Category Archives: Frugality

A Parking Lot Case Study

MP900385984Let me tell you a story about a parking lot. My fiancé and I went away for the holiday weekend with three other couples. On the afternoon of the 4th, one of the other couples went into town to pick up some supplies, and learned from a local that there was going to be a big fireworks show that night. The local told them that most people here for the weekend would gather in the park, but they’d charge you $8 to park there, so the locals usually park for free at the golf course across the street and watch the fireworks from there.

“What great inside information!” I thought. “We can watch the fireworks for free!” I was apparently alone in my thinking. “The people here are really cheap, they’re not willing to pay for parking, but we can afford to pay for parking, so we should just go park in the lot” said one of my friends.

I wanted to give him the benefit of the doubt. After all, the locals are indeed a bit seedy (we were in marijuana country) and we had children in our group, so perhaps my friend just wanted a more wholesome environment for the kids. However, something about the way he said “cheap” made me think that wasn’t the whole reason. There was the implication that the locals had to be cheap because they don’t have a lot of money, but because we are all gainfully employed, there was no reason we shouldn’t pay for the convenience of parking in the lot.

My suspicions were confirmed when, as we were approaching the gate to the parking lot, we spotted a parking space just outside of the lot where we could park for free and walk the extra 50 feet or so to the park – we’d get free parking, and we would be in the park with the tourists rather than the golf course with the locals. “Let’s just park there and walk into the park” I said, which thankfully at least got the agreement of one other person in the car. But despite that person being the one driving the car, she instead listened to her husband, who chimed in with “nah, let’s just go into the lot, it’s fine.”

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Who Makes Your Buying Decisions?

shoppingMy fiancé ran an experiment at work. Employees at his office get the very nice benefit of several shelves of snacks and a fully stocked drink fridge, and he is in charge of keeping them stocked. Inside the drink fridge, there are three flavors of sparkling water: lemon, lime, and mixed berry. The lime and mixed berry are stocked on the bottom shelf, and the lemon is stocked on the next shelf up with the orange juice. Every few days when he restocks, he notices that much more of the lemon has been consumed than either the lime or the mixed berry. This week, he decided to switch the lemon with the mixed berry, so the lemon was on the bottom shelf and the mixed berry was on the next shelf up. Sure enough, when he went to restock the fridge, mixed berry was the most consumed flavor.

This tells us that people make their decisions of which flavor of sparkling water to drink based on the positioning of the bottles on the shelves rather than the flavor itself.

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Why is it So Hard to Get Ahead?

Broken piggy bank

It doesn’t take a genius to realize that if you spend every dollar you earn, you’ll never build up savings. Everyone knows that if you want to buy a car or house, or ever be able to retire, you need to save money. So why do so many people fall so far short of their goals?

It Takes a Long Time To Save That Much

Saving up a down payment for a house requires a lot of dedication for an extended period of time. When you first decide to start saving, you’re motivated and excited at the prospect of owning a house. But two years later when you only have $10,000 saved and you need $50,000 for a down payment, your motivation may start to wane. Skipping restaurant meals and shopping trips wasn’t so difficult when you were gung-ho about your goal, but after months and months of sacrifice, you may begin to feel like you’re never going to make it to the goal, so why bother trying? May as well enjoy your life now and worry about the future tomorrow, right?

They Think Only About Cash Flow

When it comes to car buying, the first question most people ask is, “what’s the monthly payment?” This is the wrong question to ask. Dealers are more than willing to accept a tiny down payment and stretch out a payment plan for 6 years or more to reduce the monthly payments. Paying $400/month for your car may not sound like such a bad deal right now,  but what happens if you lose your job two years from now and can’t make the payments any more? Are you really willing to bet on your job security for the next 6+ years just so you can have a shiny new car? On top of that, though your monthly payment may seem manageable, over the course of 6 years, you’ll be paying thousands of dollars in interest, which is just plain silly.

Retirement is So Very, Very Far Away

Even home ownership is a short term goal compared to retirement. Many people in their 20′s fool themselves into thinking that they have so much time until retirement that they don’t have to worry about it yet. Also, while you’re early in your career, you’re rapidly learning new skills, focusing on career advancement, exploring new possibilities, and are generally excited about work. The prospect of working into your 80′s doesn’t sound so bad — after all, your job is great! So why bother putting money into your 401(k) when you’re going to keep working forever?

Expensive Things Must Be Better

For many people, they just have an impossibly hard time accepting that pricing is not always based on value. “This shirt costs $50, so it must be higher quality than that one which only costs $20.” “I need granite counter tops because everything else is such poor quality.” “This apartment is too cheap, there must be a catch!” (Ok, there probably is a catch, but it may be something you’re perfectly happy living with, so don’t write it off until you dig deeper.)

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Weddings Kill Your Budget (But Not the Way You Expect)

weddingWeddings are expensive, elaborate, complicated occasions that require a lot of planning. You need to find a venue and then coordinate all your vendors, including a caterer, florist, baker, DJ, photographer, officiant, etc. There are a lot of details that require quite a bit of advanced planning. And most of those details are very expensive. That means you spend months and months immersed in things you would never pay so much for on a regular basis. It starts to warp your sense of perspective.

After you’ve spent weeks getting price quotes from caterers who want to charge you $100pp, suddenly going out for a $15 lunch doesn’t seem like such a big deal. Once you’ve tried on $1000 dresses, that cute $150 sun dress you saw at the store seems downright cheap. If you’re not careful, you could blow your entire budget.

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Save Money with Beauty Schools

Hairstylist Cutting HairYesterday I wrote about the ridiculous cost of beauty services. The obvious solution that I discussed yesterday is to learn to be happy with yourself just as you are, without the monthly haircut, coloring, waxing, tanning session, etc. But we should still be able to treat ourselves to these beauty services from time to time, and we certainly can’t go forever without a haircut. That’s where beauty schools come in. For a fraction of the cost, you can get your beauty fix from a cosmetology student, under the careful supervision of a professional.

For my last haircut, I made an appointment with the local cosmetology school, thinking I was quite ingenious for thinking up this brilliant plan for a $12 haircut. I soon discovered I wasn’t the only one who had thought of this, as the day I wanted for my appointment was completely booked. I thought maybe it was a very small school, but when I did finally get there for my 9am appointment the following Saturday, I was one of about six people with that appointment time! (The word is out, so if you haven’t jumped on the beauty school train yet, get with the picture!) Now granted, my haircut did take two hours, but I think perhaps I got a very inexperienced student. However, her teacher came over several times to help her and guide her, and once the student was finished, her teacher had to give the cut her seal of approval. At the end of the day, I got a great haircut for $12, with the only negative being that it took quite a long time.

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Gift Giving on a Budget (And a Giveaway)

giftsIf you’re anything like me, all holidays that “require” gifts cause a ton of anxiety. Maybe you have no idea what to get the person. Maybe you don’t know how much money you should be spending. Maybe you’re worried your gift won’t be thoughtful enough. And all while you’re trying to stay on a budget! As I’ve written about many times, I absolutely hate the idea of required gifts. Gifts are supposed to be a token of appreciation, symbol of love, or just a way of letting someone know you were thinking about him. They shouldn’t be something you give someone just because you feel like you’re supposed to.

But I digress. Let’s just assume that you’re getting a gift for someone, whatever the occasion may be. I can’t tell you what to get, since I don’t know what the recipient likes, but I can give you some guidelines to follow that will help you save a few bucks and alleviate the guilt you may feel about giving “tacky” gifts.

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Reflections on Christmas

ChristmasNow that another Christmas is past us, I’ve been thinking more about the holiday season, frugality, family, and giving. As perhaps you’ve noticed, I hate the concept of expected gifts. I believe gifts should come from the heart, not because the calendar tells you it’s time to buy things. It kills me to see the kids tearing open a dozen gifts and throwing the things that don’t immediately interest them over their shoulder. And the ones that do hold their interest may only do so for a week or two, until they’re distracted by some other new toy or video game. So it came as a bit of a surprise to me when my fiancé and I were shopping for a couple last minute Christmas gifts, and I suggested to him that we buy an additional gift for two of his nephews.

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When There’s Not Enough Money – $100 Cash Giveaway

not enough moneyThis week I am participating in a $100 giveaway hosted by Savings Advice. The theme of this giveaway is “When there isn’t enough money at the end of the month”.

A little while back I wrote about how I’m living paycheck to paycheck (sort of). The gist is that I have automated savings set up, so once my recurring bills are paid and money is automatically transferred into savings and investments, I’m left with a very small amount in my checking account with which to pay my credit card bill. Anyone who’s actually living paycheck to paycheck might wonder why I would voluntarily put so much stress on myself to stay within my budget when my cash flow would support much more spending.

The answer is simple: if you’re not at least a little worried that you won’t have enough money at the end of the month, you’ll end up overspending on things like lunches and dinners at restaurants, shopping, and entertainment. If you’ve never experienced running out of money before the end of the month, you’re probably not saving enough.

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If You’re Broke, Act Like It

empty pocketsI have an acquaintance who is going through some tough financial times right now. She tells me her job doesn’t make her very much money, and her car was recently totaled in an accident. She is, in her words, “broke.” To afford the monthly payment for a new(er) car, she had to move to a considerably cheaper apartment, though apparently her parents are still helping her out with rent and the car payment. I feel for her, but at the same time, I wish I could shake some sense into her. She’s made several financial missteps up to this point, and though she’s slowly getting better, she still has a lot of progress to make.

Despite my advice to the contrary, she bought a late model used car (I believe a 2010 or 2011) rather than a much older model. I was peeved by her insistence on buying such a new car when her finances were in such poor shape, but I saw glimmers of hope when she was willing to relocate to a cheaper apartment and shop around aggressively for the best car insurance rates. But I lost it a little yesterday when I saw her boasting about her frugal ways on Facebook because of her “bargain” purchase of a $300+ dress for 60% off. 60% off is great, don’t get me wrong. But there’s nothing “bargain” about a dress that still costs $120+, plus tax and shipping & handling. She’s making good progress in some areas, but she still doesn’t quite understand the kind of sacrifices you need to make when you’re broke.

There are a lot of different things going on with her situation, so let me try and break it all down into a few actionable items. Unfortunately, it’s too late for her to fix some of her mistakes, but hopefully others can learn from them.

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Financial Lessons From My Fiancé

Couple MoneyRounding out this series, I thought I’d add some financial lessons I’ve learned from my fiancé. For previous installments, see what I’ve learned from my mother and my father.

My fiancé had a very different upbringing than I did. My father was a salaried professional who recently retired from the job he’d held for my entire life. My mother was a stay-at-home mom for most of my childhood. They’ve been happily married (and living in the same house) for 35 years.

My fiancé’s parents on the other hand had separated a couple times throughout his childhood before finally getting a divorce not too long ago. His father moved his family around the country buying up businesses trying to turn a profit. As my fiancé puts it, it’s not that he was unsuccessful making a profitable business, it’s that he got greedy and would cut corners so he could pocket more money, over-expand the businesses, and turn down offers from buyers because he was holding out for more. He ended up selling most of his businesses for about what he bought them for in the first place, and had to take a loss on a few of them. At one point when his parents were separated, my fiancé lived with his mother on food stamps. This is all to say that my fiancé had a radically different childhood than I had.

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