Recently, JLP discovered that if he needed to, he could “find” an extra $13,000 per year by cutting back some of his discretionary expenses. By eliminating beer, soda, and a number of other unnecessary but nice expenditures, the savings can add up quickly. (I’m a bit surprised that JLP spends $50 per month on beer. But I’m not a beer drinker, so I’m unfamiliar with those types of expenses.)

My situation is similar. Once I was able to dig myself out of a hole and began earning income outside of my day job, I decided I should allow myself some of the more enjoyable aspects of life rather than wallow in extreme frugality.

But if I had to cut back, could I still do it?

Cable television and movies

I have a Netflix subscription I could cancel if necessary. In fact, I’ve considered getting rid of the service already, as I’m not an optimal user. My subscription was born while I was starting to earn more money but didn’t want to make the jump to another other than 13-channel cable television service. Netflix currently costs $15 per month, or a savings of $180 each year if I cancel.

I’m currently paying about $20 for an extended Comcast cable television service including all the standard channels plus an HBO package, the basic high-definition package, the sports high-definition package, and a digital video recorder. The $20 price includes the high-speed broadband internet connection, as well. I could drop HBO and the HD sports package to reduce this cost to $0, a yearly savings of $240. Even paying $0, I could still have my internet connection, which is important for continuing my extracurricular activities.

Meals and dining out

Based on my progress so far, I expect to spend about $1,400 dining out and ordering delivery from local restaurants. That includes off-campus lunch with my co-workers. I could shave this expense by making smarter choices at the groceries, forcing myself to cook, and motivating myself to bring in homemade lunches to the office. For a full year, I could probably save about $1,500 by cooking more and eating out less.

Communication

After purchasing a BlackBerry 8830 to keep me connected to the world when it’s probably inappropriate to be so, Verizon Wireless suggested the unlimited data plan for a total, including both voice and data, of $80 per month. This saves me from being charged per byte for every email or text message I transmit or receive and every web site I browse. Those charges would add up, but $80 per month isn’t slim, either.

I do not have a land line and I have no intention of getting one. I recently signed up for Skype so that can be used in some cases, but I believe I’ll need to keep a minimum cell phone if driven to extremes. I could choose a prepaid cell phone option and reduce my $80 per month expense to $20 every three months. If so, I could save $880 throughout the year.

Live entertainment

I spent over $200 at the Appel Farm Arts and Music Festival this past weekend, including admission, snacks, gifts, and tee-shirts which functioned well for a change of clothing when we were drenched in sweat. I’ve spent several hundred dollars on Broadway shows so far this year. I intend on seeing more concerts and shows this summer. I’ve also spent close to $200 on the “Goodbye Shea” package of 7 tickets to Mets games during the last season at Shea Stadium, with the first game scheduled for this upcoming Saturday. I expect I’ll spend more this summer on souvenirs and stadium food.

I see perhaps an average of one movie a month with my girlfriend, though that may be overestimating. We aim for matinées but they’re not discounted much.

Let’s just estimate that I could probably save about $2,200 throughout the entire year by cutting out my live entertainment expenses, including related travel.

Vacation

I haven’t purchased my tickets yet, but I plan to visit my family in California for Thanksgiving again this year. The flight will likely cost around $600. My girlfriend and I haven’t solidified details surrounding our summer vacation yet, either, but I would expect what we decide may cost from $600 to $1,000. Add in my spring visit to the west coast, and we can estimate $2,000 spent on vacations per year.

The little things

I buy books, music, and videos (DVDs, Blu-Ray discs, etc.) to enjoy. I also slowly work on a coin collection which involves purchasing new releases from the U.S. Mint and perhaps some coins from shows or eBay. I purchase miscellaneous electronic equipment and gadgets occasionally, such as last year’s TomTom GPS device, last year’s Sharp Aquos HDTV and last year’s now-extinct HD DVD player.

While I haven’t spent as much this year, I could see looking for a new computer by the end of the year. Let’s say I could save about $3,000 a year by cutting all of this out of my life for a while.

$10,000 may not be enough if I’m faced with a crisis. I’m glad I have a healthy emergency fund which can help me recover. I intend on reducing expenses when possible before tapping the emergency savings accounts, however.

What would you do to find an extra $10,000 or more over the course of a year?

Life is short, and I believe it’s important to do and accomplish the things that make us happy while we can enjoy it as much as possible, healthily and with full wits. Is this philosophy at odds with the idea of frugality? A reader recently wrote in with this question for other Consumerism Commentary readers: Are you missing out? Here’s John N.’s email:

I buy into the importance of not living beyond our means. And there’s a great deal of comfort and satisfaction to be had in having money in the bank so that we’re not devastated by the next misfortune.

But, when it comes to living frugally, do you feel you’re missing out by forgoing the sports car, fine dining, and exotic vacation? If so, how do you make a place for those things in a frugal lifestyle?

Robert Kiyosaki’s (author of Rich Dad, Poor Dad) answer is to wait until you’ve saved the cash and then go forth and spend. But some of us, depending on predisposition and earning power, may grow old or die before that happens. Are there compromises? Can you make them and remain financially secure?

I say absolutely. Frugality is not my strong suit, but I believe it’s important to strike a balance. I try to do what I can now to secure a comfortable retirement so I can stop trading my time for money—working to earn a living —and to make relatively smart financial decisions throughout my waking life. At the same time, I strive to enjoy the time I have today that’s not spent typing at a computer in an office or in my living room.

Frugality and making the most of the present are not mutually exclusive. First, not everyone needs to spend on a sorts car, fine dining, and exotic vacations to feel they are making the most of their life. Simple pleasures can often be the most satisfying. That’s not for everyone for a variety of reasons.

So, you want a buy a sports car because that would make you happy. That doesn’t make you a bad person, and it doesn’t mean that you can’t be frugal at the same time. No, a sports car is not the most economical decision, but for people with the means, financial decisions can be weighed against other, somewhat more nebulous aspects, like the thrill of driving (known popularly as fahrvergnügen).

Whether fahrvergnügen exists as a reflection of a true feeling or only as a feeling created by a marketing term is an entirely different discussion.

To the point of John’s question, what if you don’t have the means to afford the thrill today? There are three options. The first option is to go into debt or forgo saving for the future. Obviously that’s not recommended and could lead to problems down the road. However, everyone is different, so if one understands the cost and risk of debt then one should be free to make that decision.

The second option is to wait as long as possible, but what if you never have the money to experience a safari in the Serengeti? What if by the time you could afford it, you won’t have the capacity to enjoy the trip? Life is for those who don’t wait.

The third option is to realign your expectations with the reality of your financial situation. This option is the hardest but the most rewarding. I’m not saying a trip to Six Flags Great Adventure & Wild Safari is a worthy alternative to the Serengeti, but there may be other experiences that induce a comparable level of happiness and satisfaction.

What do you think? Does a frugal philosophy necessitate missing out on life and how can one compromise?

Image credit: Stig Nygaard

This is a guest post, written for Consumerism Commentary by Single Ma. Single Ma is the author of Fabulous Financials, a blog presenting a chronicle of a 30-something single mother’s pursuit of financial independence.

I’m paid bi-weekly, which is typically twice per month. Every now and then, there’s a month or two sprinkled throughout the year when I’m paid three times per month. But regardless of how often payday arrives, most of my salary is already spent before I see a dime. Why? Because, excluding taxes, there are several transactions that process automatically through payroll allotment:

• $574 goes to 401k
• $185 goes to IRA
• $150 goes to emergency fund
• $74 goes to my daughter’s 529 account
• $38 goes to FSA

• $Big Chunk goes to employer benefits (health, life, pension, etc.)

  By the time I receive my “real” paycheck, it’s less than half of what I actually earned, which is ok with me. All of my financial priorities are accounted for, so I have fewer things to worry about. Automation also locks in the funds to make sure I achieve my financial goals (e.g. max out 401k, IRA, and tax deductible college savings).

  However, the challenge is being able to control expenses and live on the remaining ~45%. And baby, please believe, this is a challenge indeed! Just to give you an idea of what I’m working with, here are my major monthly expenses:

• $1,825 Rent (an entire paycheck + some)
• $1,600 Mortgage (always in reserve but paid by tenants)
• $300 Utilities
• $300 Food & Essentials

• $170 Transportation

  None of this includes discretionary spending, such as donations, doctor’s visits, personal grooming, pet expenses, dining out, entertainment, and the occasional fabulous shoe shopping excursion. So if something out of the ordinary happens, such this month when I need new tires, I find myself strapped for cash—or dare I say BROKE—before the month is over. Because incurring debt is NEVER an option, I have to make hard and fast choices about how I will manage the rest of my cash flow. A few things I’ve done so far:

• Forgo ALL shopping until things are back to normal.
• Skip a bi-weekly salon visit and wash & set my own hair.
• Brown bag and invite friends to my office for lunch.

• Choose between the wine festival and the banging concert of the year.

  You’re probably thinking, “I work HARD for my money and I DESERVE…” but that mentality will cripple you financially. We can never have it all. I guess if I really wanted to, I could opt to change anything that causes me to be short on cash. Am I willing to reduce my retirement contributions? NO! Reduce my emergency or college fund savings? I don’t think so! Move to a cheaper apartment in a less desirable neighborhood and settle for a less than desirable school district. Absolutely not! Instead, by prioritizing my needs and being selective about my wants, I am able to strike a balance to live a fabulous lifestyle AND achieve my financial goals.

  There was a time in my life when I lived paycheck to paycheck because I had to, but now, I do it on purpose. And I like it!

  If you enjoyed this article, please visit Single Ma’s blog, Fabulous Financials, and consider subscribing to the Fabulous Financials RSS feed.

I’ve never been a big movie buyer, and own a whopping 3 DVDs. If I can’t guarantee I’m going to watch it at least 5 times, I don’t want it cluttering my abode.

But I do like movies, and so I opt for rentals. And there are more rental options out there now than ever before. Plenty of ways to add another bill to my monthly deluge.

I hear Netflix is pretty good, as long as you properly estimate how many movies you’ll need at one time. And my mailbox is constantly bombarded by ads for Blockbuster’s similar offering. There’s also the downloading option, from iTunes and the like.

But to me, nothing compares to my local public library.

In the very minimal off-time I’ve had lately, we’ve been chilling out with free movies, everything from foreign films to more recent hits like Babel, I Heart Huckabees, City of God, and The Corpse Bride. They even have HBO’s wonderful Rome series, which retails for $68.99 a season on Amazon. And that’s the discounted price.

They don’t have every movie I’ve wanted to see, but there’s a very nice selection, I can take out as many at a time as I like, and keep them for a whole week without cost. I can renew them, too.

I keep a list of movies I’d like to see on my desktop, then go online every so often and request a couple via interlibrary loan. When they’re in, I get a call and go pick them up.

I’m lazy that way—it’s been months since I searched the shelves for anything. I do the same thing with books, and I feel like I have my own personal concierge service. It’s pretty sweet.

I don’t remember Blockbuster ever having a stack of my choices waiting for me when I got there, even when I phoned first to make sure my selections were in stock.

Plus, while I’m there, I can pick up some books to help grow my career skills. At the local video store, I’m just likely to pick up popcorn.

When it comes to getting rich slowly, I’m generally a skeptic. The typical example prescribes investing $1,000 a month for thirty years into the stock market, earning 8% each year. At the end of thirty years in this example, you will find yourself with $1.5 million, but there are major assumptions that must be overcome:

1. Do you have $1,000 each month to invest? Many people live paycheck-to-paycheck. $1,000 may be 25% to 30% of your monthly pre-tax income.

2. Will you earn 8% each year in the stock market? It’s possible; over long periods of time, the stock market has provided this level of return, but it isn’t guaranteed. Taxes and fees eat into this return as well. Many professionals believe 8% is too aggressive an assumption; stock brokers will tell you it’s too conservative.

This also doesn’t address a major problem: inflation. If you accept the government’s measurement which declares that money loses purchasing power at a rate of about 3% each year, to find the “real value” of your future investment, reduce your assumed return percentage by that amount. Suddenly the $1.5 million 30 years from now looks more like today’s $836,000. That six figure amount is nothing to sneeze at, sure, but that in itself does not make someone “rich.”

Despite my thoughts about the fallacy of getting rich slowly, an enticing but ultimately disappointing endeavor, people make it work. Paul Navone from Vineland, New Jersey is an example. He worked in a mill for never more than $11 per hour, but he retired with millions. He doesn’t say how much he has to his name, but it was enough to become a significant philanthropist, giving away millions of dollars.

The day he turned 16, Navone left the eighth grade and applied for a factory job at Wheaton Glass in Millville. When he got his first paycheck two weeks later – Navone was earning 75 cents an hour – he thought he was a Rockefeller… At 21, he joined the Army and spent two years assigned to the base post office in West Germany. Back home, Navone moved in with an older sister until he had saved $6,500. With that stake, he bought his first property. He moved into one half and rented out the other…

“I lived on the income the one unit provided me, and I saved my wages from work,” Navone said. Not just saved, invested. He acquired a second rental property, then a third. Eventually, with the advice of stockbrokers, Navone expanded his investments.

So while Navone was working at is $11 per hour job at the mill, he was also earning money in property. That’s the key in this particular case, despite Navone’s penchant for cutting expenses. Even so, living frugally puts money in the bank and certainly contributes to a large bank account.

• He seldom watched television.
• He has never read a book. (What?!)
• The last girl he had a crush on contracted tuberculosis and died; he has avoided relationships since.
• He has no children. (Now this certainly contributes a lot to his bottom line!)

• All of his clothes come from thrift shops.

  Navone’s mantra is, “I’ll work for the money, and then I want the money to work for me.” It sounds to me like he attributes his wealth to his investing prowess rather than his extreme frugality habits.

  Donor built millions on $11 an hour [Philadelphia Inquirer]