Ask HN: What's Wrong with Penny Pinching?

I do not know who Sean McClure is ... nor do I care. He seems to have a tune and he's going to continue playing it:

1) The author uses "penny pinching" to mean something other than its common definition[1].

2) By definition, the rich don't need to be concerned with pennies.

3) While not getting lost in minutiae is a good thing, not caring about details is not optimal in all circumstances.

Statements such as

> The best generalists have a very specific way of being so.[2]

and the blog post seem to constitute part of a personal branding campaign.

[1]: https://news.ycombinator.com/item?id=28168440

[2]: https://twitter.com/sean_a_mcclure/status/142650253938255872...

I totally agree. To take your example of coupons, i would estimate savings <$500-1000 a year for around 50 hours of work. If you spend that time/mental energy to find a higher paying job, or learn to negotiate better, or build a side business, or spend a few more hours picking the right stocks, you could earn $10000s more. Or just use the time doing something you like, thats easily worth it too. Just spending the time truly relaxing will make you happier and more productive at work the next day.

It does not apply in all cases but it does in many. I once estimated i would save <$100 a year screwing around with different credit cards and maximizing rewards - not worth it. The saving is not just time either. Having less low value tasks on your mind gives you more clarity and mental room.

For grocery shopping, i just pick a cheap store like walmart and accept the prices i get. Maybe for a more expensive purchase like furniture or a car its worth spending time to find a good deal. You can generally ballpark how much you will save by penny pinching at X pretty easily and decide if its worth it.

I think a lot of penny pinching comes from viewing frugality as like a moral virtue. Seems silly to me :>)

I think Sean McClure's advice only applies when you have so much of one resource that you can afford to be inefficient when trading it for another.

If you have so little cash you have to choose between paying the water bill or the gas bill because you can't afford both, spending time to optimize your cash is a matter of survival. Poor people are also criticized if they don't penny pinch.

College students are often cash-poor but time-rich, so it makes sense they would pinch their pennies and consume time to preserve the scarce resource of cash.

Tech professionals are often time-poor but cash-rich, so it makes sense to pinch their minutes and spend cash to preserve the scarce resource of time.

And for the many in poverty who are both cash-poor and time-poor, time is usually the more flexible resource and so they pinch pennies.

I honestly believe this is hard to answer. Is it worth it to churn credit cards, cut coupons, and constantly optimize for price? Probably not. That said, the average person in society is woefully under skilled in my opinion for everyday tasks. Most people cannot fix a leaking sink or cracked tile. There is a significant cost to outsourcing everything, and this cost is more than monetary. Our agency is reduced when we cannot be self sufficient. It may be cheaper to rent in the short or long term, but owning a house means that you might dabble more in real estate later because it won’t be new to you. Really this is an exploration vs exploitation problem. The answer is that you should exploit the things that provide the most benefit, and explore enough to find those opportunities. Outside of word of mouth, this can’t really be known beforehand. So the answer is pick the right things with imperfect information, which is impossible.

Personally, I enjoy exploration and learning about everything. I’m studying construction management on the side because I want to feel like the house I’m in is mine, because I designed and made it. Likewise, if you use Simplifi Money or YNAB or any other budgeting app, you have more agency.

My general thesis is that it’s useful to go outside of your comfort zone and try to do and learn things that aren’t clearly the optimal economic path. I’ve done that and I think it’s worked out well for me, but I am very lucky.

Just like in software: optimize where appropriate. If there is a good return on investment (time spent to money saved), then do it, if not, don't. Another consideration is if you enjoy it. If you seriously enjoy clipping coupons even if it doesn't end up saving a lot of money, do it anyway.

It depends on where you pinch. If you start pinching everywhere, it is going to be very painful!

I am described by some as penny pincher. I am actually not; I just don't like to shop because it is stressful for me. So I try to avoid or delay as much as possible buying anything.

Now, having said that, there are downsides of blanket penny pinching. Instead of helping, it can be counter productive.

You mentioned the rich do not penny pinch as per the book's author. Well, rich spend money only if they can get a return from it; otherwise they will save(read invest) money as much as possible e.g. say if they want to buy a car, first they will see to it if they can pass it as business expense. Other reason they spend money is to project strength/status or for PR purpose. Another reason is for investment purpose, e.g. old paintings, wine, wintage cars, properties etc. So anything that they spend is used in a way to get back more money. Even if they spend on private jet, it is not just to project their status, it is to save them time to reach their destination and hence save money.

I was attending a course on entrepreneurship and the lecturer there once said that most successful entrepreneurs who do not own their own private jet travel by economy class.

Interestingly, I saw sometime back a teleseries on life of Paul Getty. In one of the scenes it is shown that he is recording in his pocket book the money spent on newspaper, and asks his butler to inform the owners of the newspaper that if the newspaper keeps on raising prices without improving the content then he will stop buying the paper :)

I feel that most of the time, my time is worth more than the money saved doing monotonous things to save money. Sure, getting the Sunday paper and clipping a few coupons saves money and doesn't cost time, but taken to the extreme it does.

I have friends that drive an extra 30 minutes to save off a few cents in gas or ones that endure the hoards on craigslist to sell an item for 50$.

I'd rather take the craigslist item to a goodwill, donate it, and take the $50 off on my taxes later.

Some people shop at 3-4 different stores on sunday to optimize their costs, but I'd rather shop at 1 store and spend an extra 20$ to avoid doing that. It all comes down to preference but time spent at home on a project or with family is worth the small amount of money I'd lose doing things optimally.

I think it’s as simple as your time isn’t free.

You can spend a lot of time optimizing your costs, when it would be better spent on increasing your income. Costs hit diminishing returns to how much they can be reduced, while, luckily for most of us here, there’s much more upside in using that time In career or entrepreneurial growth.

I’m not against some awareness of costs. But even spending 30 mins trying to optimize getting the cheapest form of some commodity at the store is going to maybe save me $10? Spending 30 mins learning a new skill or having a valuable convo would likely net me a higher upside.

I don't think being frugal is a bad thing in of itself. One could almost approach it as a game, but one with tangible rewards.

The issue is the opportunity cost. Because there's a limit to how many pennies you can pinch per month, you will start hitting diminishing returns on time invested trying to reduce spend.

There is however no upper bound to how much you can earn, so time spent figuring out ways to increase earnings typically don't hit diminishing returns. In fact, it usually give exponential gains.

Time isn’t free or infinite. You need to invest in tools and burn a bit too save time and move faster. Being too slow burns potential gains as well and has a cost

When I "penny-pinch", I don't do it to save money, but instead to reward the sellers who have the lower price.

Ramit Sethi says, (and this is my paraphrase!!) that in the long run it's more effective to focus on ways to earn more, than it is to spend less.

The book is "I Will Teach You To Be Rich"

The rich may not penny pinch..but they are already rich. It's a logical fallacy to assume a correlation.

What would be really interesting is to trace their spending behavior while they weren't rich.

ah

penny wise and pound foolish

vs

a penny saved is a penny earned

People have been tackling this issue for a long time.