How to be a cheapskate and get away with it

We write all the time in our homeowners blog about personal finance and by far our most popular topics revolve around saving money on this, that or the other thing.  (4 Frugal Ways to Cut Costs at Home, Bringing back old fashioned values to survive in a recession, Thrift is the latest vogue- getting back to basics)

The truth is, being thrifty is the new black. For example, according to CNN’s Money Expert Clark Howard, coupon redemption in the U.S. was up a whopping 25% in the first half of 2009. And, if you look at the personal savings rate in 2009 from the Bureau of Economic Analysis, you will see a huge spike compared to the first quarter of 2008 in how much money people are putting aside in savings accounts. (See the full graph) It’s reassuring that our economic state has taught us something about personal finance- even if we did have to learn it the hard way.

On the flip side, while we as a whole are getting stingier with our money- is  the fine line between being thrifty and being cheap getting relatively smaller?

How to be a Cheapskate and Get Away With It:
Rules of Thrift

1. Understand that you get what you pay for.  One of the biggest mistakes a consumer can make is skimping on quality just to save a few bucks.  While you should always shop with thrift on the brain, understand that many items/services are priced the way they are because they are worth it. This doesn’t always stand true, however, so you have to do your research.  Some of the best tips I get are from friends who say, “Try this generic brand insert product here, it works just as good as the expensive stuff!”.  Or, pick up a copy of a consumer reporting magazine and see what the research recommends.
2. When it Comes to Designers-Stay Away from Knock-Offs. If you can’t afford the most expensive designer purse/watch/perfume go for an alternative from a reputable but more affordable competitor. While you may  be sporting Levis instead of  Prada, at least you’re not trying to get away with Prado. Remember, frugality is back in style. Dress with confidence instead of trying to pretend you (or your jeans) are something you’re not. 
3. A little more up front  may just pay off in the long run. Just bought a new TV/power tool/house? Don’t try to cut costs by ditching the optional warranty. Product warranties are designed to protect you from repair and replacement costs that you may face down the road. And typically, compared to the purchase price, product and service warranties are on the cheap side. And this does not just go for warranties, as insurance experts we see examples of this often. Homeowners will opt for insufficient coverage or extremely high deducitbles and then in the event of a claim, have to pay a lot more out of pocket. Compare how much extra you will pay to the cost in the event of a claim or needed repair and judge accordingly. Or, consult with an expert and get some good advice before deciding your coverage on your own.
4. Gifting? Replace cost with thought. This becomes extremely important around the Holidays but stands true any time of the year. If you have less to spend on a gift, replace cost with thought instead of just purchasing something cheap. An example: This holiday season you have about half of the money to spend on  gifts for your family that you had last year. Instead of re-gifting or giving everyone perfume/cologne samples you got free from the department store, think of something thoughtful that replaces monetary value with sentimental value. Photo albums, homemade ornaments and baked goods are just a few ideas.