Being frugal is held as a hallmark of fiscal responsibility. Everyone thinks that seeking ways to save money makes you inherently good with money.
Those people are wrong and frugality is most often stupid.
Being frugal is the equivalent of someone shopping sales and thinking they’re saving a ton of money.
All you did was spend money. Sure, the money you spent is less than what you would have spent on those items regularly but since when has spending money made you financially savvy?
THE TWO MOST COMMON FRUGALITY ILLUSIONS
- Note: If you hadn’t guessed it by the title of the blog, I am a combat sports fan. Throughout my writing I will use many fighting metaphors, similes, and analogies to illustrate various points.
In fighting, the fans are drawn to the knockout artist, dynamite arm ripper offer, or even the tap on their face until the ref stops me type of fighters. In other words, the offensive-minded draws the crowds and is showered with lucrative sponsorships at places like Mike’s Rib Shack.
We all watch their every move in open mouth amazement, and if we’re honest we find ourselves daydreaming that we are them. Flexing in the mirror and spouting off their famous catchphrases.Their next fight comes and we are the first people at the bar to watch their next successful conquest; shouting at anyone who dares attempting to talk during their fight. And right before our very eyes it happens!
But how could this be? Weren’t they too smooth, too strong, too fast (too furious?) to be defeated? No man, woman, or orangutan could even touch them let alone best them!
Ok, maybe an orangutan.
In the coming weeks, we see armchair pundits break down how they lost. They had a dynamite offense but lacked the appropriate defense.
Defense? Who cares about defense?!?! No one buys a PPV to watch two people block punches!
While this example may be extreme, it is indicative of how some sports fans treat their favorite teams/fighters/athletes/mascots, and even more suggestive of how most people treat their finances; only in reverse.
In finances, much like fighting, there is an offense and a defense. In this case everyone seems to focus on the defense while being terrified of the offense. For our financial purposes, I am referring to saving (defense) and investing (offense).
Why Saving is Defense
I have been told, quite often, that tangents often derail what otherwise are clear ideas and make trains of thought hard to follow. So with that in mind let me start this post with a tangent.
As children most of us went to school for many years and were taught assorted topics that our teachers told us would be super important for being a successful adult. You know those things we use every day like imaginary numbers, what year George Washington became president, and cursive writing for letters that aren’t in your signature block.
My imaginary friend had to go but somehow you got to stay.
However, in the midst of all that vital knowledge someone forgot to tell us about finances. Heck, even our parents were little to no help as they also hadn’t learned about it in school nor did they have the internet to fall back on at the time.
Isn’t it ironic though that those same parents gave us the only lesson about money most of us ever received?
The simple lesson I am so mysteriously drawing out before directly referencing is that a dollar has value. I imagine your lesson was much like mine. Your parents took you to some store/carnival/illegal back alley poker game and gave you some cash to buy whatever your little heart desired. Being the innocent little darling who only understood that money meant “I can have things I didn’t have a second ago by trading this green paper” you did one of three things:
- Grabbed something that was too expensive for the amount you were given
- Grabbed too many affordable things which added up to more than you were given
- Took everyone’s money in the poker game and ruined the life of some poor sap who shouldn’t have paid to see the river
Once this happened your parent lovingly looked down at you and told you that you didn’t have enough money for what you were trying to purchase.
Or they just covered the difference and deprived you of a key learning moment that you could tearfully thank them for once you make your first million dollars, I don’t know I wasn’t there or paying attention enough to remember.
For most of us that’s when we learned the basic concept of money that sticks with us to this day. In my mind that is only one of the two true values of a dollar.
Value 1: What You Get for Giving It