I get a lot of folks searching for “frugal” in one form or another on this blog. I wrote a post a while back entitled “Frugal Retirement: Living a Rich Life”. The post was about the importance of being frugal, but not necessarily about how to be frugal. Being frugal isn’t rocket science, but for some, especially those that live the typical American lifestyle of unrestrained consumption, it can be tough.
I should know. That person used to be, and in many ways still is, me. I didn’t know what frugal was until about 6 months before I retired. My inspiration was the book “Your Money or Your Life”. I don’t follow the process outlined in the book exactly, but many of the ideas stuck with me. Luckily, I was smart enough to pursue a pension back when I was 23. If I hadn’t done that, who knows when, or if, I could have ever retired!
Since that discovery, we have found ways to become more frugal and identified long range ways to spend less money without really impacting our lifestyle or happiness. We’re always looking for ways to cut back, save a little money and downsize. In fact, we think that being frugal will make us happier. Life is about relationships and experiences, not owning lots of stuff.
So how does one go about becoming frugal? First off, it’s a process. You probably can’t just stop spending money overnight and shake years of habits. We have a big mortgage on a big house. We wish we didn’t, but we have kids and we would barely break even if we sold. For now, it makes sense to stay here. That doesn’t mean we have to keep the big mortgage forever. In fact, we plan to sell the house and live in an RV once the kids are out of the house.
It’s really about deciding what’s important to you. Start small and examine your expenditures. Are they bringing value to your life? If not, why are you spending the money. Do you have a gym membership you never use, but continue to pay for just to fit in at work. Do you have all the bells and whistles on your cell phone plan, but never use any of that stuff? Ten dollars here and thirty dollars their may not sound like much, but it adds up.
Then you can begin looking at bigger things. Maybe you don’t really get a lot of extra enjoyment out of the BMW and a Mazda would suffice. How many times have you actually used that big boat? Stuff like that. Then maybe start looking at your mortgage. How often do you really use your den or the 3rd and 4th bays in your garage? Maybe you’d rather spend some of the money you use to pay for and maintain that stuff on something else.
Remember, it’s not about cutting out expenditures on expensive or luxury items, its about eliminating spending on things that don’t have value to you or bring you joy. Some people love collecting expensive cars, eating lobster three nights a week, or having a big home. Fine, they are spending their money on stuff they love that makes them happy. Good for them! But if your spending money on stuff like that to impress people or because you think that’s what you should do, maybe you should stop.
Once you’ve cut out the stuff that brings no value to your life, you’ll find you probably don’t miss it. You just need to get over the compulsion to accumulate stuff for the sake of accumulating stuff. Spend money on the stuff you really want and leave the rest on the shelves. Try these ideas to get started:
- If you haven’t used it in a year, you probably don’t need it and won’t miss it. Sell it or give it away. Note: Does not apply to Christmas decorations!
- If you see something you think you want, wait. If you still want it the next day, week or month then consider buying it. Often, its just a momentary urge.
- Buy things on sale, used or buy last years model. A new gadget might be worth buying at a lower price. I’m buying a refurbished first generation iPad instead of a new iPad 2 and saving over 300 bucks. All of a sudden, it’s worth it to me.
- Look for trade offs and evaluate the pros and cons. The big house might seems like it’s worth it, but would a condo with no yard or exterior to maintain make you reconsider? Would having an extra $1000 a month in your pocket make you move?
- Assess all the plans in your life. From insurance to cellphones to satellite TV, check regularly for discounts and savings. We called DirecTV about changing plans and they gave us a discount for 12 months to stay with the more expensive plan. Did the same with our auto and home insurance and saved there too. Just by asking.
- Look for redundancies. Are you paying for roadside service with your cell phone, auto insurance and credit card. Cancel the service on two of those. Remember, the little saving add up.
- Use coupons, rewards cards and loyalty clubs. Businesses are giving away free money, so take advantage. I wouldn’t sign up for credit cards to get a discount, though, unless you’re a disciplined person. Otherwise they could cost you money in interest. Also, don’t buy stuff you don’t need just because it’s on sale.
- Utilize points and cash back opportunities. We use our American Express card a lot. We usually spend about $30,000 a year on it and pay it off every month, a lot of it on my wife’s business which is reimbursed. The points we earn are worth about $300. Our fee is only $45 a year. Sign up for that stuff. It’s usually free and you’re probably spending the money anyway.
- When you start downsizing, sell that stuff and make money. Craigslist is free and effective. If it’s not really worth much, donate it and take a tax deduction. Every year we donate well over a thousand dollars in stuff we would usually throw out. Old clothes, toys, books, you name it. Every one hundred dollars is $25 in your pocket come tax time.
- Cook at home. Feeding a family of four at a chain restaurant can cost fifty bucks. You can make a good, nutritious meal at home for less than $10. If it takes you an hour, you just paid yourself forty dollars an hour!
- Finally, ignore the pressure to buy stuff. Friends, family, coworkers, neighbors and media all pressure us to spend, spend, spend. Resist the urge to do so just to please others. You are not inadequate just because all your golf buddies have the latest clubs or your neighbors all have a lawn service. Just remind them of all the cool stuff you can afford that you really love because you aren’t buying stuff just to show off.