Are you cheap or frugal? Although everyone has different definitions for these words, here is how I use them:

• Being cheap - You are unwilling to spend money on anything. Even stuff you need. You go out of your way to save money, even when it might not be a great idea.

• Being frugal - You don't waste money. You spend it on things you need, and save it on things you don't.

Clearly, being frugal sounds better than being cheap--that's how I defined it. ☺ The problem with being cheap is that not spending money is actually hurting you or your finances, not helping you.

How can saving money hurt you? Well, take a look at this article from WiseBread. The writer's mom saves up ketchup packets, and when her ketchup bottle at home is empty, she cuts up each of the packets and refills the bottle.

That is being cheap, not frugal.

Now, maybe she enjoys cutting up the packets and she considers it fun and relaxing. That's a different story. But if she does it from a money-saving standpoint, well, that isn't very smart at all.

The money she saves by cutting up packets (what, maybe $2?) is not even close to being worth the time it takes to do it (1-2 hours, probably). In that time she could do a multitude of things that might make or save her money, like planning her finances, or working. However, even if she didn't do any of those things, she only saved $2 dollars. That amount of money isn't worth 1.5 hours of cutting and squeezing plastic packets.

The point of having money is to use it wisely. (On a side note, when the shampoo at my house gets to the bottom, my mom fills it with water and shakes it around and uses that. When I got to college, I was surprised that everybody didn't do that.)

Don't be cheap. Be frugal. Then take all the money you’ve saved and invest in P2P loans on Lending Club.

Here are six more tips to insure that your Holiday spending doesn’t break the bank. The first six tips can be found here.

1. Watch the small expenses – When setting a budget for Holiday spending, make sure to include small expenses, such as postage, shipping, wrapping paper, greetings cards, etc.

2. Avoid spending future money – Don’t plan on paying off your holiday debt by hoping for a tax return or a wage increase. This is money that might never appear and you might be stuck with paying for debt for longer periods of time. If you know you have some big-ticket items you’re buying, get a P2P loan through Lending Club to cover these expenses.

3. Give your time – Would your kids appreciate two fishing trip “coupons” more than just buying them a $75 video game? Or would giving your friend a “3 lunches on me” coupon make a better gift? There are many different ways that you can give of your time and it would be a more meaningful and cost effective gift.

4. Get the kids involved – If you have kids, have them design the cards that you will send out to close family and friends. This will get them excited in a time that is often stressful for the parents, and it will make the cards stand out from regular store-bought cards. It’s a fun family activity that will also save you money.

5. Don’t open up a new card in every store to save an extra 10% – Open up a new card in every store and you will end up spending more than you ever budgeted for. On top of that, you might end up carrying the balance for a long time and paying high interest rates on balances.

6. Don’t give gift cards – While gift cards may seem helpful by saving you time and ensuring the recipients get what they want, you may want to think twice about giving them. The cards might go unused or get lost. Merchants might also tack on hidden costs and fees.

Do you have any good tips to share?

With the holidays, and black Friday, only weeks away, it is a good time to plan out your Holiday spending so that you don’t end up being a compulsive spender or end up with credit card debt you can’t handle.

Here are six tips for Holiday spending:

1. Determine how much money you have and are willing to spend – Figure out how much cash in the bank you actually have, how much you will allocate to holiday gifts, and how much you may have to borrow.

2. Make a list of everybody you are shopping for – Doing this will save you time, money and clear your mind to focus on the actual shopping instead of trying to remember if you forgot anybody. If you wish to be fair, divide the number from #1 by the number of people on your list.

3. Add your budget to each person – Adding a target price and maximum price to each person will ensure that you stay within budget and that your emotions will not take over when you see something really appealing. For example: Aunt Mary: Target $50 Max $75

4. Shred the convenience checks – This should be done as soon as they arrive, because the interest rates on the credit card convenience checks are usually the same as cash advances, which are sky high. If you need extra money, consider getting a p2p loan through Lending Club.

5. Shop online – Starting early and shopping online, you have all the time you need to comparison shop and find the lowest prices. Using sites like Shopping.com and Google Products, you can quickly compare prices from many different stores.

6. Give sentimental presents –Would sending a $25 framed picture of yourself and your dog to your Grandmother mean more to her than buying a $100 gadget? Probably! Run down your list and see if you can send something that’s more sentimental and cheaper than just a product with no emotional appeal. Better yet, homemade gifts are always appreciated due to the effort that goes into making them.

The above six tips will put you on the right track to having a Holiday season that will not break the bank. You can also use this worksheet to track your spending for the Holidays.

In part 1 of this topic, I discussed a recent survey that showed how parents were either saving for college in the wrong way or planning to finance college through long-term debt. In this post, I go into greater detail about 529 College Savings Plans, which have significant tax advantages for many people saving for college.

While you invest in 529 College Savings Plans with after-tax dollars, the gains on those investments are not subjected to federal income tax if used for qualified education expenses. This is similar to the way a Roth-IRA works for funding your retirement. Many states treat the gains as free from state income taxes as well. To make the situation even better, many states offer state tax deductions for contributions. In some cases, there are residency requirements for joining a state’s plan or deducting interest, so read the disclosures for any plan carefully before enrolling.

Multiple individuals can contribute to 529 plans on a child’s behalf, such as grandparents or other relatives, but you will retain full control of the account. This control also gives you flexibility in naming the beneficiary. If you accumulate more money than the beneficiary needs, or if the beneficiary is unwilling or unable to attend college, you can often use the unused funds for another child. While withdrawing funds for non-qualified expenses does carry capital gain and withdrawal penalty consequences, many people leave unused gains in the plans for siblings or future generations of aspiring students.

Due to the fact that 529s are offered by states, they are not regulated in the same way as other securities. This has led to the criticism that fees for plan administration can be difficult to compare between plans. Fortunately, there are some great resources out there for parents trying to compare their 529 options. I personally found Morningstar’s comparisons very useful. There is a lot of helpful information available at the Saving for College website as well.

By learning about 529 College Savings Plans and comparing the options that are available in your situation, you will be better able to save for college in the most efficient manner. While 529 plans are a great way to go for many families, other options might be even better for some people. We here at Lending Club hope that more and more parents will educate themselves about using a tax advantaged 529 College Savings Plan as one possible way to make their children’s college expenses more affordable. As always, we recommend a diversified approach when considering investment options. For example, consider placing a portion of your available funds in P2P loan portfolios on Lending Club.

At a time when a college education is becoming more and more of a necessity for finding a good job, the cost of that education continues to rise. This is cause for concern in many households as parents struggle for ways to afford college. We recently mentioned a study which suggests that many parents are unaware of tax-advantageous 529 College Savings Plans and intend to rely on long term debt, such as second mortgages, to finance their children’s college aspirations.

The study, conducted by The College Savings Foundation, can be downloaded in its entirety here.

Of the more startling results from the survey of nearly 500 parents:

• 79% Would be highly disappointed if their kids couldn’t afford to go to collage, but 54% have saved less than $5,000 per child

• 40% expect at least 10 years of debt due to college expenses, meaning they are planning to finance through long-term debt, such as second mortgages

• Only 30% are using 529 College Savings Plans despite their significant tax advantages

• 54% were unfamiliar with 529s or unsure of how they work

• Of those using 529s, 44% have saved more than $10,000 per child. Compare that to those saving in other ways: 52% of those investing in CDs, 57% in stocks and bonds, and 59% in mutual funds have saved more than $10,000 per child

What these results mean is that parents who are saving a lot for college are generally not saving in the right place. By saving in taxable investments like CDs, stocks, bonds, and mutual funds, their savings will likely perform worse than if parents had invested in tax-advantageous 529s. It also means that parents who aren’t saving enough will be relying on long-term debt to finance their children’s education. As these parents age, it will likely mean that they will have to work longer, and defer their own retirement, to pay down this debt.

While part one on this topic has highlighted the results of The College Savings Foundation’s survey and some of its implications, the second part will discuss 529s in greater detail. Be sure to return to the Lending Club blog soon to see that discussion as well. Meanwhile, check out P2P loan portfolios on Lending Club as another way to put your money to work.