Guest Post Author Bio: David Bakke enjoys living frugally in Atlanta and frequently shares his best financial tips and experiences on Money Crashers, an online resource ranked as one of the top personal finance blogs online.

In response to a pay cut at work three years ago, I started living a frugal lifestyle and decided to save wherever I could. I started by cutting grocery expenses, and then expanded to lowering monthly bills and reducing insurance fees. Eventually, I staged an all-out assault on every area of spending in my budget. I still find new ways to save everyday, but for about the past year or so, it’s fair to say that I have lived a completely frugal lifestyle.

In my quest for frugality, however, I’ve learned that some would-be saving methods are not truly practical. In fact, it’s easy to lose money in an attempt to be frugal. I’ve unintentionally gone too far a few times, and in doing so, learned valuable lessons about trying too hard to live a frugal life. Below are my three biggest discoveries.

1. Losing Valuable Time
Being employed full-time and running two home-based businesses over the past few years, I’ve learned the true meaning of the phrase “time is money.” I must consider time commitments before I go ahead with any money-saving initiative.

A good example of this is clipping coupons. Even though I claim to live a completely frugal lifestyle, would you believe that I rarely clip coupons or take part in extreme couponing? For me, the process just isn’t cost-effective. I spent a lot of time scouring the newspapers and seldom yielded any coupons that I could use. I’m a vegetarian and I eat quite a bit of organic foods, so my diet doesn’t match up with many manufacturer’s coupons. I was spending two hours a week to save maybe $10. By taking action on some side business ideas, I could make far more money in those two hours.

Lesson: Time is just as important and valuable as money. Why else would we need effective time management tips to help manage our days? Coupons might be a great tool for your family, but you may have other well-intentioned time drains that aren’t really saving you money. Cutting back on landscaping services, for example, might seem like a big slash through an unnecessary expense. But if spending three or four hours on your yard work is keeping you from bringing in some extra cash, hiring a low-cost professional is well worth it.

2. Sacrificing Ethics
Being frugal is a worthy effort, so it may seem strange to consider the relationship between being “frugal” and being “unethical.” The overlap is surprisingly dangerous, and if you ignore the issue, you can end up in trouble. Too often, the daily tools for saving a buck or two involve blurring ethical boundaries or simply breaking the law.

Don’t go the dishonest route to save. It’s simply not worth it, though temptation is lurking. It’d be easy to try to slip some groceries past the cashier, fraudulently file for multiple rebates when the limit is one per household, or fake your way into a senior citizen discount you’re not really eligible for.

Lesson: At the end of the day, you still have to live with yourself. Keep all of your money saving ideas on the “up and up.” Don’t let an attempt to save $5 here and $10 there land you with legal trouble, tax problems, or hundreds of dollars in fines.

3. Avoiding Rewards
This topic might be the most important piece of the puzzle. In the course of heightening my financial life to true frugality, I found myself completely shying away from spending money on myself. While indulgence is bad for the budget, ignoring your needs is incredibly counterproductive.

I still struggle with this today, but if you’ve made significant strides in your personal finances, reward yourself for living frugally. When you make a big difference, take a small celebration. For example, if you’ve gotten yourself down from five-digit credit card debt to a zero balance, then your monthly bills are the lowest they can be, so it’s okay to spend a little on yourself.

Even if you’re not 100% out of the woods, but you’ve made significant progress, periodic rewards and small splurges are the key to maintaining your lifestyle and avoiding frugal fatigue. You don’t want to save up all your money for the “rainy day” that never comes. However, don’t go out and drop $2,000 on a 55″ LED, 3D television just because you’ve had a good financial week.

Lesson: If you don’t reward yourself from time to time, then there may be little point to living frugally. You don’t even need to buy yourself a new toy or expensive meal. For example, I recently rewarded myself by setting aside enough money to start upgrading my house. I’ll get to enjoy new paint, new blinds, and new appliances, all of which I can apply or install myself – staying true to a frugal style even in rewarding myself. It’s doubly enjoyable!

Final Thoughts

Frugality can be quite addicting, and it often becomes its own reward. But you need to know when to say when. Don’t sacrifice a good chunk of free time in your life just to save a few pennies, never do anything unethical to save money, and by all means, reward yourself from time to time. With this strategy, you’ll be able to live a truly frugal life, and fully enjoy the benefits of doing so.

In what other ways do you live too frugally? Have you found yourself in these traps on your path to a more frugal life?