November 10, 2016

Frugal isn't Cheap

"I'm frugal".

I wasn't always able to say that. Partly because I equated it with being cheap. They're not the same, you know. But it's easy to confuse them. Cheap people focus only on price. If it's on sale, then they buy it. But being frugal ... aaahh that is much more interesting. Frugal people maximize their joy to pain ratio.

Frugal = max ( joy / pain )

Let's say you walk by a store and it's having a 50% off sale. A cheap person might jump at the opportunity to impulse buy and talk about how much they saved. Not bad you might think. But a frugal person will think about whether they really need the item. How much joy will it give them? After the initial rush of unwrapping the new item will I still have the same joy 15 minutes later? Later that day? In a few weeks when the batteries run out? A year from now when a newer version is released? Frugal people look for purchases that will yield long term joy rather than quick hits that fade quickly. Cheap people are like addicts, always looking for the next high.

Beyond the joy is the second part which is how much pain the item causes. Pain is usually measured in dollars and cents so the question is whether the product really is on sale or simply marked down from some inflated price. Retailers are continuously adjusting their prices so it's sometimes hard to know what's a good price. And about those batteries, how often do they need replacing? How much do they cost? Are they easily available? Pain can also be measured by how much of a hassle it is to maintain a product.

So a frugal person could just as easily purchase a product on sale, purchase a different model of it for full price or walk away without buying anything at all. Because it's really all about maximizing the joy to pain ratio. The more you do this, the easier it becomes and the happier you will be.