Category Archives: Money

What made you decide to live frugally?

Every frugal family has a unique reason for choosing this lifestyle. For some people, it’s a job loss. For others, it’s the birth of a child or the desire to be a stay-at-home parent. For us, it was a gradual change, but I do still remember the day I made the conscious decision to live frugally.

When we arrived in North Carolina before my husband began graduate school, we had quite a bit of money in the bank (about $10,000 to be exact). We’d saved for a year knowing we would need a little padding until I could find a job.

In the beginning, I wouldn’t say we were frugal. We spent too much on groceries. We bought a lot of new things for our apartment. We adopted a puppy (which I absolutely don’t regret). Even though we were careful, we weren’t what I would call frugal yet.

We’d been living here for two months, and I had no leads for jobs despite sending a ton of resumes. I was beginning to worry that we were going through our savings too quickly. It’s scary to look at the bank account and see a lot of money going out with nothing coming back in.

Then I finally got a call for a job interview. I was thrilled. I even went out and bought new clothes for the interview. They called me in for a second interview. Then a third and a fourth. I met everyone in their small office. I thought I had the job in the bag. Our spending had gradually increased. I was so sure I’d be working full time soon.

They invited me back to meet with the president of the company for the second time. I was positive this was the hiring interview. It was such a relief.

The day before the meeting, they canceled. For some reason that I’ll never understand, they decided not to hire me at the last minute.

Devastated does not describe how I felt. I was completely crushed. After two months of sending resumes and six weeks of interviewing with this company, I thought this had been my shot. I thought this was the perfect opportunity. But it didn’t work out.

I was absolutely depressed for days. Then I started fretting about money. Our savings was running out. I had been counting on this job for six weeks, so we’d spent more than we should have leading up to the rejection.

I realized I would have to take a part-time job outside of my field until I could find something else. I also realized we were going to have to live on a lot less money than we’d hoped. Even with freelance writing jobs, it just wasn’t enough to cover the gaps.

If I couldn’t do anything to increase our income, we’d need to decrease our spending. At the very least, we’d be able to get by without increasing our debt or worrying about paying our bills.

Frugality empowered me to pick myself up, dust myself off, and get on with my life. I realized that I had more control over our financial destiny than I thought. For so long I thought the only answer for us to improve our financial situation was to make more money. When I realized that wasn’t the case, a huge weight was lifted off my shoulders.

We made under $20,000 that year. And yet we were still able to plan our wedding, pay off a chunk of credit card debt, and keep our heads above water. We didn’t start saving again until we paid off our credit card debt and I was hired full time, but I’m still proud of the progress we made on such a small income.

Even though our income has finally increased some, the lessons I learned in that year will stay with me forever.

What made you decide to live frugally?

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.

Thoughts on our first cash-only weekend

We made it through our first cash-only weekend! It has been quite a challenge, but it’s actually been fun! Here are some highlights:

Successes

We didn’t use our debit cards once! The only money we spent was from the $90 we withdrew on Saturday.

We also didn’t go over budget! After buying groceries and seeing a matinee, we have $20 left. This is the exact amount we budgeted for household expenses. Because we didn’t need any household items this week, we’ll hang on to that $20 for a later week when we’ll inevitably need more than $20 for necessary household expenses.

The biggest victory is that I’m not dreading our bottom line. Most weekends, I cringe when I look at Mint the following week and see how much we spent. This week, I know exactly how much we spent, and I know we didn’t blow our budget. Yay!

Challenges

This afternoon, the weather was beautiful and I felt the urge to go out to lunch someplace with patio seating. Because we didn’t have cash for it in the budget, we didn’t go. It was tough, though.

Instead, we took a drive to the beach, walked the dog around a nearby lake, and got some work done. In the end, our choice was healthier for us physically and financially, so I’d say our cash-only budget is having positive effects beyond our bank accounts.

Setbacks

We technically didn’t follow our own rules. Because we were $9 under budget for groceries, we should have ended the weekend with $29 in pocket. Part of the deal was that we would hang on to extra cash if we went under budget for later weeks or something fun at the end of the summer. Instead of hanging on to it, we spent an extra $4 over our entertainment budget because the new Pixar movie “Up” wasn’t playing at the cheap theater. We also picked up a couple extra items at the grocery store for $3 total.

After a weekend of success (with our cash-only budget and with my diet), I was seriously craving ice cream. But I couldn’t bear to break the $20 bill that had survived the weekend. I had $1 in my pocket, plus we had change scattered around the house and in the car. We scrounged together $2.50 and headed to the grocery store to pick up some ice cream sandwiches.

While it was technically cheating, it was definitely the most fun we’ve had on a cash budget. Working hard to scrounge together the money for that ice cream made it that much sweeter, and knowing that we could only spend $2.50 limited our choices.

My unwillingness to part with that $20 bill already shows a change in how I’m viewing money, particulary cash. In the past, I would have viewed that as “extra money” already removed from our account. Now I view it as “household expenses” money that we’ll most likely need in a future week. I didn’t want to spend it, because I knew we would probably need it later to avoid using our debit cards.

If we had gone to the grocery store to pick up ice cream with our debit cards, we might have spent $4 on specialty ice cream instead of the store-brand ice cream sandwiches we chose. I hate to admit it, but when it’s only $4 coming from our bank account instead of breaking a whole $20 bill, I would have been much more likely to spend it. Those little purchases add up, though, which is the reason we’re trying this experiment.

Overall, I think our first weekend was a success! And so far we’re having fun. It’s certainly changing the way we view money. I’m looking forward to more challenges and successes for the next three months. Stay tuned!

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?

Celebrating our first (frugal) year of marriage

married
He just pronounced us married!

One year ago, my husband and I were celebrating our wedding day. I can’t believe how quickly this year has flown!

I’m so proud of what we’ve accomplished in just a year. Our main goal was to begin our life together on the right financial track, and I’m confident that we’ve accomplished that goal and then some!

Here’s what we’ve accomplished in one short year:

It hasn’t been easy for my husband, but he has been incredibly supportive as we adapted to this new lifestyle. When we began living frugally, I was the one constantly reminding him of our goals. Now I love it when he’s the one reminding me. We’re a great team, and I’m excited about all that we’ll accomplish together in the future.

After an amazing year with an amazing partner, I’m looking forward to many frugal years to come!

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 SmallNotebook.org. 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!

The bottom line: Frugality is about quality of life, not money

For me, frugality isn’t just about money. It’s not just about a bottom line. It’s not just about asking myself, how much did I earn this month? How much did I save? How much is in the bank?

Goals are so important to frugality, but they can also make frugality a little counter-productive. When you spend so much time setting goals and scrimping and saving, it’s easy to lose sight of the real goal — happiness and peace of mind.

Yes, frugality is about saving money. But the true bottom line is quality of life. The whole reason I want to get out of debt, save money, avoid living paycheck-to-paycheck is because I want to live better. I don’t want to worry about money. That’s why it’s so ironic when frugality occasionally leads me to do just that — worry about money.

When I worry about money now, it’s so unnecessary. It’s not because I can’t pay my bills or buy groceries. It’s because I forgot a coupon at home and paid an extra 30 cents for groceries, or a slight setback prevented us from hitting our savings goal for the month. Those are the times when I have to stand back, look at how far we’ve come, and remind myself to relax.

I continue to be mindful of my spending and save as much as I can, but I draw the line when it crosses over from mindfulness to worry. I’m frugal because I don’t want to worry about the money issues that really matter, like making ends meet or covering emergencies. If I still worry about money after all of this hard work, then what’s the point?

If you sweat the small stuff when it comes to frugality, take a step back and ask yourself why you’re clipping coupons, budgeting, saving. No matter what your overall goals, chances are your motives are the same — you want a better life. But fretting about every last penny isn’t the life I envision when I think about my best possible life.

When you’re kicking yourself for leaving a coupon at home, worrying about how long it’s going to take you reach your final goals, just take a step back, breathe, and remember the real bottom line.

Ask yourself: Is this improving my quality of life? Many of my frugal habits do: menu planning, budgeting, saving. At the end of the day, those things make me calmer and happier.

But the ones that don’t — worrying, depriving myself, sacrificing my comfort or happiness for a little bit of money —  shouldn’t be a part of my lifestyle.

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.

Housing

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.

Savings

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!

Food

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.

Debt

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. :(

Retirement

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?

Always track your rebate claims

In February, I bought a year’s supply of contact lenses at Costco after searching for the best price. One of the main reasons I decided to go with Costco was the $20 rebate on a year’s supply, which brought their price down to the lowest.

Costco allows online rebate claim submission, and it was pretty simple. I filled out a form with information that was readily available on my receipt. I figured it would be several weeks, maybe even a couple months, before I received my check, so I kind of forgot about it.

Yesterday it was time to replace my contacts with a new pair of lenses. For the first time since I’d submitted the claim, I thought about my rebate. It had now been over two months since I submitted it, and I haven’t received a check.

I logged onto the Costco site and checked the status of the claim using the claim number they emailed me. It was so easy that I couldn’t believe I hadn’t checked it before. According to their records, the check was sent on March 17 and should have arrived 7-10 business days after that. It didn’t.

When I called the rebate hotline, they were extremely helpful. Within about 5 minutes they were able to determine that my rebate check had been sent and returned to them. The customer service rep assured me that a new check would be in the mail by Monday sent by certified mail to ensure delivery.

While the hotline was extremely helpful in resolving the problem, I can’t help but wonder what would have happened if I hadn’t thought to check on it. It’s only $20, an amount that many people might not bother to follow up on. If I hadn’t called last night, I probably never would have received a check.

It would have been nice if they had recognized the problem and resolved it without a call, but to be fair I don’t really expect them to track that sort of thing for me. It’s my money, after all. If I don’t care enough about it to track it, why should they?

People who regularly submit rebates for Walgreens and other stores usually have intricate systems for tracking this sort of thing. I don’t regularly submit rebates (only when I happen to buy a product that offers one), so I easily could have let it slip my mind.

When I bought my computer, it came with a $200 rebate. You better believe I tracked that one. I sent the required materials by certified mail to ensure that they weren’t lost, and frequently checked the status on my claim until I received my check. After all, $200 is a lot of money.

But $20 is just as important when it comes to getting a little money back after a purchase. It’s so easy to submit and track rebates these days, there’s no reason to lose track of that money. I takes more trouble to clip coupons than it did to log in and check on that rebate, and coupons usually only save cents. I would be careful to keep track of a $20 bill; why lose track of a $20 rebate?