Bills. Expenses. Stagnant income. The rising costs on just about everything. Our retirement portfolios see-sawing up and down. Being “financially strapped” is becoming more than a problem; it’s an epidemic.
But as I read through a few popular articles and posts, I wonder if we really have the right artillery to fight this battle and defend ourselves. For example: Here are just a few money-saving strategies that people are resorting to:
• Skimping back on regular household products. No more dish soap, paper towel, fabric softener??
• Making your own clothes.
• No more hot showers.
• No more eating out.
• Canceling the TV.
• Living on less than $12,000 per year.
• Ditching the car altogether.
• Moving back in with the parents (and not in your 20’s).
Some of these might be silly, but this is what we offer up in retaliation. This is what our society is resorting to as a way of combating these economic pressures.
More and more, there seems to be a rising trend of people who are deciding to live WELL below their means on or at near-poverty level income. And their proud of it! It’s their way of being frugal. But to me, it’s just plain ridiculous.
Don’t Get Me Wrong:
…“Anyone who lives within their means suffers from a lack of imagination.” – Oscar Wild, …
Now before you start filling the comments with hate stories about how the rest of the world lives in poverty and therefore why should we spend like there’s no tomorrow; that’s not what this is about.
I’m not an advocate for consumerism or materialism. I am certainly way off from living like a Kardashian.
What I’m getting at is overcoming the guilt of not being able to spend your money the way you want to. Isn’t this the reason we go to work? To be able to afford the lifestyle and things we want?
What Inspired This Rant:
All personal finance comes down to two parts:
• Money In
• Money Out
For over a decade now, I’ve really been trying to ramp up my knowledge on the first one. I’ve been engaging and learning about investing, stocks, saving, and passive income have been some of the major areas of focus. I want to increase the number of things that make me more money besides just my job.
But as I look to learn more, I keep getting clogged with advice that focuses solely on the “Money Out” part. And to some extent, there seems to be a trend to become righteous about the extent to which someone practices this method.
The Latte Factor:
David Bach, the author of “The Automatic Millionaire”, became famous after suggesting his simple savings strategies such as hording away the $5 per day that they’d usually spend on a latte. At a 6% interest rate, you’d save $24,055 in 10 years (assuming you buy that coffee every single day).
That’s a lot of money. So gee, what else could I stop doing to make a few grand? What if I:
• Wore the same clothes for the next 10 years?
• Stopped driving my car?
• Stopped taking showers?
…. Okay, let’s not get carried away. Or are we? This is my point. The media has a bad habit of taking a good metaphor, scrambling the message, and then turning it into something that may not be good for you.
I’m not making fun of Mr. Bach. His book and the notion of the “Latte Factor” have helped many people. But remember that this is just a metaphor. The Latte Factor was asking us to look at our priorities and cut back on the things that might not be helping us reach our goals.
It’s perfectly reasonable to ask ourselves this question and make cuts to things we really don’t need. But I don’t think the intention was to cut down to the bone and not enjoy your life.
If You Do Your Chores, You Get An Allowance:
This might be one of the first personal finance blogs you ever read that actually tells you that its okay to buy something that you want.
But like when you were a kid, you only got your allowance when you did your chores. So here are your chores:
• Put some effort into the “Making Money” side of personal finance. Read about 401k’s, stocks, real estate, whatever. Find a way to make money “literally” while you sleep.
• Get your budget in order. Remember that setting up one is simple as long as you follow one principle: Money In > Money Out. Otherwise, try again until you get it right.
• Work into that budget an allowance. Say $50 to $100 every month. And you go spend that money on whatever your heart wants. No guilt. No strings attached!
If you’re responsible, you go to work everyday, and you’ve got your goals in order, then I see nothing wrong with enjoying the fruits of your labor every once in a while.
So go ahead. Have that coffee. I’ll be there too.
Readers: Are you tired of being frugal all the time? Do you feel like some of the strategies and suggestions out there for making money through cutting back are starting to miss the point? What ridiculous things have you heard people try to save a buck? Is this really how we want to “get rich”?
* This post was originally published October 12, 2011.
1) Let Curiosity Guide You, But Common Sense Protect You
3) How to Budget – Download My Excel Template
Photo Credit: Microsoft Clip Art
I like to think of myself as frugal…bringing more money in and watching where it goes out. The out part is what I consider more thriftiness. Thriftiness can help make you rich, but only if you’re bringing quite a decent sum of money in. What’s the point of living below the poverty line? Figure out ways to make more money so you can give more instead of trying to commiserate with them.
Exactly! Being cheap is not only not fun, but it can only take you so far.
I totally agree. I think everybody is on a frugal hype now and granted a lot of people have to be. I read so much about frugality that I try to be more frugal also. But usually that leads to me being cheap and in turn wasting money. I think frugality needs to have some sort of limit (for me anyway) and we need to enjoy our lives while we are still living. Sometimes it takes money to create memorable experiences.
I hate it when I feel like I shouldn’t spend money on something. I usually try to imagine myself one year from now and see if I’ll regret not spending the extra cash to have a great experience. And it usually ends up being worth it.
Jason @ WorkSaveLive says
I am sitting at the coffee shop as I type this up!
I think there is something to be said for being a wise steward of our money but I do believe there is a fine line with living life and being responsible.
I do get tired of being frugal, and I’m sure I go a bit overboard, but right now we’re focused on getting out of debt. I’ve convinced myself that we will “live” a little more once we’re out of debt.
With all of that said, I’ve still learned to be content with what I have. If somebody can be TRULY content while not taking showers or having a car, then good for them. I can’t do that though.
Well said! I have done my fair share of soul searching and becoming content with my “needs and wants”. I’ve learned to keep things to a minimum. But I’m not sure how much further I could ever go!! And if that’s “getting rich”, then I think I’ll try another way.
Sean @ One Smart Dollar says
Yeah I find being frugal can get a little old sometimes, but my wife and I still make a point to treat ourselves.
You’ve got to! Enjoying just a little bit of your money every now and then is helpful for re-motivating you to make more!
We have as part of our budget a category for “fun money”, which is $50 each per month. We can spend this money in any way we wish without asking the other or feeling guilty. As long as you have money left over after the essentials are paid for, I think this is a great way for couples to avoid suffocating one another.
We’ve got the same thing – we literally call it our allowance. And we’re free to use it as we please. It just keeps things fun without getting out of hand.
John @ Married (with Debt) says
I’m with Ramit Sethi on this one. I practice conscious spending, which means I’m miserly in spending on things I hate, so that I can spend freely on the things that interest me. It’s why I’m spending $5k on a vacation this summer. I agree that what’s the point of working if we can’t have any fun?
Good call. And coincidently Family Vacations also rank very high in my family. Each year we spend pretty close to what you are for our travels. But we consider this to be one of our greatest memory creators all year!
Jacob @ iHeartBudgets says
YES! You hit it on the head that your money should follow your priorities! I’ve been beating this drum for a while, but YOU SHOULD SPEND MONEY! Just make sure it’s on the things that are important to you. You can save yourself thousands by looking at your spending over the last few months and then cutting out all the “extra” spending on crap that just is not important.
One thing I’m trying to do is kill the negative connotation that goes with the work budget. Budgets = Freedom in my book and they also allow you to focus your spending on things you enjoy. I actually spend more on the things I love and save more money at the same time because of my budget! You CAN have your cake and eat it too!
I like the sound of that! Like a good diet, I’ve gone beyond seeing a budget as constricting and more as an opportunity to succeed at my goals.
[email protected]&More says
I agree that you need to have some spending money for sure. Just make sure you spend on what is important to you!
That’s right. We’re not blowing our money or being frivolous. We’re just overcoming the guilt that comes along with spending any money at all.
Justin @ The Family Finances says
A lot of people don’t really understand what frugal living is really about. It’s not about scaling back on everything and seeing how cheaply you can get by. Rather, it’s about scaling back on the things that aren’t important to you so that you can spend more of your money on the things that really matter. This is different for everyone. We decided not to have cable TV; however, we spend an equivalent amount on our dog each month. TV = not important, Dog = important.
And there it is. Each household has their priorities. And each one is different. If treating dog is what is important to you, then do it.
when we first started the blog, and our climb from debt, we were pretty hardcore about capping spending.. but there was no way for that to last. we realized that we are going to have to account for some sanity money..
i do buy a coffee every once in a while.. and here and there, we pickup things that we need (and occasionally just want).. but we are smart about it, and never reach for the credit cards.
Nothing wrong with that. It’s okay to both smart and yet breathe a little when it comes to spending.
Budget & the Beach says
It’s a lot like being on a diet. What you resist persists. You have to find balance I think between being frugal and living life. If you restrict yourself too much, you might end up going crazy and going on a spending spree. I think having money budgeted for fun or whatever else you like to do is key…unless you are dangerously close to living on the street, but hopefully anyone reading this and commenting on it (who has a computer) isn’t in that situation. It’s also about priorities. I spend way more on food then most bloggers I’ve seen. I don’t feel too bad about it, because good quality food is a priority in my life right now. Instead I drive an old, shitty, but paid for car. 🙂
You got me there – I’ll spend a fortune for good food. You are what you put in your body. I agree that it is simply a matter of priorities and what is important to YOU.
You are an amazing writer MMD. Needless to say, I am your biggest fan. I understand your view point. I’d suggest that while increasing income is important part of the happiness equation, you have to have some rules to save more. If you increase your income by $100, spend $50 for your instant happiness and save additional $50. You don’t have to sacrifice your latte or live like a monk to have financial freedom.
That’s quite a compliment Shilpan. Thanks! And I agree. The equation must always be balanced. So if you hope to get a better output, you need to revisit your inputs.
the journey itself should be enjoyable. i am so guilty of waiting till i get “there”. i believe that life is a finite amount of time. its about who can enjoy the most for the longest.
Invest It Wisely says
I think the latte effect can be a good metaphor, but I don’t agree with people that call coffee drinkers stupid for buying their coffees. It’s all about subjective value, and to each their own. I see nothing wrong with someone enjoying a coffee. 🙂 I guess the more important point is not succumbing to death by 1000 cuts.
Carrie Smith says
I think I would have to be really bad off, to stop taking showers. Granted I don’t wash my hair everyday, but that’s to keep my hair healthy, not necessarily to save money. The no TV thing I can live with, but I still pay for Netflix and Hulu subscriptions.
A lot of people take the frugality mindset way too far and sometimes stop enjoying life just to save an extra buck. I struggled with this while paying off my debt, because I didn’t want to lose focus that I can still be happy and enjoy a few guilty pleasures along the way (in moderation of course). I think that’s the key – moderation!
I think is about balance. It is about recognizing that happiness is an internal state, it comes from within and that abundance is the true nature of the Universe. Lack or abundance of money is a result of our beliefs. My personal belief is that there is more than enough money and resources for all human beings to live comfortably in perfect peace and harmony with each other and nature.
Let us embrace abundance of money and leveraging money to increase wellness and prosperity for the entire humanity
There is something to be said about scaling back and just being happy with what you have. Once you do that, you discover just how rich you really are.