“(The true servants of the Merciful One are) those who are neither extravagant nor miserly in their spending but keep the golden mean between the two, who invoke no other deity along with Allah, nor take any life – which Allah had forbidden – save justly; who do not commit unlawful sexual intercourse – and whoso does that shall meet its penalty.”
(Al Quran – 25:67-68)
Keeping the golden mean between being extravagant and miserly is a distinguishing characteristic of the believers. They are not extravagant. They do not squander their wealth on vain and evil things like lavish weddings, or on drinking and gambling, or on unjustified festivities and amusements. Nor do they spend beyond their means for show on food, houses, clothing, and décor, etc. At the same time, they are not those miserly folks who are wont to count pennies, who neither spend on their families nor give anything away to a noble cause or as charity. Both of these types were then found quite commonly in Arabia. There were, on the one hand, those who spent recklessly on their own comfort and luxury or to demonstrate their affluence and social status. On the other hand, were those whose miserliness was proverbial. Very few people lived moderately. This moderation was a distinguishing characteristic of the Prophet (peace and blessings of Allah be to him) and his Companions.
Extravagance consists of spending money on unlawful things, no matter how small be the amount so spent. It also means over-spending on lawful things or spending on charity for show.