Smart Money Management vs. Cheapness: The Eternal War

The following is a guest post by CM at Infinite Transcendence. Enjoy! 

Which Side Are You On?

People are often big on saving money since budgeting is a major part of life in your personal life and in business.  With poor money management, even the richest person can become poor very quickly.  There are countless stories of people with money going broke, and our country is a debtor nation.  Clearly, we need to spend and utilize our resources wisely.  The average person has student loans, car loans, mortgages, and a manner of other expenses.  Controlling these wisely is essential to living a life of freedom.

The difference comes down to how people choose to manage their money.  A few people manage their money from an overall cost evaluation while others simply cut down costs as much as possible no matter the expense.  Today, I’d like talk about the major difference between effective money management and being cheap.  This is something, when done properly, will make a major difference in how you live your life.  You will essentially increase your productivity while reducing costs.  That’s why smart money management is important.

What Is Cheapness?

Cheapness and effective money management are two different things.  Some prefer to use the word frugal to describe wiser money management.  I prefer the term smart money management because it looks at other factors outside of simple dollar and cents costs.  An individual who is cheap is someone who values monetary cost above all others.  They’ll waste immense amounts of time, comfort, energy, and sanity just to come ahead a few pennies.  They’ll drive clear shot across town to save a few pennies on gasoline.  Nothing is ever irrational if it’ll save them a few dollars, even if the cost is countless hours of frustration afterwards.

Have you ever:

1. Bought food that was expired just to save a few dollars?
2. Spent lots of time arguing over a minor price difference just to save a few dollars even if it meant burning a few bridges?
3. Sacrificed quality to an extreme level to get minor savings?
4. Massively inconvenienced yourself for a good deal: i.e. sleeping in front of a store for a weekend just to save on some item?
5. Gone without something you really need for a long time because you simply didn’t feel like paying the price?
6. Given up a lot of time, convenience, and quality in any other way in a disproportionate way compared to the cost?

These types of activities will only ensure that you end up further behind when it comes to building wealth and intelligent financial management.  People who want to succeed at not only managing money effectively but also in terms of building wealth will avoid this behavior like the plague because it only ensures that you’ll expend more time than what your money is worth.  Time is far more limited than money and people who want wealth are cheap with time.  Treat your time and your energy sacred.  You’ve already traded it once to make the money.  Don’t trade it again being cheap.  You’re then spending a multitude of time for a minor savings benefit.

The True Cost of Cheapness

People don’t look at the true overall cost of being cheap.  I have known many people who will indeed drive across town to save gas, or go through other extreme lengths to save a dollar.  One situation I remember with my own family was when we were moving.  Instead of paying for a larger U-Haul truck and hiring some extra help, they wanted to do it without help on a smaller truck.  It took around 7 trips and 4 trips on two smaller trucks to get it done.  What should have been a day or two job ended up taking several days.  This time could have been spent putting the items in the house or relaxing and using the time on something more fulfilling.

I had another friend who just used their cars instead of U-Haul and it took them an entire week!  They would have been better off hiring the help.  These things often come up in business where the time it would take to do something would be better off spent being subcontracted so that you can focus on the things that will generate you the most business.  It’s the principle of working “on” your business and not in it”.

Another negative is using cheap or inadequate tools.  This can easily run you in the red because you’ll have poorly done work or you’ll end up with sub-par equipment or machines that can fall apart on you.  This can even put you in risk in certain situations.  Many people have been harmed or killed due to machine malfunctions.  In most cases you’ll end up spending a lot of money fixing problems that could have been fixed the first time.  A $1000 job ends up costing $5000 because you tried to cheap out and spend $500.  Compounded with the time cost this is just not an effective way to manage your resources.

Avoiding Cheapness In The Future

Here are some ways to avoid cheap behavior in the future:

1. When making a purchase decision whether its’ a product or a service, analyze the true cost of everything. Time, money, frustration, and time spent fixing problems again should all be analyzed.
2. Think buying time instead of strictly saving money.
3. Hire people when you can. That time could be used to increase your productivity elsewhere. If you can hire someone for a job that’s $50 that takes them 7 hours, is it worth it to do it yourself when you make $20 an hour?  You’re paying yourself a low wage to do the work in this instance.
4. Use quality tools whenever you can. It saves time and you don’t have to replace them as often.
5. Use quality parts when doing repairs. Nothing is worse than nickel and diming yourself over cheapness.
6. Look at freeing yourself up. This means having the time to do the things you enjoy in life.

Following these tips should launch you ahead in managing your money and time resources adequately.  Simply remember with wealth management that time is a major factor as well as money.  Don’t squander your time for meager financial savings.  You’ll find that you end up digging yourself deeper into the hole.  Go out and start budgeting wisely today!

***Photo courtesy of https://www.flickr.com/photos/76657755@N04/7408506410/sizes/l