Category Archives: Saving & Investing

The importance of dreaming big

frugal goals
Photo by martie

I’m the first to tell you that frugality is a real struggle sometimes. No matter how committed I am to this lifestyle, no matter how appreciative I am of the security and peace of mind it brings us, I still have weak moments when I look at what other people have and want.

I want to own a pretty little house with a huge fenced-in backyard and a cozy fireplace.

I want to travel every other month and see the world.

I sometimes even want to buy big ticket items that we don’t need just for the luxury, like a big screen TV or new furniture or even a second car.

But the hardest part isn’t the big stuff. I can always easily remind myself why we need to wait for those things. I remember what debt feels like, and I don’t want to owe a furniture store or a credit card company ever again.

The hardest part is not spending little amounts every day. Sometimes I find myself wishing I could spend $5 on a frou frou coffee drink from Starbucks or $15 on a book or $30 on a restaurant meal.

Don’t get me wrong, we give in to those urges every now and then. But we can’t give in every time I want to or we’d never make any progress. We’d nickel and dime ourselves right out of our savings.

When I find myself struggling to say no to the little things, I remind myself of our big dreams. Our trip to Europe, the house we want, the family we plan to start in the next couple years. When I think about those big dreams, and how every penny is bringing us closer to achieving them, it’s much easier to resist the temptation to spend a little here and a little there.

When I think about our big dreams, suddenly buying a frou frou coffee drink isn’t nearly as important. I can live without that little stuff if it means we’ll have the big stuff sooner.

How do you keep yourself going when frugality gets tough?

Life before our emergency fund

Every once in a while I’m struck by the difference between life now and life before we started living frugally. Back when we made more money than we do now, but we were always strapped for cash. Back when a car problem or unexpected bill could completely wipe us out and then some.

It hasn’t been easy to keep it up. Like any frugal family, we struggle constantly to avoid falling into old habits. The more we save, the more comfortable we become. We start to feel invincible. After all, with several thousand dollars in the bank, we can weather most unexpected expenses without stress. We start to feel the itch to spend more.

I have to remind myself that even though we may have more money in the bank than we’ve ever had, that money is what stands between us and disaster. The more money we’re able to save, the safer we become. Sure, we could pay our car insurance deductible with no problem. We could pay our entire health insurance deductible for the year without breaking a sweat if it was necessary. But what if I lost my job? What if I couldn’t work anymore? We have enough saved to make it a couple months, but the thought of emptying the savings account we’ve worked so hard to build is terrifying. Then what? When that money is gone, what do we do next?

More importantly, though, I never want to spend just because we can. Spending just because the money is there is how people with twice our income remain constantly broke. If we can keep saving, keep living frugally no matter how much we have in the bank or how much we make in a year, then we’ll always be one step ahead of ourselves. We’ll be capable of dealing with any financial disaster, and we’ll never be broke.

It’s amazing what an emergency fund can do for your peace of mind.

We’re making some serious progress

If you’re following my progress through my progress meters in the sidebar, you may have noticed some changes over the weekend.

Our emergency fund is now over 75% complete! Woo hoo! We’re getting so close! Our Europe fund doesn’t appear to have changed, but it did. I increased our savings goal for Europe to $10,000 since we’re now hoping to take an extended trip.

So how did we make such a sudden jump in our savings? We decided to move the money from our “summer savings” account into our emergency and Europe funds early.

Originally, our plan was to keep the money we’d saved for the summer in its own account until we made it through our no spend summer without needing extra money. Now that it looks like our cash budget will get us through the summer on our tighter budget, I kept looking at that money like it was “free” money. But “free” money is dangerous for me. When I have free money, I start thinking about all the stupid things I can buy with it.

So I went ahead and moved half of it into our emergency fund and half into our Europe fund. It’s still there if we get into trouble later in the summer, but I’ll be a lot more hesitant to pull money from our emergency fund than I would have been with the summer savings account.

Basically, I don’t want to make it easy for us to fail. As long as that safety net was there, the stakes weren’t quite as high for our cash-only budget. But now that I’ve gotten used to a 75% complete emergency fund, I’m going to work extra hard to keep it that way.

Bottom line: the easiest way to save money is to do just that — save it. When money is floating around without a purpose, it’s too tempting to spend it. When you assign it to a specific savings purpose, you’ll be a lot more likely to protect it.

Do you keep extra money in your checking account? If so, I recommend that you move it to a savings account, set a purpose for it, and keep only the money you need to live in your checking account.

Our “no spend summer” starts this weekend

Last week, I wrote about the steps we’re taking to make sure we can get through the summer on my income alone. Throughout the year, Tony is paid to teach undergraduate classes at his university. Now that it’s summer, he won’t be receiving a paycheck. We knew this was coming all year, so we saved enough to cover his income through the summer without using our emergency fund. But now we want to try to hang on to that money, too.

We’ve come up with a new plan to ensure that we don’t overspend and we’re able to save. It’s something we’ve never tried before, but we’re excited about the challenge. Beginning this weekend and continuing through the months of June, July, and August, we’ll not only be limiting our spending, but we’ll be living on a cash budget.

Here’s how it works:

I added up our total income for the summer without Tony’s paychecks. Then I divided that number by three months to determine our total monthly income. I added up all of our fixed expenses — rent, utilities, and other bills — and subtracted that total from our monthly income. After paying all of our fixed expenses, we’ll have $370 left each month. That means we can only spend $90 a week on groceries, entertainment, and other expenses. This is only a little less than what we would spend anyway, but lately we’ve been more and more complacent. I really want to make sure we’re not tempted to go over.

Each week before we head to the grocery store, we’ll withdrawal $90 in cash from our bank account. This will be our only spending money for the entire week. We’ll have to work extra hard to stay within our grocery budget, and if we go over, it’ll reduce the amount we have for entertainment and other expenses. I’m anticipating that we’ll spend $60 or less each week on groceries, $20 on household expenses, and $10 on entertainment.

Our idea for a cash budget for the summer was inspired by Small Notebook’s “no spend month.” It’s essentially the same concept, only we’re not limiting our spending quite as much as her family does so we can maintain it over three months instead of just one.

As an incentive to hang on to as much cash as we can, we’ve decided that whatever cash is left at the end of the summer will go to something fun. We’ll see how much is left before we go making any plans with it. :)

I initially decided to pause saving for the summer, but based on this budget, we’ll be able to save $250 a month (about half of what we normally save). At the end of the summer, we’ll be able to put the $2,000 we saved to supplement our summer income into our regular savings.

I’m a little nervous because I’ve struggled with cash spending in the past. But we’re really excited to take on this new challenge! I think it’ll be a good exercise to get us back on track. For the past few months, we’ve been a little too comfortable. Each month, we go a little more over budget on things like food and shopping. Hopefully this summer will get us back on track.

Our no spend summer begins this weekend. Any tips on how to make a cash budget work?

Surviving the summer without spending our savings

Tony’s summer vacation has officially started. He won’t be teaching or taking classes again until the end of August. Unfortunately, this means we’re losing a third of our income for the months of June and July.

We’ve been anticipating this temporary loss of income all year, so we prepared by putting aside most of the money we’ll need to cover Tony’s salary without using our emergency fund. But now I’m looking at that money, a pretty hefty chunk of change for us, and thinking about all the things we could do with it if we could save it.

Our original plan was for Tony to find a part-time job. Any extra money he made would go toward replenishing that savings. We’re not giving up on that plan yet, but it’s tough out there. He’s applied for about 20 part-time jobs so far with no returned phone calls. When he follows up, he’s told, “Don’t call us, we’ll call you.”

It’s frustrating, but this is exactly why we saved the money. We knew it might be difficult for him to find a part-time job this summer, especially since we share a car and he’s limited to jobs that are accessible through walking or our city’s limited public transportation. So the money is there if we get into trouble, but even if he doesn’t find a job, we’re challenging ourselves to spend as little as possible for the next three months.

Here’s what we’re doing:

We’re temporarily halting savings.

It seems silly to take money out of savings only to put it right back in. We currently save about 60% of Tony’s income every month including retirement. For the months of June and July, we won’t be putting the full amount into savings. It seems counter-productive, but the point is to live only from our income without dipping into our savings. If we can make it through the summer without spending it, then we’ll be able to double what we would have normally saved in two months.

We’re participating in a no spend month.

I’m intrigued by the idea of a “No Spend Month,” from We’ve never tried a cash budget system, but we’re going to give it a shot one month this summer. We’ll probably wait until August when our finances are likely to be tightest.

We’re working from a three-month budget.

Every month I set a zero-based budget based on our expenses and income. This summer, since our monthly income is reduced, I’ll be setting a zero-based budget for three months instead of one.

Here’s why: Because I’m paid every other week, there are two months out of the year when I get three paychecks in a month instead of two. July is one of these months. Because I base our budget on our total monthly income instead of my yearly salary, this feels like “extra money.” When it’s split up over the course of three months, it helps cover some of the gaps of our lost income. So I added up all of the paychecks I’ll receive over the next three months, divided them by three, and set a monthly budget based on that.

We’re cutting our overall expenses — slightly.

After adding up our total income over the next three months and cutting out savings for two of those months, we come surprisingly close to our normal monthly income without moving money from savings. We’ll make a few adjustments to spending to cover the remaining gaps. I’m hoping that the no spend month at the end of the summer will help us increase our savings by even more.

Anything extra will go straight to savings.

If Tony does find a part-time job, it won’t change our plans. We want to save as much as possible this summer, and any extra income will go directly toward savings. We’re still hoping he’ll find something, because this will help us save so much more!

If all goes according to plan, we should be able to double the amount we would have put into savings this summer. Here’s hoping we can do it!

How do we measure up to national averages?

One of the main concepts of frugality is that life isn’t a competition when it comes to finances. I try to avoid comparing myself to other people, because we inevitably fall short in terms of material possessions.

Just for fun, though, I took a look at some national averages to see where we fall on the spectrum. I was actually surprised to discover that in some ways we’re right on target. I had hoped we’d be considerably more frugal than the national average, but it turns out we’re pretty average.


I couldn’t find any hard and fast statistics newer than 2004. As of 2004, the average American spent 21% of their income on housing costs. But that was 5 years ago, and so much has changed since then. According to CNN Money, mortgage costs should equal no more than 28% of your income. Our rent is about 26% of our monthly income, so it looks like we’re pretty average in that respect.


This is my favorite category. :) As of February, the national personal savings rate reached 4.2%. We save a minimum of 21.5% of our after-tax income every month. Yay us!


I’m sort of bummed about where we fall here. According to the USDA food plans, families of 2 living on a “thrifty” food plan spend $82.10 a week on food. Doesn’t sound too thrifty to me. We typically spend $60 a week at the grocery store, but our monthly food costs are closer to $400 total, or $100 a week.

We’ve become increasingly lazy about monitoring food costs, and those extra trips to the grocery store and occasional meals out really do add up. So we’re closer to the “low-cost” food plan, which is about $104.60 a week (again, that doesn’t really sound “low-cost” to me). We’ve always struggled with food spending, and this little comparison exercise has really opened my eyes. We need to crack down.


The average American owes $8,329 to credit card companies. We owe $0 to credit card companies. Woo hoo! When it comes to student loan debt, we fall above the national average, though. The average American student graduates with about $21,900 in debt (that’s $43,800 per couple). We owe about $60,000 to student lenders, or about $30,000 each. That’s about 37% more than the average. :(


Again I struggled to find recent statistics for what the average American saves for retirement on a monthly or even yearly basis. I guess there are too many factors. But a number that gets tossed around a lot as a “recommended savings amount” is 15% of your income. We’re just getting started on retirement savings, and we made the decision to start slow for now at a 3.5%. Not so good, but our plan is to ramp up our retirement savings when we finish paying down our debt and get our liquid savings where we want it to be.

This was an eye-opening exercise that really showed me where our strengths and weaknesses lie. We should be able to easily cut our food costs, netting us about $160 a month for savings and debt repayment. We just renewed our lease, so there’s not a lot we can do about our housing costs until we move, but when we move we’ll try to get below the national average. I’d like to fall on the lower end of the scale in all of these categories (except savings and retirement, of course).

How does your budget compare to national averages?

Comfort & complacency – frugality’s worst enemies

A year ago, our situation was drastically different than it is today. Our savings was depleted after months of bringing in less than we needed to make ends meet. We had a little money in the bank, but not enough to sustain us for very long.

We were living frugally out of necessity. Though our spending was cut to the absolute minimum, I estimated that our savings would last only a few more months. I could count the number of restaurant meals we’d had in a year on one hand, and we never spent money on anything but necessities. We were in frugal survivor mode.

A month later we were married, enjoyed a frugal honeymoon in Washington D.C. that we’d saved all year to take, and came home with a little nest egg from generous friends and family who had attended our wedding. I wanted to save the money, but I feared that our situation would force us to spend it to continue paying our bills in a few months when the rest of our savings ran out.

Thankfully, I was hired at my job a week later. The additional income helped us start saving again, pay down our remaining credit card debt quickly, and turn our financial situation around.

Eleven months later we have no credit card debt, 60 percent of our emergency fund in the bank, and we’re on our way to paying cash for a vacation in Europe all on the equivalent of one full-time salary. We’re considerably more comfortable and nowhere near as stressed about money. And yet, we’re still in danger.

The more comfortable we become, the easier it gets to edge toward the lifestyle we’ve fought so hard to resist. When I look at our bank balances, I feel calm instead of stressed. But that makes me more likely to forgo cooking dinner for a meal out. We can afford it now, right? When I see a good deal on clothing or books, I’m tempted to drop the cash. I deserve a little treat for my hard work, don’t I?

Comfort breeds complacency, and while I’m okay with being a little more lax about our spending than we used to be, I don’t ever want to be complacent. I always want to be mindful of our spending to ensure that every penny we spend is for good reason. I’d rather go out to dinner to spend a date night with my husband than head to a restaurant because I’m too tired to cook. I’d rather save our money for one memorable experience than fritter it away on a thousand little things I won’t remember a week later.

Now that we have more income and more savings, our finances are less stressful, but our impulses are harder to control. When I see a big screen television on sale or browse a bookstore, I’m no longer resisting because I can’t afford it. After all, the money is right there. I could easily withdraw it from our savings account and buy any number of things. The more comfortable we become, the harder we have to work to fight it.

Lately I’ve felt complacency creeping in, replacing the desperation to keep our heads above water that we felt last year. I’m aware of just how much money we’ve saved and so tempted to spend it. The struggle to pay our bills has been replaced with the struggle against our culture and our spendthrift natures.

Every day I remind myself that our goals are more important than frivolity. It’s a constant battle, but it’s one that I’m willing to fight. The reward of accomplishing our financial goals is much greater than the brief satisfaction we’d get from instant gratification.

How much money do you need?

This question has been floating around the blogosphere and beyond forever, but I’ve never really taken the time to answer it — not on my blog or even for myself.

We all dream about one day having enough money that we don’t have to worry about it anymore. But how much money would it take to get there?

Here’s what I’d need:

  • Student loans: $60,000
  • Home: $300,000? (I’ve never actually looked into how much we’d need for a home since we’re so far from buying one, but this seems like a fair estimate for a nice home in a good neighborhood.)
  • Cars: $40,000 (for two reliable economy cars)
  • Living expenses: If we invested $600,000 at a return of roughly 8% per year, it would net $48,000 a year. Without a mortgage, debt, or car payment, that would be plenty for us to live comfortably even after taxes.

So $1,000,000 would be enough money that we’d never have to work again. We’d probably make a little money writing, but the point is we wouldn’t have to work to live. Isn’t that a nice thought? I’m surprised that’s all it would take to sustain us for the rest of our lives.

How much money would you need?

An update on goals & a progress report

I can’t believe it’s only been about 8 months since we committed to frugality and began saving our emergency fund. Our progress has been slow, but it’s started to pick up since we paid off our credit card debt.

Beginning in January, we doubled our monthly savings amount. Hopefully that means the progress meter I added to my sidebar over the weekend will begin to move more quickly.

Our summer savings account is actually complete … we’re just waiting on a tax refund check from the state of North Carolina. Once that arrives, it’ll go directly into our summer savings account to cover Tony’s income during the two summer months when he doesn’t receive a paycheck for teaching. We’re hoping he’ll be able to find a part-time job over the summer, and all of that extra income will go directly into the emergency fund.

As for the Europe savings account … well, that’s pretty sad so far. Our plan was to finish funding our emergency fund and then begin saving aggressively for our trip to Europe. We’ve had a slight change of plans.

It’s easier for me to stay motivated toward a goal when I can watch its progress, so we decided to open a new savings account and save separately for Europe. Opening a new account for Europe doesn’t change the total amount we have in liquid savings, it just helps us to track our savings to reach the two separate goals.

Since Europe is a fun goal, seeing the progress meter move should be extra motivating. Whenever I want to make an unnecessary purchase or spend money, I can take a look at our progress and remind myself that our tight budget will be worth it in 14 months!

After assessing our progress and our goals, I realized that we weren’t saving enough to reach them. So I shifted my budget around and cut down some of our discretionary spending to increase our monthly savings amount by $100. I’m hoping we can sustain the increase, but we’ll have to see how it goes.

Our emergency fund will remain our top priority, but we’ve begun saving a small amount for Europe every month, too.

Based on our current rate of savings, here are my projections for completion:

Emergency fund: Completed by July 2010

Europe fund: Completed by May 2010

Hopefully, we’ll bring in some additional income this summer and we’ll be able to finish sooner.

I’m glad I took the time to assess where we are and where we need to be. I was able to make a change to our savings before it was too late! Have you assessed your goals recently?