It’s said that a penny saved is a penny earned. Well, not if you go right out and spend that penny on something else!

Let me explain.

I recently helped a friend save over $100 on a flight using the strategy discussed in my post How to fly really cheap on Southwest. “Great!” my friend said. “Now I can afford to stay in a nicer hotel!”

I cringed.

I like to help others live cheap but a lot of times people just don’t understand that living cheap is more than a one-time thing. It’s more than an airfare discount or cheaper groceries or improved gas mileage or what have you. It’s about sustained commitment. It’s about achieving goals. If you wanna live cheap, you must get out of the mindset that saving money on one thing will allow you to blow more money on something else.

Everybody likes to save money, but this incident reminded me that everybody has different reasons for wanting to save money.

Do you believe that money exists to be spent? Do you believe that you might as well live in luxury if you’ve got cash to burn? I used to believe this, but that’s before I learned about compound interest. That’s before I actually sat down and figured out how much an IRA contribution today would be worth in 35 years after all that tax-free compounding. That’s before I realized how money can buy you more than just material things - it can buy you freedom. (It’s funny how I thought I didn’t have enough money to contribute to an IRA until I realized how important it really is!)

If you save money one on thing, will you go and spend it on something else you don’t really need? If so, you didn’t really save money. You didn’t reduce your overall living expenses - you just shifted some numbers over from one category of spending to another.

I’ve written before about the importance of goals, about how saving money isn’t just about ending up with more money, and if it is then you probably won’t end up with much money at all. This is just what I was talking about.

I wouldn’t waste my time writing a blog about living cheap if the only purpose of living cheap was to have more cash to blow on unnecessary luxuries. In my mind, that’s definitely not the purpose of living cheap!

I write about living cheap because it’s a means of accomplishing goals. Some people can’t feed their kids; they’ve gotta live cheap. Some people wanna quit their day jobs and become musicians; they’ve gotta live cheap. And if you’re only a (pardon the language) half-assed cheapskate, you’ll find such goals slipping out of reach.

The moral of the story: treat the money you save by living cheap the same as any other money. Consider it a down payment on your life goals. For goodness’ sake, don’t spoil the whole game by spending it on more stuff!

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