re sort of the “Left, Right and Center” when it comes to frugality.

Here’s what they had to say, starting with Ramit:

Nobody wakes up in the morning and says, “Today I want to be FRUGAL!”

Instead, people want to live a rich life, which means spending extravagantly on the things they love, as long as they cut costs mercilessly on the things they don’t.

The frugality movement and I agree on this…at least in theory. But when you get specific, you’ll find that many people don’t actually believe it. Witness the outrage when anyone writes about spending $200 on jeans…or $1,000 on a vacation to Vegas…or $25,000 on their wedding.

“That’s ridiculous!” is what many people will say. “I threw a perfectly good wedding for $200 with jelly beans for 450 guests! Spending $25,000 is an outrage!”

Well, good for you. But not everyone has the same money values.

There’s one more big difference: The frugality movement loves to talk about how to cut back on everything, often to the point of absurdity. How much can you actually save by making your own laundry detergent? They miss one of the most powerful ideas in personal finance: earning more. There’s a limit to how much you can cut — but no limit to how much you can earn, as I’ve shown in examples of earning more.

The frugality movement isn’t a cult, but it sure does miss the point much of the time.

So if you’ve automated your finances, negotiated like an Indian, and focused on earning more money, you’ll be able to spend extravagantly on the things you love — guilt-free.

And now Donna weighs in:

Frugality is not a competition. It isn’t about who has the most pared-down life or who snowflakes the most debt the fastest. It’s about using money intentionally and making the best financial choices.

But you can make these choices only for yourself. What works for you might not work for others.

Frugalists vary on the merits of early mortgage payoffs, shopping at thrift stores, cooking all meals at home, being a one-car or no-car family, and countless other forms of tightwaddery. And, yeah, washing plastic bags.

I believe frugality means thinking about the future (emergency fund, retirement) while embracing the present. Using money “intentionally” can mean living without a car so you can afford private school for your kid, or brown-bagging it so you can afford a beautiful piece of jewelry. It could mean working at a low-paying job you believe in and sculpting your life to fit within the parameters of the salary – but doing it joyfully.

Frugality isn’t one-size-fits-all – and more importantly, we don’t get to decree what other people “should” be doing. We’re not the money police. We don’t get to demand accountability, as it were.

And finally, J.D.:

For some, frugality becomes a cult. If a person’s goals aren’t well-defined, frugality can become an end rather than a means.

In my mind, frugality is a personal finance tool, just like a savings account or salary negotiations or budgeting. These tools are there to help you meet your goals — whatever they might be — and ultimately to bring happiness to you and your family. It can be easy to get carried away, though, not just with frugality, but with any tool. In the past, I’ve obsessed over boosting my income, for example. Eventually I realized that I was being foolish. Sure, I was earning lots of money, but I wasn’t happy. My goal wasn’t to be rich; my goal was to be happy.

Frugality is awesome. It’s a tool that *anyone* can use to improve their financial situation. Once you learn how to cut costs, it’s fun to find new ways to use these skills to save even more money. But there’s a real danger of crossing the line from frugal to cheap. Frugality effects *you*. Cheapness effects other people.

Eating soda crackers for dinner is frugal; serving them to your guests is cheap.

Or, to use a real example from my neighbor across the street (who is actually very wealthy): Doing your own home repairs is frugal. But not hiring somebody to fix the things that you don’t have the time or ability to fix is cheap — especially when it causes you to lose rental income because your tenants move out.

What I’m trying to say is that frugality is a means not an end. So long as people recognize that it’s a tool to meet other objectives, they’re usually find. But once they start focusing on frugality for its own sake, things can get out of hand.

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I wrote last week about 5 places to find free money, and one of them was Coinstar, which offers free coin counting if you opt for gift certificates instead of cash.

Coinstar just sweetened the deal by offering a free $10 gift card from several retailers, including Lowes, Borders and iTunes, if you cash in at least $40.

Not sure you’ve got enough coins? Get a roll of quarters from your local bank (or two) to make sure you can get the freebie.

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