Some people view frugality as inherently virtuous and valuable. This is a serious oversimplification. Sometimes spending less on something is a very bad idea. This applies to time as well as money.

The apple farmers from my last post will not benefit by spending less on new apple trees. How about a wheat farmer who decides to save money on seed by planting only half his land this year? Being frugal with investments (things that produce additional value over time) is counter-productive.

I see three major postures:

• Frugality says underspend on everything. This is not much fun now, and not much fun later.
• Consumerism says underspend on investment, overspend on consumption. This is fun now and painful later.
• The long-term view says underspend on consumption, overspend on investment. This is not much fun now, and fantastically rewarding later.

Remember I’m not just talking about money. Tools, infrastructure, learning, savings, system improvements, personal growth, and healthy relationships are some investments worth overspending on. Don’t be frugal with those things.

I think most people in wealthy countries are acting primarily on consumerism. They feel a little bad about this, sensing that it can’t be right somehow, so they add a layer of frugality to the whole thing. Frugal consumerism is a confused strategy resulting in very low investment in the long term. The U.S. personal savings rate (the portion of household income that is saved or invested) is around 4% these days, and came close to zero before the recession.

I suspect at the deepest level misplaced frugality springs from survival instinct. It’s a defensive posture. Why invest in the long term if short-term survival is (or feels) uncertain? For a squirrel, it makes sense to prioritize running away from predators above storing up nuts for winter. For a business, it makes sense to prioritize avoiding bankruptcy above long-term expansion plans. There’s a time and place for defensive postures. Survival really does matter.

If you are struggling to survive in your money or time management, focus intensely and immediately on what you can do to make changes to your life to create some breathing room. You must get out of crisis mode so you can start making decisions with a longer-term view.

However, if you are not about to be eaten by whatever eats squirrels, be generous, not frugal with your investment spending.

Caveat: There will always be more investment opportunities (for time, money, and relationships) than you can afford to invest in. Be generous in allocating resources toward investment, but choosy about what and who you invest in. More on that next post.