By Lesley Scorgie / Illustration by Julie McLaughlin
As I approached the end of university in 2005, visions of a new car, exotic vacations and a big house flashed through my head at the same frequency as future value calculations. My education in marketing and finance lacked certain elements of post-graduation reality. Never did I imagine that I’d sleep on an air mattress for more than a month, grocery shop from my parent’s refrigerator, dig for coins in the couch cushions to purchase postage stamps or cringe at the cost of a gym membership – all while working full-time as a business analyst and making an above-average income. Thankfully, feeling flat broke three years ago was all the motivation I needed to begin the journey towards frugal living.
The word frugal has a bad reputation. Nobody wants to be called a tightwad. I believe, however, that living frugally simply means making creative decisions about shopping, spending and saving. Thomas Stanley, author of The Millionaire Next Door, conducted a series of focus groups with wealthy Americans. Multiple tests with self-made millionaires rendered similar verdicts: wealthy people tend to be thrifty.
Before exploring some ways to spend smarter, a recap of resourceful debt solutions is in order. (You don’t put an addition on your house without fixing the foundation first, after all.) According to Statistics Canada, in 2005 the average Canadian household owed $9,000 on its line of credit, $2,400 on its credit cards, $9,000 in student debts, $11,000 in vehicle loans and $6,000 in other debts. If you’re in debt – and statistically speaking, you probably are – try to trim your highest-interest debt first. If you can afford a few extra dollars each month, set up an accelerated biweekly payment plan; it will tackle the principle amount (as opposed to interest charges) more often than monthly payments. While you’re at it, phone your credit card company and negotiate the interest rate on your card. Yes, this actually works and, no, you don’t have to spend hours on the phone – it takes 10 minutes. Call in, ask for a lower rate, if necessary present them with a competitor’s offer and if they want to keep your business, they’ll match it – deal closed. Make the same calls to the institutions that hold your loans, mortgage and so forth. Remember: if you don’t ask, you don’t get.
Cutting costs is one thing, but creative spending – now that’s one of my favourite subjects. In fact, I consider shopping a sport. It requires agility and shrewd decisions. Here are my top spending tips.
First, be ruthless. Before you plunk down your hard-earned cash, ask yourself whether you really need the item in question or if you just want it. If you don’t need another pair of Prada shoes, you might want to reconsider your shopping list. Try waiting 24 hours before buying.
Second, cut the credit. If your credit cards are getting you into trouble, hide them. Better yet, stash them in a re-sealable bag, fill the bag with water and put it in the freezer. By the time your cards thaw, you’ll have a chance to think twice about that “must have” purchase. And don’t bother trying to hammer the ice; that will just wreck the cards.
Third, pare down. Look for opportunities to save on (or cut out) monthly cable, internet or cellphone plans.
Fourth, become a bargain hunter. Look for sales and discounts when you shop. Check out eBay, auctions, garage sales, estate sales and vintage stores for cool clothes, jewelry and accessories. I’ve done it and had great success. My dining-room table cost $50, my TV stand was $8, my stove was $60 and my two leather couches cost $500. Grand total: $618. Had I purchased these items new, I would have paid nearly $3,500.
Fifth, think about your food habits. There’s a lot you can probably change. Eat at home or pack a lunch for work – fast food is a budget killer. If, for example, you cut out $9 worth of fast food every week from age 25 to 65 and invested the money instead at 8.5% compounded, you’d have about $150,000 saved up. Stop drinking pop – you’ll have more money and you’ll be healthier. Try cutting back on meat (vegetarian dishes are often cheaper to prepare). Buy your food in bulk (the more you buy, the cheaper it gets). And trade in your designer coffee for a less expensive cup. Better yet, buy a travel mug and bring your own.
Sixth, get healthy. Think about it: if you drink or smoke, cutting down can put dollars back into your pocket and add years to your life. Walking or biking, instead of driving or taking public transit, will leave you feeling fit both physically and financially. Give it a try for a week and see what a difference it makes.
Seventh, travel last minute if you’re going on vacation. These days, you can take a trip anywhere in the world for a fraction of the price if you’re willing to wait until three weeks before your travel date.
It doesn’t matter what’s motivating your focus on frugality: a dash of creativity and a sprinkle of fun are the key ingredients in any successful savings recipe. U
|Lesley Scorgie is the author of Rich by Thirty: A Young Adult’s Guide to Financial Success (Key Porter Books). Need money tips? Then email Lesley and we’ll bail you out in an upcoming issue.|