In the spirit of Financial Literacy Month, I wanted to tackle the epic battle of– frugality vs. earning more. A classic debate that will never end. Instead of fully re-opening it for today, I wanted to look at some of the negatives of frugality.

As you get acquainted with the world of personal finance, I don’t want you guys to think that you have to cut every single cost in your life just to save money. That’s not what Studenomics is about. Personal finance gets really boring once you start dwelling about finding more and more ways to cut back on your spending. I’d rather find a level of spending, where my savings are increasing and I’m happy overall with my lifestyle.

Let’s jump into the flip side of the coin and look at some of the negatives of frugality:

You don’t pay for value.

I could be wrong but it seems like frugality advice often entails cutting costs on every area of life. I’m a firm believer of saving money but I’m a stronger believer of paying for value. I like to pay more for good stuff. I won’t wear cheap cologne. I won’t wear second-hand clothes. I won’t cut my own hair. I won’t cut my gym membership to work out at home. These are all things I absolutely refuse to do simply because I believe in paying for value. In all of the scenarios mentioned above I see value, hence I’m willing to pay. If you find value in a purchase, go for it.

You don’t value your time properly.

I don’t mind squeezing in the odd frugal activity or money saving task into my schedule. I do have a limit though. There’s only so much time I’m willing to dedicate to cutting costs. I personally feel that my time could be better spent on something that I enjoy and could improve my financial situation (working on this blog for example).

There’s only so many costs you can cut.

You’ll eventually get to the point where you’ve cut every cost possible. What’s next? One summer I drastically cut all of my costs. It wasn’t long before I realized that I simply needed to earn more money if I wanted to improve my financial standing. Some of you might disagree with this. I do stress that frugality is an important tool for financial independence. It just isn’t the only tool.

Many people take it to the extreme.

Once you see your bank account hitting record numbers, a sense of euphoria will hit. Unfortunately, the next step usually involves figuring out how to become a complete miser. Many of us that follow the financial media and read about personal finance, have experienced this. It’s really easy to pass the point of being financially conscious and reach the infamous stage of pinching pennies. You need to watch out for this stage. You don’t want to get to the point that you save money by not getting your parents a Christmas gift. You also don’t want to reach the point where the quality of your life begins to deteriorate because you’re always worried about saving money.

Do you guys agree with my flip side of the coin for frugality tips? Or perhaps are you a major proponent of frugality no matter what?

Being a frugal student or living a frugal student lifestyle does not mean you have to give up all material things and stop going to the movies or enjoying dinners at restaurants. Instead, being frugal is really more about being smart with your money and being aware of the value of money and these frugal principles are ones which can benefit anyone, in any stage of life or financial situation.

1.Take responsibility for your financial situation

This means you need to acknowledge that it is no one else’s fault that you are in the financial situation that you are, and no one else should have to take responsibility for managing the situation but you. As soon as you take responsibility for your finances you will be able to see any issues clearly and go about solving these problems logically, rather than responding emotionally.

Being responsible for your financial situation as a student also means having all the information and to maintain a frugal life where you are able to control your money without it controlling you, you need to make regular checks of your credit report and score. This helps you know whether there are bills which should have been paid which were missed, and can also keep you aware of any fraudulent activity in your name.

2. Know the value of money

Being frugal is not about going without, but it is about going without the things which are unnecessary. Therefore an important frugal principle is being smart with your money and to do this you need to know its value. This means you take the time to shop around for the best deal, or you pass over the more expensive product with extra features which you know you don’t need, to purchase the cheaper one you know you can afford, and which fulfils your needs.

3. Paying yourself first

There is no purchase or bill more important than you, so to be frugal with your savings, create a direct transfer from your wages each pay day so that a portion of your wage goes directly into a high interest savings account. Paying yourself first means that no matter what else happens you are able to protect yourself, your family and your future as you should make sure to keep between three and six months worth of expenses in your savings account in case of emergencies.

4. Budgeting

Making a budget requires you to be realistic about what you can afford after your wages have come in and your bills have gone out. This helps you remain frugal because you are living within your means and spending only what you can afford, because it has been budgeted for. To make sure your budget is accurate, track your actual expenses by keeping receipts and entering purchases into your budget spreadsheet. In this way you can see where you are spending the majority of your money and identify places you go over your budget unexpectedly, allowing you to rectify your budget in the following month.

5. Planning for future expenses

If you want to be frugal in making your money go further, you need to be clear about where it has to go. This means you need to think about your plans for the future and how much money you will need to achieve those goals. It may be that you are planning a family, you want to pay for your child’s studies, are planning a retirement or you simply want to make sure you can keep up with the costs of living. Whatever your plans for the future, knowing how much money you need to achieve them and when you need that money will help you manage the costs in your future responsibly, without having to take out loans or use credit cards to pay for them.

6.  Adjust your attitude

Living a frugal student lifestyle and being smarter with your money is not just about what you are doing, it is also about why you are doing it. Having the right attitude towards life, money and possessions will help you make smarter financial decisions. When you realize that it is alright to have nice things, but it is not essential, then you will be able to adjust your goals to be achieved when you can afford them, not when you want them and have to extend yourself in debt to buy them.

7. Consumerist products

Of the things you want to buy from the point above, when you adjust your attitude you will realise that not all of your possessions have to be brand new. There are a lot of good quality clothes in second hand stores if you take the time to look for them, and you can even make your own clothes for a fraction of the price of new ones. While you are considering making your own clothes, look at what else you could make to be more frugal – you could bake your own bread, make your own jam or craft your own Christmas presents. You also don’t have to go completely without and if you can shop smarter you can be more frugal with your money, for example shopping online can save you money and time and many websites will run specials on free delivery.

8. Consumerist services

It is nice to go out to dinner or be able to put your clothes in the dryer rather than taking the time to hang them out on the line, but these are also unnecessarily costing you money. To be frugal look for ways you can cut back on your luxury services, for example instead of eating out with friends take turns to host dinner parties at home to save money, and instead of turning up the heat in winter to keep warm, snuggle up in bed under a few extra blankets.

Fred Schebesta writes for Savings Account Finder, where he helps people to compare term deposits and savings accounts online

(MD’s Note: I’m not the most frugal person but I do understand the role of frugality in a college student’s life.)

This guest post from The Digerati Life, a site that covers a wide range of topics on personal finance, from reviews of discount brokers to the best credit cards in circulation.

Bargain hunters will disagree, but paying retail prices may not only save you money but also save you some hassle. Learn from my mistakes. I bought a briefcase — a famous brand name while I was shopping at an outlet mall in person. While hoping to obtain a high quality briefcase at a low, sub-retail price, I ended up with an item I could not use. Little did I realize that by not paying the regular retail price, it meant that I was sacrificing something very important when shopping: the salesperson’s service and advice. By visiting a discount retailer, I ended up limiting my choices to a narrow range of products and only one brand.

As we all know, outlet malls are good places to find bargains. You might notice that the staffing levels in an outlet mall are smaller, and the service is downplayed. (This may be true online as well, but I have not tested that.) This business tactic is deliberate in order to offer lower pricing, and as it goes, low prices are the holy grail of retailing. So this was how I purchased my briefcase — the selection of products I had was limited in the outlet store but I made the best decision I could at the time and I was wrong. I ended up with a briefcase that I felt was ultimately too large for my needs.

So what are some of the things I learned from this shopping experience? Here are a few of my thoughts:

What if I had simply bought a briefcase at a regular retail store, with a larger selection of products? In a regular retail store, the salesperson would have had me try out several types of bags before I found the one that suited me best… the experience would have been akin to trying on clothes as many people do when clothes shopping. I might have chosen a different bag, perhaps not even a briefcase. Shopping at an outlet mall with a narrow selection of choices, only worked out poorly for me. Had I been willing to pay the retail price, I might have gotten the perfect bag for me, and ironically, I might have spent less because I would have gone with a smaller and more useful briefcase which had a lower regular retail price. I would have had the opportunity to eliminate some choices and that would have been good.

So here’s a tip: if you’re going to go discount shopping, make sure that you are able to compare a range of sizes, colors, brands, and consider which features are important to you and the most necessary. In the end, you have to live with and possibly wear what you buy, so if the product does not truly fit your needs, walk away and do not buy that day. Say it again, walk away and do not buy that day!

Also, check out online product ratings at reputable places. Epinions has been a leader in the category of online product reviews only — the website does not sell products. Best In Class does comprehensive reviews of digital cameras and plasma TVs. Many online stores or magazines also contain product reviews, while Consumer Reports is the old stand by.

Some would say I have experienced the sad tale of caveat emptor and buyer beware… So can I sue a store for their bad service? Very unlikely. That type of bad service is actually part of the store’s business model –- to them it is simply less service but not bad service. Can I return my giant briefcase? I don’t know because I was traveling and am no longer near the location of the store –- most outlet malls are out in the boondocks. I feel that I was taking precautions and that the real problem is that I did not know how to shop. No longer will that be an excuse. Shopping is a hassle and many people try to get around that hassle by not becoming informed consumers, but it doesn’t do them any good. In the end, since I didn’t have the time to do a proper job shopping for discounts, I should have just paid retail and saved.

This past Thursday, J.D.Roth of Get Rich Slowly wrote an interesting post where he asked if there was a generation gap in spending?

The post itself got me thinking but it was all of the discussions under the comments section that really got me motivated to write about this topic.

Obviously I can not be upset with any analysis that is made of generation Y because I’m a weird very-early-20-something that actually writes about money. Unless you’re a Journalism Major, chances are you hate writing (especially about money management). But before I digress and my mind starts wandering off as usual, back to the topic- are twenty-somethings not saving money?

Let’s look at some of the banking issues for 20-somethings:

Extravagant amounts of fees

Banks are nickel-and-dime-ing us worse than the night clubs we go to on Saturday nights. If you don’t have money in your bank account you would logically assume that the bank would stop your debit card purchase. That’s not what happens. The bank allows the transaction to go through and your account goes into a negative (overdraft). On top of this negative balance you are also charged a fee for the overdraft. No wonder banks love young people.

High yield savings accounts online have become the better option

Gone are the days of brick-and-mortar and present are the click-and-mortar banks. Most of my friends that have a traditional bank account only keep them intact because the bank is right around the corner from their home and because they need a checking account. These days every employer provides its employees with direct deposit payment. This makes an online high interest savings account even more attractive because you don’t want your money sitting in a traditional bank account where it earns you 0.01% or some minuscule number. So if banks notice that young people are pulling out money from their bank accounts, it’s likely because they are transferring it to their brand new online savings account.

Now it’s time to look at the spending money aspect of this equation:

Plethora of options for spending money

Twenty somethings do not by any means have a shortage of ways to spend money. It’s one thing that there’s a coffee shop and fast food spot on every corner, but what amplifies this issue is that now you do not even have to get out of bed to spend money. Online shopping has literally made it idiot proof for anyone to buy anything they want.

Spending money has become increasingly convenient

Whenever I go on Amazon or any other online merchant site that I use, all of my information is conventionally stored. I usually don’t even have to type in any information again. To make a purchase I just need to add the product to my “virtual cart” and then “checkout.” A few clicks and two days later, my doorbell is ringing with a new purchase literally right at my door. Of course the onus is on the individual to practice self control. If you do have a mental lapse it is very easy to splurge at ease.

Traditionally “small” fees are increasing

To take the bus one way in my city is $2.75 (and slowly rising). A pack of cigarettes (if you smoke) is about $10. Parking by my college is about $12. A beer is about $5 (and I know you don’t go to bar for just one beer). Gas prices are on the rise. Car insurance is not getting any cheaper. I will stop the list here. If you net $500 weekly after taxes, your earnings may go towards covering small purchases here and there.

(Don’t yell at me. I know this a basic discussion and inflation was omitted for simplicity purposes.)

The Debit/Credit card generation is here…

And cash is slowly fading away. A few weeks ago I spent a few hours with a buddy from school in between classes and for study sessions. As the day went on I noticed that he literally purchased everything with his debit card. I mean everything. Coffee, lunch, bus tickets, as long as it was accepted. This can be a great idea if you download your bank statement and meticulously go over your purchases. Unfortunately, it can be a horrible idea if you rarely check your bank account and don’t feel like your spending money because all you do is swipe.

Of course you can argue that it is more of a credit card generation than it is a debit card era, but either way it’s a generation of people using plastic to cover purchases.

At the end of the day 20somethings may not be saving as much money as they should be. However, certain aspects of personal finance have improved. The money that we do save is held in high yield savings accounts. Many facets of our personal finance system are automated. We have access to our financial information from home. Many of us earn money online. It is just becoming a matter of learning to say no to the overabundance of options that come our way.

Anyone that knows me is well aware that I love to workout hard and then pig out until I’m so full I can’t even move. Granted, I know this isn’t healthy so I try to limit myself as to when I get to pig out. The most common form of pigging out traditionally is to go to an all-you-can-eat buffet.

The other day something strange happened. I opted out of the all you can eat option and I just ate a regular meal at the same restaurant (yes I know it’s cheaper to make your own meals but once in while you got to spoil yourself).

You know what’s funny? I went home just as full as I would have been if I paid for the more expensive all-you-can-eat meal. I ended up paying $5.89 for my meal and the all-you-can-eat option would have cost me $10.99.

Much to the annoyance of my girlfriend I pulled out my trusty pen & paper to make some notes on the subject. I came up with a few ways to help you prevent getting scammed by the all-you-can-eat buffet option:

Think of the law of diminishing returns

Anyone that took grade 10 business class will remember the law of diminishing returns. If you don’t know what this term refers to then do not fear I hate textbook theory too so I will break down the all-you-can-eat buffet example into simple terms.

If you have one pizza slice you tremendously enjoy the slice, if you have 2 you enjoy them both, if you have 3 you really enjoy all 3 pizza slices. When you have 10 pizza slices how many of them do you really enjoy? Chances are you will enjoy eating the first few but after that you will be eating just so you don’t waste food & money. After 10 pizza slices you will be so full & bloated that you won’t be able get off your chair and that feeling won’t go away for many hours.

That’s what the law of diminishing returns is all about- you enjoy consumption only until a certain point and then your level of satisfaction begins to decrease.

Compare the buffet option prices to your normal meal

If I can pay a dollar or two more than my normal meal to obtain an all I can eat option I would gladly do so. If the buffet option is double the price then no way is it worth it. Think about it- if your normal meal fills you up and provides you with the necessary nutrients/energy for the time being then what’s the point of stuffing your face until you can’t walk?

Drink water not soda

The very kind servers at the buffet will offer you soda or some carbonated drink. They don’t do this to make you happy they do it to fill you up before the meal so you eat less. If you are absolutely convinced on the flat rate buffet option then do yourself a favor by only drinking a small glass of water before your meal.

This started off as more of a rant and ended up as a frugality post. Any frugality tips you guys want to share when it comes to food?

photo: avlxyz

Some personal finance bloggers absolutely love frugality tips, while others brush them off as pointless because they don’t see the need for aggressively saving every penny. I fall somewhere in between. I try to save money whenever it is reasonable and feasible, but I will never make my own laundry detergent or cut my own hair. I can also spend money foolishly at times but I will always think through major purchases with fine detail.

Where am I going with this? The other day in conversation someone asked me about my diet and eating habits. I admitted to this person that I try to eat well but that I eat enough sugar/junk food to not make life completely miserable. What I mean is that I eat well but sneaking in a coffee or chocolate bar every day or so is good for the soul and could prevent you from going insane.

I want to tie this in with frugality because I feel that there is only so much cutting back on spending you could do before the quality of your life will start to rapidly deteriorate. Ya ya I know money doesn’t buy happiness but nothing is free in life either.

I have seen all of the calculations and I know how much money I can save by not drinking a cup of coffee in the morning but guess what? I love my cup of coffee in the morning and this is where I draw the line on frugality tips. You can save a fortune by riding your bike to work & back, while eating the lowest costing food and never leaving your home but what kind of a life will you have?

I understand the importance of frugality tips and saving money strategies but we sometimes get too caught up in debating minutiae that we lose track of the “bigger picture” when it comes personal finance. The bigger picture for 20 somethings is that career growth, productivity, retirement planning, mortgages, etc. are far more deserving of our time than tips on how to save a few dollars on something that brings joy to our lives.

It’s important that college students and entry level graduates learn how to live on a budget but there must be a line you draw when it comes to frugality tips. It’s perfectly fine if you try to save money on food and going out but don’t show up to an interview dressed in borderline acceptable clothing just because it saves you a few bucks.

The take home point for the day is that I urge you guys to practice frugality tips only to the point where you can save money on unnecessary purchases while still maintaining a high quality of life. What’s the point of saving money if you’re going to be miserable all the time?

photo: chad_k

Wealth can only be accumulated by the earnings of industry and the savings of frugality.

- John Tyler, U.S President.

This quote is over a hundred years old but it still holds true today. With that being said many people are unable to grasp the concept of frugality and they become cheap in their pursuit to be extremely frugal. What’s the different between cheap and frugal? That’s another argument for another day. Today I want to discuss types of frugality and money saving tips that college students and new graduates should not follow:

Cutting out caffeine.

Many personal finance bloggers will jump at me for this one but if you love your cup of coffee in the morning then do not give it up. If a cup of coffee is what gives you that mental/physical boost in the morning without a major crash then don’t let anyone talk you out of it. Find ways to spend less on coffee or simply brew your own coffee at home.

Cutting your own hair.

People can tell when you cut your own hair, well at least I can. You can keep on telling yourself that looks don’t matter until you get blue in the face but if you want to be taken seriously you need to take care of yourself.  If you don’t have $10-20 to spare for a haircut then at least have a friend with some barber skills cut your hair. If you simply sport a shaved head then you could maybe once in a while get away with shaving your own head.

Taking less courses.

I’m taking a course this summer that will set me back about $600. Sure it’s a pretty huge blow financially but I know that at the end of the day when the dust settles the piece of paper (University Degree) will have cost me the same general amount regardless of when I took the courses. Believe me it sucks handing over $600 but the sooner you obtain your education the sooner you may begin your career.

Dressing professionally.

Once again, image is everything. Every industry has its own set of standards for what “professional attire” is so try to follow those standards. If you come into an interview for a business related position in a major company wearing the same jeans you wore to the night club on Friday night you should expect a nice “thank you letter” from the company for applying. In University/College you will do presentations in front of hundred of other college students and a few college professors, you want to come off as professional as possible.

Are there any other areas where you guys think you should not always be saving money?

Are you a college student struggling to save money? Are you tired of working long hours that interfere with your studies? If yes, then I would like to provide you with 11 simple ways you can save money next semester at college:

1. Use your student ID for discounts. Most restaurants and retail stores offer discounts to those that can provide a student ID card. Take advantage of this and try to only shop at places that provide a student discount (it’s actually more common than you think).

2. Get an unlimited bus pass for all of your traveling needs. You guys know the deal, driving is expensive. Take the bus around until you graduate college and have a steady career earning a decent income.

3. Eat breakfast at home. Don’t avoid breakfast because by noon you will end up feeling really weak and may spend all kinds of money on a ridiculously unhealthy and expensive meal.

4. Try attending a college in your town instead of moving out to a major city. Don’t move out of town just because you want to follow your friends or to try to be independent (aka racking up major student debt). We all live in different ares but unless you live deep in a rural area, the chances are that there is a college a bus ride away. My city has 4 major universities and 2 colleges, yet many of my friends moved out town.

5. Party like a student, not a rock star. College pubs, frat parties, live entertainment on campus, and I’m sure there are another 6759 ways you can have fun as a college student without going broke. Would you rather hang out with people the same age as you and attending the same school? Or would you rather hang out with completely random people at an expensive downtown night club?

6. Avoid a credit card as if it’s an STD. Yes there are ways to optimize your credit cards and obtain cash rewards but let’s be honest at age 18 you do NOT need a credit card.

7. If you must get a credit card then make the payments on time. When your Visa statement comes in the mail make sure the first thing you do is go to the bank to pay it off. If you make

8. Buy used textbooks or share with a friend. The college students guide to saving money on textbooks is a must read for everyone. The amount of money you save on textbooks could pay for a vacation after your college graduation.

9. Don’t follow all of the latest trends. I wanted to buy this trendy shirt last summer and it was going for $60. Today I can buy the same shirt for half of the price. Who cares if others had it before you?

10. Practice delayed gratification. The longer you wait for something the more you will enjoy it.

11. Avoid bank machines/banking fees. If your bank is still charging you monthly fees or for cash withdrawals then it’s time you talked to them. If they don’t budge then it’s time you walk. These days there are plenty of bank accounts with zero monthly fees and free cash withdrawals.

photo: Jeff Keen

In the last few weeks I have probably received a couple of dozen emails in regards to my personal finance views, particularly my frugality. Some readers have questioned whether I even follow any frugality tips based on some of my spending that I have discussed. While on the other hand other readers have told me that I’m too young to be so strict with my money. Today I want to address the concept of how college students should embrace frugality tips and why.

Why should college students follow frugality tips? When you’re studying full time there are only so many hours you can work and only so much income you can earn. Your time and effort should be entirely dedicated to your education and not trying to save up enough money for a new Affliction shirt.

By following frugality tips you can have the life you want without having to work long hours. Instead of working a minimum wage job for long hours you can find ways to optimize your spending so that you can have the full “college experience” without graduating in massive debt that will prevent you from moving out until you’re in your 30s.

How should college students embrace frugality tips? I’m well aware that most 20 somethings love to bash frugality tips and follow the principle of earning more. There is nothing wrong with that but the sad reality is that as a college student you don’t have too much disposable income to spend on enjoying your life. Now here’s where this whole personal finance thing gets tricky- college students want to enjoy life on a small budget. Is this possible? It certainly is if you are willing to embrace frugality tips.

Frugality tips for college students should be used as a means of optimizing spending but not as a means for taking a short cut or compromising your future. Frugality should be thrown out the window when it comes to spending money on your courses or anything that will help grow your career. Too many times do I see a college student save money in an area where they really shouldn’t. It’s one thing to save money by taking the bus to school but receiving a low grade because you didn’t want to pay for a tutor is not acceptable.

What’s next? Once in a while I will provide college students with tips on how they can optimize their spending by simply trying some frugality tips. Don’t worry I won’t let this personal finance blog become full of “don’t drink coffee” or “cut your own hair” tips. I just want to show college students that it is possible to enjoy your whole college experience without racking up massive amounts of debt.

I will compare being frugal to getting in shape, there is simply no quick fix, no getting ripped for spring break or getting rich by summer, it is a complete life style change and a whole new way of thinking. Just like someone that works out who has cheat days where they will eat snacks, a frugal person will have cheat days where they spend money foolishly. The key once again is moderation, days on end where you spend tons of money and then save for the next week do not count. Of course there are times when many of us will get desperate and save as much money as we can in the shortest period of time. In doing so we usually deprive ourselves of the basics that make life enjoyable. The key is to have a slow and steady build up of finances for the future without compromising the quality of life we have today. I have already covered the art of frugality, so below I provide the building blocks of frugality, which pretty much are general tips on how to think like a frugal person.

1. Always think twice before make you any purchase. You do not have to think about anything in specific but just pause for a minute. Take a minute or so to realize what you are about purchase. Chances are the rational side of your mind will come into play and you will start thinking about why you are even about to purchase this product.

2. Look into alternatives. There will always be alternatives in life, whether it is getting an insurance quote or buying a car used as opposed to brand new, you will always have options. Do not just look into one other alternative, look into all of the possible alternatives, and there is a good chance you will find a better deal. There is nothing wrong with consuming a cup of coffee in the morning, but there is no reason that you need to purchase a fancy latte from Starbucks or God forbid a $5 energy drink.

3. Find a discount. If for some odd reason you do not find an alternative or a substitute for the product that you absolutely need than just find a discount.You can find a discount through coupons, websites (www.redflagdeals.com), or even just by asking sometimes. Remember retailers need you more than you need them

4. Can you live without this purchase? Sometimes you are going to have to take a step back and ask yourself if you could live without this purchase. Chances are the answer will be yes, aside from nutrition, insurance, property, water, and other basic necessities of life. Before you buy those $400 sunglasses think about, is the sun so bad outside that you need to buy $400 sunglasses to protect yourself?

5. Make a shopping list. I know most people think it is lame to walk around a store with a shopping list, so you could put it on your Blackberry or iphone and walk around the store playing with your cell phone just like everyone else these days. The point of a shopping list is so that you do not walk into a store without knowing what you exactly need. If you walk into a store knowing that you want something in general, chances are you will make a couple extra purchases that you would have never imagined prior to entering the store.

6. Set a budget. This goes without saying, everyone should always have a budget in place. It does not have to account for every penny but it should be what you live by for a specified period of time. You should not go over this budget unless you absolutely need to. Helping a family member in need is a good reason, buying the newest shoes is not.