Frugality is for winners

Frugal folks know what they want. Then they buy it when it's cheap as chips.

A few years ago I was living in NYC. Rent was high, and I looked to save whenever I could. Rite Aid had a Raisin Bran Sale (it was all over the papers). So I bought 10 boxes.

I learned about consumption smoothing in undergraduate economics, and while my logic in this case may be fallacious, my understanding of the principle makes me a savvy consumer. Sometimes a short-term cash outlay will pay dividends down the road, as your average cost will drop. So, when a product you'll use is on sale, buy it! Maybe buy a lot of it. Just be aware not to eat / use more than you normally would because the desired product is readily available. I call this the Costco fallacy.

Where do you look for sales? What do you buy in advance or in bulk?

The Difference Between Cheap and Frugal

There are hazards associated with being a frugal MBA. Notably, some peers will at times ask (or imply strongly) if you are being cheap. The following three criteria can help you determine whether you are being cheap or frugal.

Frugal folks recognize quality

Being a frugal MBA does not mean that you have to buy low-quality items. Instead, frugality is about thinking carefully about the full cost of a purchase. For instance, a cheap person may think that eating bean burritos every day is a wise way to spend money because they are inexpensive. Yet, the frugal MBA recognizes that food impacts more than just your wallet—it also affects your health. When all aspects of food are taken into account, higher quality, more expensive food are often the right purchasing decision. Obviously this reasoning can be dangerous—it cannot be used as an excuse to purchase fine cuts of seafood for you tuna salad sandwiches!

Frugal folks place value on their time

Frugal MBAs recognize that their time is a valuable commodity. As a result, they will not spend precious hours to save a paltry sum of money.

Frugal folks do not save by putting costs on others

Frugal individuals assign value to other people’s time and resources. They will not save money at the expense of others. As an example, a friend from the East Coast had a wedding in the groom’s hometown in South Dakota, even though the vast majority of the wedding’s guests would be coming from the East Coast. The bride’s justification that doing so was less expensive does not pass muster under the frugality guidelines. The wedding was actually much more expensive to have in the Black Hills, the costs were just displaced to others.
Hopefully these criteria are a helpful way to determine whether your behavior is frugal or cheap. I am always looking for other guidelines. If you have ideas, be sure to include them in the comment section below!