Is there a fine line between being frugal and being cheap?

Is there any sharp line that distinguishes people from being frugal and being cheap? Are these the two sides of the same coin? Well, in my opinion, I don’t think they are. I have met people from all grounds and I have seen people who are frugal but not cheap, and on the other side, people who are cheap but not frugal. I met a girl when I was in my law school. She always followed the absolute rule of not going to the ATM. She took out $40 in the beginning of the week and that was the maximum amount that she will spend in the whole week. At first, I used to admire her kind of approach towards sticking to the strict budgeting principles. Later, I came to know the character flaw behind it. When we went out as a group to have pizza, and she was down to her last $2, I was curious to know whether she declined to go further with us. Nope. She went out with us for the outing. When we had our food and the check came, we divided each of our share as $5. This girl offered the $2 only that she had. The rest of us made the difference. Now, my question is was she both frugal and cheap? Or was she just cheap through and through, both with herself and with others?

During those days, I was in touch with another guy who was saving every penny that he had for the studies in the law school, and he rarely bought more than a hot dog at the corner vendor for his lunch. But when he used to go out with the group, he used to pay more than his fair share. He is successful now and doesn’t’ usually eat hot dogs, but he still believes in saving money even today. He will buy a used furnace from a neighbor rather than get a new one, but he will never act as cheap when he is with others. He is one of the nicest guys I had known so far.

I get pissed off with those types of people who are cheap in the name of frugality. A cheap person will ignore the fact that a ten-dollar meal, after tax and tip, is more than the ten-dollar share and his friends had to pay the rest of the balance because of his tight-fisted ness. In the end, this kind of personality flaw is not about the money. It’s a sign of deep lack of character and this has an affect on the overall personality. The most important thing that is really missing is the

I really admire frugal people and I wish that I can be like one of them. They are the ones with all the good tips on travel discounts. These are those kinds of people who are never afraid of buying used things. When I am out with such type of people who show their care towards me, they will never let my wallet go astray because they are watchful of other people’s money as they are of their own. Truly frugal people are really generous. Remember, the other girl who was with me in the law school and I was talking about her above; she is still not well balanced in her life and she has taken wrong decisions with her money. The more important thing is that she really doesn’t have any friends who can trust on her. Life!!

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Month after month, we have been spending on our groceries and it can average to around $400-500. This is spent only on food and dining, and not on household items. For our family of three, I know we can spend a lot less than that.

There are free sites that can help you with your grocery shopping and finding good deals. But unfortunately, for us due to our location, those sites do not have any affiliates with our local grocery store. We don’t subscribe to our local newspaper as it’s too expensive. So, to get those flyers, it means a trip to the grocery store and pick the flyer. Then, we have to come back home, review the flyers and creating a grocery list, and go to purchase items. With our schedule and the time when the flyer comes out, the time doesn’t adjust too well for us. So, here’s what we are trying to do.

Once a month, we purchase all the inventory items of our food. I have made a list of all the necessary items that we will need during the month to make meals and I mark those items that have to be fully stocked up. Then we head to Wal-Mart to do shopping. Wal-Mart has some items on sale that our local grocery store will not usually put. Last time, when we came to Wal-Mart, we had a cart full of groceries for $150. I am not sure if we have ever spent that much on one trip before.

Now, we have the normal items that will stay for the whole month. Then it’s the small weekly trip to the grocery store to buy fresh fruit, milk, bread and meat on sale. We don’t buy fresh meat from Wal-Mart anymore because it can get quite expensive for us and our budget is not to exceed $50 each trip during the weekend. So, here’s what we have spent at the end of the month.

$150 + 50 + 50 + 50 = $300/month

So far, it is working awesome. One major problem that we faced was that we were making too many trips to the local grocery store during the week. All those little trips can add up quickly and result in buying items that we really don’t need like frozen pizzas for a quick dinner. This is an unnecessary expense that can fully be avoided. Once we have limited the number of our trips, we are more focused with our purchases and we are getting a little more creative with our meals to use what we have and saving money from our budget.

Limiting our grocery store trips is challenging us and I like it. After some time, I would like to plan our menu also. I used to do that before and this saved a lot of money. But because of my work, I couldn’t devote much time on it. I will have to start doing it again.

The main thing is about saving money. There are many strategies of executing it. You have to spend some time looking at your spending and figuring out the plan that works well for you.

With the growing number of bankruptcies, mortgage foreclosures and rising prices, it’s very important to know useful ways of managing personal finance. Recent statistics show that many people can manage their finance very nicely if they keep their expenses within their income. But unfortunately, many people are not aware of the ways to do it and don’t know how to recover once they have overextended themselves.

Personal money management is not a one step process. It’s not just enough to have your budget in place or keep a check on your checking account. You need to follow set guidelines that cover several aspects of money management. The basic of the process are discussed below.

• Set Your Goal

Most people think that their objectives are accomplished if they have planned their retirement and college for their kids. These are very important goals but they are just the beginning. You have to think about what you and your family need in future and make financial decisions on that basis. This may include keeping money aside for an annual vacation, repairing your car or purchasing a home in the future.

• Find Out Where You Stand Now

You have to have a complete understanding of your total income and expenses. Prepare your monthly budget on a piece of paper and stick to it. Give a detailed description of your bills and expenses in one column and your total income in the other column. Add up everything and see if your expenses are lower than your income. You will know at a glance if you are going through any money problems or it might come unexpectedly in the near future.

• Develop a Budget You Can Live With

Budget sample forms are available very easily and most of them turn out to be very effective. Many people maintain 50 different categories of expense items but it’s important that you know how to manage it. It’s better to have less number of categories of expenses and have all your attention on it when you have your paycheck.

• Cut Expense in Every Budget Category You Can

There are hundred different ways to cut your expenses without changing your lifestyle. For example, if you are using several mobile phones, you can stop them from using and stick to one phone only. This way you can reduce a certain percentage of your expenses and use it for other important purposes. There are many tips available on the internet for those who don’t know how to get started.

• Set Up a Debt Repayment Plan

A large number of people are losing their hard earned money just in interest charges and late and over limit fees. Your main priority should be to eliminate all the debts from the past and do it at the earliest. By following the process of snowballing, you can pay off your debts much earlier and save a lot of money that could have gone just in interests and fees.

Snowballing is the process where you add up all the amounts having the minimum payments and choose one bill to add extra money to the payment until it is paid in full. Then you can take that extra portion of money and the payment you were making on bill 1 and add it to the next bill and so on. You don’t have to stress by putting a higher amount. Just adding $25 will pay down your bill much faster because the amount in the bill is not going to be the same until paid off.

• Know Your Credit

You need to have your credit in good standing before applying for a loan. If your scores aren’t good, you will have to pay higher interest rates and it’s the opposite if your scores are better. Get a copy of your credit report and know how your credit looks like before you shop with any lender.

• Look For More Sources of Income

If you are not able to cover all your expenses from your paycheck, look for different ways to earn money and make your life comfortable. Everyone has specific talents. Use your skills and you will realize that people are ready to pay for the product or services that you can offer.

Once you know the art of managing money, you will have perfect control over any financial problems that may arise in the future. You might even be surprised that the solutions were never far away from you.

Thinking about improving your financial situation is a good decision to make at any time of the year; many people find it easier to make it at the beginning of the year. It’s not important when you begin. The basics still remains the same. Here are the top ten strategies that will keep you stable financially.

1) Get paid what you are worth and spend less than you earn – It looks very simple when you read this line, but most people struggle through this first basic rule. Know the worth of your job in the marketplace. Evaluate your skills, productivity, job tasks, contribution to the company, and the going rate, both inside and outside the company, for what you do. If you are getting less paid, it will have a downward effect in your working tenure.

Once you have determined your earning potential, don’t spend more than what you earn. You will never get ahead in life. It’s very easy to spend, but it takes a lot of time, patience and skills to earn. A little cost-cutting effort in a number of areas can result in big savings. You don’t need to make big sacrifices all the time.

2) Stick to a budget – Everyone needs to do a proper budgeting of their finance to know the inflow and outflow of your money. It will be tough to set spending and saving goals if you don’t know where your money is going.

3) Pay off credit card debts – credit card debt is the number one obstacle to getting ahead financially. Credit cards are so easy to use and it’s even easier to forget that it’s actually real money and needs to be paid when payments are due. If we don’t pay in time, we end up paying the principal at highest interest rates and fees that could have been saved otherwise.

4) Contribute to a retirement plan – if your employer is providing you a 401(k) plan and you are not taking the benefits, you are walking away from one of the best deals. If your employer has such plans, sign up for it today. If you are already contributing, try to increase the contribution. It will help you only after retirement. If your employer doesn’t offer a retirement plan, consider an IRA.

5) Make a savings plan – Pay yourself first! If you wait until you have paid all your debt obligations and then see whether there is any amount left for saving, chances are that you will never be able to make a healthy savings account or investment. Always try to set aside at least 5% to 10% of your salary before staring to pay the bills and utilities.

6) Keep investing – first try to put money as much as possible towards a retirement plan and a savings account, and then see if you can stretch more towards making some investments. Your finance will get all better in your future.

7) Employment benefits - Employment benefits like a 401(k) plan, flexible spending accounts, medical and dental insurance, etc., are quite expensive. Make sure you’re maximizing yours and taking advantage of the ones that can save you money by reducing taxes or out-of-pocket expenses.

8 ) Insurance cover – you need to have enough insurance for yourself and your family to get protection in case of death or disability.

9) Update your Will – protect your loved ones. Write a will. Most people in US don’t have a will. But if you make one, this will be for good reasons and beneficial to your family members.

10) Keep good records – Always do book keeping perfectly. If you are not doing it, you are probably not claiming all your allowable income tax deductions and credits. It will be much easier instead of scrambling to find all the details during filing taxes. There will be chances to save more money if you have every income and expense documented.