I try to use smithing when I naturally acquire the materials needed for it. For instance, when I kill a number of wolves or sabrecats, I bring their pelts to the city and turn them into leather, then I create leather items or improve existing items.
However, this is a very slow process and when I really need to use smithing in order to improve my weapons, for instance, I realize that I don't have the skill level necessary for doing it. That's when I tend to make use of the old smithing trick: buy lots of iron, create lots of iron daggers... and I get frustrated because the whole process seems unnatural to me.
The same goes for enchanting; when you start to enchant things, the items you enchant are pretty lame, so I end up resorting to cheap tactics like getting lots of clothes and enchanting them with puny effects just to level up the skill. And it always seems I'm abusing the system.
Does this bother you? Or is it just me?