Frugal is the New Black: Living within Your Means (Part 2)

Last time we talked about the importance of developing a frugal mindset. That is, learning to ask the question, “What is this worth to me?” in evaluating your spending decisions. Now it is time to put that wisdom into practice (since I know you’ve completely revamped your brain in under a week J ).

Today we are going to go through various expenses and talk about where you might be able to shave off some dollars. Remember, this list is based on my values and choices…your list will probably look very different. But if there aren’t enough dollars to go around, you’ll have to decide what is most important to you and go from there.

This is just a brief overview of various categories. Some of these we will explore more in-depth later on, but the idea is to get you thinking about what you are spending, and how you may go about some of these needs/wants in a different way.

So, first off, I think it is important to have some guilt-free, “I can spend this on whatever I want” money. This is especially important if you share your finances with someone else. Nothing is more annoying or nagging than having to account for every last penny when sometimes you just want to buy something simply because you want to.

This means I don’t have to justify buying forest-friend post-it notes to my husband, and he doesn’t have to explain why his tractor needs yet another random part.  We take this money out as cash at the beginning of the month and spend it however we want, no questions asked. When it’s gone, it’s gone.

This is also money we use to save for “wants”—for example, he is saving for a fiddle, I am saving for an iphone. Combined with some money I got for Christmas, this is how I paid for our new couch (it took me over 6 months to get there).  I whittle this cash into an envelope so I am not tempted to spend it elsewhere. It can be as little as $5 if that is all you can budget for—but I think it’s necessary to have some "splurge" money that you don't have to feel bad about.

Anyway, on to the less exciting categories (in no particular order):

·         Housing—this is easily the biggest expense. Most financial experts agree you should spend no more than 30% of your income on housing (including taxes and insurance). I think this number can be pretty hokey when individual circumstances vary so greatly. For example, if you live in a city with zero need for a car, you can probably afford to spend more on housing. But I do advise you to keep it as low as possible.  Our mortgage, taxes, and insurance totals about 25% of our income (Our lender approved us for up to 40% of our income. We thought they were out of their ever-loving minds). If you find you are spending too much on housing, you have 2 options: 1) move somewhere cheaper, or 2) take on roommates. We have done both. Those of you that know me have been to some of the places I have lived (and some of them have been quite lovely!), and you know what I mean. But you have to do what you have to do.

·         Utilities—we live in a rural area with no central heat pump, so our utilities are pretty low. I understand that is not an option for everyone (you can’t live in Georgia without air conditioning), but there are some things you can do to lower expenses.  In the winter, we use “zone heating”—we  keep the thermostat really low (62) and use a space heater in the rooms we are in to stay comfortable (don’t leave space heaters on unattended or overnight!). We have a down comforter dubbed “Satan’s Marshmallow” that sometimes sweats us out even on the coldest of nights. I absolutely hate being cold, but combined with our wood stove, which gives off the loveliest free heat you will ever feel, we made it comfortably through winter. We also take our recycling and trash to the transfer station ourselves rather than pay for trash pick-up. Recycling is free, trash costs us $1 a bag. This also encourages us to generate less trash, because we hate going. We have a well so we don’t pay for water (this can present its own challenges), but if you do pay for water, installing low-flow shower heads and other water saving devices can really help you.  All told, our utilities average about $40-$80 a month depending on the season. Where you live can really affect your utility costs, so make sure to take this into account if you are looking to move.

·         Internet—ah, where would we be without the internet? Isn’t it strange how in the span of 10 years I have become completely dependent on something that didn’t exist when I was born? That being said, you pay a high price for lightning fast speed. We have DSL “lite”, which is an accurate description. You can’t watch Netflix and buffer a video at the same time without someone sighing and rolling their eyes as something gets interrupted. But, you know, a small price to pay for a functional connection that costs us $30 a month. Again, where you live will affect your costs here. 

·         Cell Phone—My favorite category for saving a chunk of change! I had Verizon for 7 years before I realized we were paying an outrageous amount (over $100 a month) for two dumbphones with barely any minutes. If you have a contract, you are probably paying a ridiculous amount of money for a “free” upgrade every 2 years. That free phone is probably costing you $600-$1000 a year, which is typically more than the cost of a new phone. We discovered the world of prepaid and never looked back. Right now we pay about $40-60 a month for two smartphones—and we have way better customer service. We have found coverage/service to be comparable or better depending on the provider.

·         Groceries—I am not a smart shopper or a coupon clipper. We could probably save more money by going to several different stores like Sam’s or ALDI before hitting the regular grocery store. But our time is more important to us, so we usually just shop at Ingles unless we need a specialty item from somewhere (for example, we are picky about meat). Which brings me to an easy way to save money on food—eat less (or no) meat.  I am (mostly) vegetarian, my husband is not, but we rarely buy meat unless it is for a special occasion or on a steep discount, and then we pay a premium for the hormone/antibiotic free “humane” variety. This means we rarely buy it because it is pretty expensive. Surprisingly, Target is a pretty cheap place to buy a lot of food items (like organic tortilla chips), and I use it to supplement my grocery shopping since I’m there at least once a week anyway. We budget about $60 a week for the two of us, and we are usually on target.

·         Personal/Household Items—I can’t say too much in this category, since I don’t really buy that many personal care products. I will pay more for cruelty-free/natural products. Same for recycled toilet paper/paper towels/cleaning products. I also will pay good money for a haircut, having been the victim of too many cheap haircuts where I told the stylist it looked great and then cried when I got to my car.

·         Gas—I really don’t think it’s worth it to drive across town to save 5 cents a gallon on gas. Also, those grocery discount cards give you a discount on their gas pumps, but if you take a close look they simply hike up their regular price to compensate for the “discount”. So, you know, look for a cheaper price, but it’s all going to be relatively the same. The best way to save money on gas is to drive less. Some will say you should buy a more fuel efficient vehicle. If you’re already in the market, then yes, you should be looking for the most fuel efficient model you can afford that meets your needs.   But picking up or increasing a car payment to get better gas mileage isn’t really saving you money (Cash for Clunkers was probably the biggest waste of tax payer dollars ever—did that actually happen?!?).

·         Entertainment—the last time I had cable was when my parents paid for it. We have a Roku box and pay for Netflix to the tune of $8.55 a month. The only time I wish I had more access to cable television is during events like the World Cup or the Olympics. But, oh well… it doesn’t justify the cost to me, and we saw a lot of the games on the big screen at our local brewery. We don’t go to the movies unless it is something we really want to see, and then it comes out of our “fun” money as previously discussed. Sometimes we will rent a movie or TV show from our local video store (they still exist!) if there is something we really want to watch. If there is a show you follow religiously, you may want to look into Amazon Prime where you can buy individual episodes. My favorite form of entertainment is spending about 3 hours in a bookstore. And the library, oh, the library—you’d be surprised what you can find there! We have a thing going. But, you know, I’m pretty boring.

·         Eating Out—for some of you, this probably belongs in the “Entertainment” category. But eating out is a major vice and thus has earned its own category in our budget. This is the place where we bleed money the most, so I am too embarrassed to tell you what we have spent. But, we are learning to eat out without spending so much money. This usually involves drinking only water, eating appetizers or splitting plates. Doing any or all of these things can cut the bill in half, easily. But I love Dr. Pepper like my life depends on it, so I will usually choose to order a drink and then just order cheese dip rather than get a big plate. My husband would rather have the food. But before we go out, we have started asking ourselves how we can keep the bill lower. And don’t skimp on tips. That just makes you cheap, not frugal.

·         Insurance—bleh. Nothing sucks more than paying a small fortune for something you might never need. Some types of insurance are necessary, some are good to have, and some are just pretty stupid. We will go over all of that in another post. However, I will take this moment to step on one small soapbox: YOU ABSOLUTELY MUST HAVE HEALTH INSURANCE. Medical bills are the number one cause of bankruptcy. This isn’t about a sinus infection or a broken bone. This is about cancer, a serious car accident, multiple sclerosis, a pregnancy with major complications. It happens. Even to young people. Seriously, unless you fall in one of the loopholes in the new law (and there are some, especially if your state rejected Medicaid assistance and you make very little money, or if you make too much to qualify for subsidies, or some other random things that weren’t planned very well—these words are not directed at you), then the ACA (aka Obamacare) should have some sort of plan that you can afford. So go sign up. Right now. (I actually think open enrollment starts in November. So do it then).  If you don’t know how or feel overwhelmed, then hire an agent to do it for you (they are paid by the insurance companies, not you, so you can hire one for free). Even if all you can swing is a plan that just covers major catastrophes, you need to do it. With health insurance, being on the hook for 10,000 if something major happens still sucks. But it is better than being bankrupt. I said I wouldn’t prioritize your spending, but in this case I will do it for you: it needs to be at the top. Now I will step off my soapbox…

·         Fitness—meh. Fitness is important, don’t get me wrong. But gym memberships have never gotten me there. If it keeps you motivated or if you want to be an elite athlete, go for it, but mostly we buy memberships, go for a month, and then never go again. I find gym workouts boring and classes and open swim always seem to be at incredibly inconvenient times. We enjoy running (or at least my husband does), biking, hiking, and, in inclement weather, the 30 day shred (or various other fitness videos/apps). We also occasionally sign up for an ultimate/dodgeball/soccer/etc. league. Just don’t pay for a YMCA membership so you can go to that Zumba class once a month. Walking is free and is a peer-reviewed method for staying in shape and prolonging your life.

·         Kids—wow, I’ve got nothing here. Anyone want to do a guest post on how to live frugally with kids? J

·         Pets—I work in the veterinary industry, so I feel like that gives me a little bit of an inside edge here. The biggest way to save money on your pets is to pay for preventive care. Not every vaccine is necessary (rabies is required by law), but unless you just picked up a puppy off the street, parvo should not be on your radar. Neither should heartworms, fleas, or other parasites. These are all preventable diseases. (*News flash*--inside only cats can have major flea infestations. They can get heartworms, too). Buy the highest quality food you can afford. Brush your pet’s teeth (no, I’m not joking). Learn how to do your own grooming (including trimming your pet’s nails). If your pet won’t let you, visit www.sophiayin.com (RIP L) to teach your pet to not only tolerate but enjoy these procedures. And don’t underestimate the cost of veterinary care or what you would “do” for your pet. A lot of people think it’s “just a dog” until their pet is in a crisis, and then they want the best care possible. If the thought of a $2000 vet bill makes you want to wet your pants, I suggest investing in pet insurance (we will talk about that soon, too!).

·         Clothing—I’m pretty sure at this point you know how I feel about fashion. I think being a kid trains you into thinking that you need new clothes every season, because when you are constantly growing, you do! But as an adult, most of the stuff from last year still fits (most of the time J ). I don’t buy much in the way of clothing, and when I do, it’s either at Target or Goodwill. I will pay good money for shoes, since I usually get about 5 years out of them, and for jeans, because it is such a pain in the rear (haha!) to find some that fit that when I finally do I don’t care about the price tag. But I buy about half a pair of jeans on average each year, so it’s not too expensive. I also don’t like cheap socks because I hate when they bunch in your shoe or flop off your foot.

Finally, one of the best tips I can give you for living more frugally is to hang out with frugal people. I never in my life thought I could survive using a wood stove until a girlfriend got me hooked on splitting wood (seriously, it is one of my favorite activities ever). Instead of social pressure to keep up with the Jones’, find people who will (kindly and gently) exert the opposite social pressure by planning your social activities with frugality in mind. And make sure your friends know you are on a budget. The people who love you will understand and will help you stick to it. If you’re like me, sticking to it is the hardest part, so rally all the help you can get!