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When Frugality Goes Too Far

Susan Johnston

Many Americans have embraced frugality in recent years, but sometimes money-saving strategies backfire when taken to extremes. Manisha Thakor, author of "On My Own Two Feet: A Modern Girl's Guide to Personal Finance" and founder and CEO of Santa Fe-based investment advisory firm MoneyZen Wealth Management, says this can occur among Americans across all income levels. "It's a mindset that comes from a healthy desire to not live beyond your means, but it crosses the line when it cuts into joy," she says.

Thakor points to people who, say, stockpile canned goods and let them go to waste because they forget what they bought. "Sometimes I see inappropriate investment decisions made based on frugality," she adds. For instance, some people fail to adjust their portfolio because they don't want to pay taxes, or forgo professional advice that could help them earn higher returns because they don't want to pay for an adviser.

Here are several consumers whose attempts to save money went too far:

The garden of discontent. Do-it-yourself projects don't always help consumers save--especially when they eat up time that could be spent earning more money. "You're exchanging one asset for another asset, and that time is not renewable," says Thakor.

Elizabeth Hanes of Albuquerque, N.M., discovered this last summer when concerns about the economy inspired her to plant a "victory garden" in her backyard. But instead of yielding fresh produce and reducing her grocery bill, the garden grew into a source of frustration. Hanes, who is self-employed, estimates she invested more than $3,500 worth of work hours over the course of the summer for about $20 worth of produce.

[Read: 15 Ultra-Frugal Money Saving Tips.]

"What was I thinking?" she says. "I'm no farmer, and made many mistakes. I planted too few of the crops I like. For example, I wound up with exactly six beets and too many of the crops that overproduce, like cucumbers; my tomatoes all failed completely. Not a single tomato fruit ever appeared on the gorgeous, green vines." This year, Hanes plans to forfeit the garden and shop at the farmers market instead.

The (unheated) room of her own. Snagging a deal isn't always worth it, especially when it means sacrificing comfort or safety. While apartment hunting after graduating college in 2004, Rebecca VanderMeulen found a month-to-month rental in Philadelphia that offered her a choice of a regular bedroom for $400 or an enclosed porch for $325 per month. The student leasing the apartment to her cautioned the enclosed porch wasn't heated, but VanderMeulen took it anyway. "I figured that enough heat would get into that room that I could survive," she says. She also presumed the city's winters were mild.

However, after VanderMeulen moved in, temperatures in January plummeted to about 10 degrees. "I had a space heater, plus an air mattress with flannel sheets and a ton of blankets on it," she says, adding she was often sick that winter. To stay warm, she slept in her boyfriend's dorm room when she could or pretended to fall asleep watching TV so she could sleep on the couch. Once she found a job, VanderMeulen offered her roommate an extra $75 per month so she could move into one of the other bedrooms. A few weeks later, she jumped at the opportunity to rent another apartment closer to her job--one that would keep the cold weather outside.

The freebie that wasn't. Many consumers get caught up in the excitement of getting something free, but many times there are costs attached to freebies. Tom Mangan, who now lives in Winston-Salem, N.C., recalls an incident 20 years ago when his wife won free tickets to an oldies concert in St. Petersburg, Fla. (The couple was living in Tampa at the time.)

[Read: What It's Really Like to Live on a Shoestring Budget.]

"All I remember is one surviving member of Iron Butterfly inflicting an unconvincing version of 'In-A-Gadda-Da-Vida' on the audience," says Mangan. "Somehow, we ended up at the hotel bar, where one of the bands was hanging out. After a few too many beers, we ended up booking a room at the hotel for the night. The next morning, we woke up hungover to realize those free tickets had cost us over a hundred bucks."

The pawn-shop Christmas present. Buying used items can save money, but it's risky with electronics since they are often sold as-is and the warranty may not apply. Determined to stick to her Christmas budget two years ago, Julie Sturgeon of Indianapolis bought her mother an iPod from a pawn shop. "There was no financial reason I couldn't buy my mom a new iPod," Sturgeon says. "I simply had it in my head we're all supposed to budget, and I clung to that stubbornly."

[In Pictures: 20 Things You Should Never Buy Used]

When her mother opened the gift and Sturgeon tried to play a gospel song she'd loaded onto the iPod, they both got a surprise. "I'll never know what went wrong, but apparently the iPod still had songs from the previous owner that didn't show up in the list when I checked it, and the machine blared [one] into my mom's ear--some rap song with the f-bomb all through it," she laments.

Then, the iPod died--"mercifully at that point," notes Sturgeon--and she returned it to the pawn shop for a refund. "My husband was so deeply embarrassed, he used the money my mom gave him for a Christmas present to buy her a brand-new iPod in the box from the Apple store," says Sturgeon.

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