Over the next couple of weeks, six finalists will be auditioning for the opening of “staff writer” at Consumerism Commentary. Each will be providing two guest articles to share with readers. After the six writers have shared their guest articles, readers will have an opportunity to provide feedback before we select the staff writer.

This article is presented by FruGal, a consultant for a prominent online educational program.

Chances are, I have something in common with either you or someone you’re close to. That’s right, I recently found myself unemployed. After a five-year employment with a steady organization and what I thought was a prosperous future, I woke up one morning to find myself blindsided by the news that I no longer had a job. Luckily, being a financially-conscious individual, I’ve always been wise about investing a percentage of my earnings in various places, such as high-interest savings accounts. While this left me with enough money to “survive,” I knew that there were some concrete steps I was going to need to take in order to ensure I was making the most of my hard-earned dollars and, in believe it or not, cents.

Cents you ask? Yes, cents. Coupon-clipping has changed my life. What has long been considered a hobby of a let’s say, more “seasoned” individuals (a.k.a. senior citizens) has truly become all the rage with today’s average consumer. As a 28 year-old single female, I may not be your “average” coupon clipper, but my point is coupons are a smart move, no matter who you are.

Coupons have long fascinated me, but it wasn’t until recently that I began to master the art of this ever-growing practice. Spend just a few minutes online, and you’ll probably find quite a few useful web pages where people dedicate their whole site to the art of coupon clipping, complete with weekly store deals, coupon links, and much, much more.

I’m excited to share with you just a few simple steps you can take TODAY (well, maybe this Sunday) to STOP seeing your hard-earned money dwindle each week, and START seeing incredible savings in your everyday expenditures.

1. The good old Sunday newspaper is an excellent place to begin your new-found hobby of clipping coupons! On Sunday morning (or perhaps Saturday if the early edition is available where you live like it is In my city), head out to your local grocery store or gas station and pick up a copy of the Sunday paper for generally around $2 or less. Your $2 will go far based on the incredible savings you find inside. (Also check out your local paper on Thursday, as they often have coupons and promotions.)

Inside your $2 treasure, you’ll find a wide array of coupon inserts from companies such as SmartSource, PGBrandSaver, and others. Note that your coupon inserts may vary from ones you’d find in other cities, but regardless, you’ll find endless deals inside.

2. Now that you’ve got your coupons, what do you do with them? Get out your scissors and start clipping! There are tons of different organization systems that you can use, such as keeping a three ring binder with inserts. What I find works best for me is a plastic file folder organizer with tabbed letters of the alphabet. You can find these at any office supply store, and again, the couple of dollar investment you make will be well worth it in the long-run.

Once you’ve clipped all of your coupons it’s time to file them into your folder. I clip just about everything, even if I think I might not use it, because you never know. You also might find yourself giving coupons that don’t apply to you to your friends and family members. Find a system that works for you, but I usually file by the brand name of the item, rather than the general category. That way if I’m going through my sales circular for next week (see the next step) and see that Cheerios are on sale, I can simply flip to the “C” section and pull my coupon!

3. The key to successfully using your coupons is in the timing. You don’t want to go to the grocery store and simply buy items because you have coupons for them. Instead, check out your local grocery stores’ sales papers ahead of time. Prior to your weekly grocery store trip, go online to your store’s website. Most stores I’ve ever shopped at post their weekly circulars on their site. Some of them even have copies of the next week’s sales circular just past the checkout near the exit, so pick it up on your way out to start planning for the next week. Once you know what’s on sale, match up those items that are on sale in the circular with those items you have coupons for.

Of course, you won’t have a coupon for every item you want to buy, but you’ll definitely begin to see some significant savings in your weekly spending. Once you become a coupon-clipping “expert” you’ll begin to see your grocery bills decrease more and more, with strategies such as clipping coupons on the web, taking advantage of stores that double (and sometimes even triple!) your coupons, buying multiple copies of your Sunday paper, and using online resources to plan out how to maximize your coupons at different stores each week if you’re super ambitious.

Since I’ve begun steadily clipping and using coupons, I’ve seen my grocery bills more than cut in half each week. Not only does this give me some degree of personal satisfaction, but it also lets me know that I have a bit more money that particular week to go out with friends, or buy that bestselling novel I’ve been wanting to read. Or better yet, maybe I should just get it from the library for free.

So, Consumerism Commentary readers, what do you think? Are you an avid coupon-clipper like me? Do you have any tips to share on how to stretch your dollars and cents even further at the grocery store? If you get a little thrill from looking at the bottom of your grocery store receipt and seeing your savings, I’d love to hear from you!

This is a guest article by FruGal, one of six finalists interested in being Consumerism Commentary’s staff writer.

Photo credit: Roadsidepictures

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Couponing Makes Cents

We all have power meters attached to the buildings in which we live, and the little needle keeps spinning around and around, ad nauseum, at least until solar panels become affordable. I recently read a story of a family who managed to install solar panels, and while that would normally have cost over $20,000, with various national and state rebate programs, they only spent $8,000.

Wow. Imagine having $8,000 to spend.

We’re customers of Green Mountain Energy here in Dallas, so our bill payments go toward producing more renewable energy (see the big bathtub analogy for more on how this works). But the hardware is operated by a company called Oncor, which has decided it’s time to upgrade our power meters to be smarter. Oncor worked through some calculations (Surcharge Analysis PDF) and figured that the best way to install them would be to charge the average customer $2.12. Every month. For eleven years.

That’s $291.72 for a new power meter.

Within the last month, a hundred grants were given out to companies making improvements to power meters. The company in our area was not one of them. So residents of DFW are likely stuck with the fee.

On their FAQ about the Advanced Meters, Oncor made this suggestion for dealing with the extra $2.12 per month:

How can you offset this fee? Just replace a 100W light bulb with an Energy Star CFL light bulb and you could save more than $2.30 a month.

That’s cute, and likely true, but I don’t believe we’re still using any of the old style bulbs at our house.

This entire scenario of being charged over an eleven-year period for something that won’t be available to everyone until 2012 would be supremely depressing, were it not for the fact that I’m a big data nerd. I love efficiency, and you can’t improve efficiency unless you know exactly what is being wasted. A smart meter will do that for me.

But what’s depressing again is that I could have this right now, for only $200. The Energy Detective (TED) Series 5000 is a device that attaches to the power control panel on the inside of your house, rather than the outside. Other than that, it does all the same stuff: analyze your power usage in real-time, and over regular intervals, then adjust your behavior accordingly.

I’d be excited to get a TED set up in my house, then walk around unplugging one thing at a time, finding the major offenders, maybe put some devices on a schedule; or find out exactly how much we’d save by keeping the house, say, 2 degrees warmer. Those are just a couple of examples. For all I know, more energy is being wasted when two particular devices are running together for one hour than by running both separately for one hour each. Like I said, I’m a big data nerd.

I’d be very interested to hear your story of using a smart meter. Has anybody had the pleasure, yet?

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Spend Money to Save Money: Smart Power Meters

The staff of cockeyed.com (it might just be this one guy named Rob, and sometimes his friends), has a series called “How Much is Inside?” which attempts to figure out how much mundane items should cost. Recently, they tackled the sandwich.

He weighed and measured and inspected every ingredient in your average turkey & cheese, grilled cheese, and peanut butter & jelly. And after some very funny and intelligent writing, he found this:

• Processed turkey sandwich: 93¢
• Grilled cheese sandwich: 48½¢
• Peanut butter and jelly: 64¢

But that’s not all. Rob went all out and created the Sandwich Price Calculator, where you can assemble your own sandwich and see how much it should cost.

Read How Much is Inside a Sandwich?

But seriously

You should also check out Rob’s experiment to see if he could apply for a credit card using a torn-up application.

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The Real Cost of a Sandwich

This is a cliché, but I need my coffee in the mornings. I prefer it iced, except in the very brief winters we have here in Texas, and for a long time, I was a loyal customer of the Starbucks Iced Coffee in a Can.

I’d have one every morning at least four times a week, at a cost of about $2.00 each. They cost more in the convenience stores, but at my former employer they’d have them stocked in the cafeteria downstairs. It was the perfect amount of caffeine, deliciously flavored, to help me self-medicate my A.D.D. And in terms of the Expensive Coffee-Related Drink factor, two dollars is on the low end of the scale.

And then Starbucks stopped selling them. Like Pudding Pops and the Bar None candy bar, my favorite treat was yanked out of my grasp with no alternative presented. Since then, I’ve gone back and forth to iced tea, water, some truly awful “energy+coffee” replacement that Starbucks is now doing, the bottled Frapuccino, and my more normal “iced venti vanilla latté, please.”

None of them have really satisfied in the same way. I just want roughly 8-10 oz. of iced coffee, and I want it to be easy. Well, I found a way (thanks to my wife) to make it easy, and cheap, through this cold-brewed iced coffee recipe at the New York Times.

The recipe makes a measly two drinks, so I just tripled the recipe to make a full week’s worth (give or take a day for the vanilla latté, which is something I like to do for myself on Fridays, anyway). I tried it out for the first time this morning, and it was an instant success. All I had to do was put some ice in a glass, pour in the coffee and go.

There are about three cups’ (the measuring kind) of ground coffee in a one pound bag, which is enough to make the modified recipe three times. That’s eighteen mornings’ worth of iced coffee for $10, presuming you’re buying the expensive ground coffee at Starbucks. Which I will probably continue to do. Nobody’s perfect.

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Iced Coffee Savings

I am a typical American consumer. I buy books, music, and movies for my own entertainment, and the objects spend more time on my shelves than they do in their respective playback devices. I make an exception for music as everything I buy is almost immediately transcoded digitally and transfered to a portable media device. The entertainment industry is thankful for people like me. I don’t even maximize my Netflix subscription, which I seem to have kept despite considering quitting the program over two years ago.

The library should be a money-saving option for people who like reading, watching movies, and otherwise consuming media. I found a calculator that will put into numbers how much money you could save by utilizing a library’s services rather than opting to buy everything you consume. The calculator is designed for library patrons who already use the free services and would like to see how much they are currently saving, but a slight modification in the terminology would focus the calculator on how much you could save by getting to know your friendly neighborhood librarian.

A quick run of the calculation shows that I could save $100 per month in books, movies, and CDs alone. How much could you save by visiting the library rather than the store?

Personal Library Savings Calculator, Winter Haven (Florida) Public Library

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How Much You Can Save By Using a Free Library

According to Alan Greenspan, this is of the first types of spending that consumers give up when a recession is felt personally. When men come to the point at which they need to save more money than usual and decide to cut bank their spending, underwear is at the top of the list of possible reductions. Because underwear is invisible to the public, man apparently have no shame in letting the fabric deteriorate more than they would when a flush bank account would allow them to replace tattered undergarments when necessary.

Furthermore, an increase in underwear purchases could signal the beginning of a recovery. If this is true, it’s bad news for the economy in the next few years. Underwear industry experts are predicting no growth in sales until 2013.

I have not noticed any decline in my own undergarment purchases. My overall spending on clothing has remained strong as I have been replacing some of the clothing I’ve owned for ten years or more, some of which no longer fits anyway. My underwear doesn’t necessarily last as long before I replace the old clothing with something new.

Purchases of women’s underwear does not correlate to the recession. Any time is a good time for buying lingerie.

Have you reduced your clothing purchases, particularly underwear, to save money this past year?

If you can’t answer this question because you don’t know how much you spend on clothing, consider tracking your expenses for a period of time. You might find you have some opportunities to save money across your entire budget.

How your undies track the recession, Michael Brush, MSN Money, May 27, 2009
Photo credit: williamnyk

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Tracking the Economy By Looking at Underwear

When DVDs (and before them, Laserdiscs) were new, I really used to enjoy listening to the commentary tracks. Granted, some were better than others, but I couldn’t seem to get enough of the “behind the scenes” talk, and to hear the cast and crew telling funny stories about each other.

Those don’t interest me as much as they used to, and in fact these days I’m more likely to rent a DVD than buy it, but there is a kind of commentary track that I still enjoy: the kind made by people who weren’t at all involved in making the movie.

The gold standard for these is Rifftrax, from three of the people who made Mystery Science Theater 3000. When it comes to making fun of movies, few people have had anywhere near as much practice. It’s a pretty ingenious system that manages to avoid conflicts with copyright law. Here’s how it works:

• Find a commentary track for a movie that you have a copy of (or want to rent, or buy)
• Pay $3 or $4
• Download the .mp3 file (free of DRM, of course)
• Play the movie and the .mp3 file simultaneously (the commentary will come with instructions for syncing and a guide to help you get back on track if they drift apart)

Here’s an example from the first “Pirates of the Caribbean” movie:

This is a great way to spend a few dollars and make new again some of the movies you probably already have on your shelf. Some of my favorites from Rifftrax go with movies that honestly, nobody should own (Troll 2 comes immediately to mind), but among those you’re likely to have lying around, these are good, too:

• Twilight
• Road House
• 300
• Harry Potter and the Chamber of Secrets
• Willy Wonka and the Chocolate Factory (with guest commentator Neil Patrick Harris)
• The Grudge

Do you know of any other good “alternate commentary” sources? Tell us in the comments!

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Movies are New Again with Fan-made Commentaries

There’s a toll-free number on the back of my driver’s license labeled “Roadside Assistance”. I’d never noticed it before today, when a co-worker was telling me how she used the number to get her tire changed on the dangerously-busy Tollway.

“For free?” I asked. “Of course,” she said.

So I started to wonder if I’d been paying AAA for services that I could be getting for free. I did some Googling and found this:

The toll-free line has been operated by DPS since 1989 for motorists to use when reporting non-life-threatening situations … If a tow truck is ultimately dispatched, the motorist is responsible for any costs incurred. Some cities and agencies do have courtesy patrols and roadside trucks to provide non-towing services and they may be dispatched by the local agencies when appropriate.

Examples of when a motorist should call the Roadside Assistance Hotline include: stranded with car problems, hazardous road conditions, debris in the roadway, suspicious activity at a rest area, and obviously intoxicated or dangerous drivers.

So, to summarize: we want you to call us if you’re having trouble or see something dangerous. We might send help, and it might be free.

My state isn’t the only one with a free (?) State-run roadside assistance program. If part of the recession means not renewing whatever service you use for emergency roadside assistance, check online to see what’s available for free.

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Free Roadside Assistance, Kind of, Sort of

During previous economic downturns, publications have often done stories about saving money by borrowing books, music and movies from the library. This is true not only in recessions, but every time you want to save some money. Libraries aren’t just for research; they have plenty of entertaining material as well.

But of course, they suffered from a problem that many bookstores didn’t: if a book was popular, you’d have a hard time finding a copy. It’s the 21st century now, most things have been digitized, so a perfect copy of anything shouldn’t be hard to find.

Well, with actual books printed on paper, you might still have to wait to get a copy of a popular title, but we recently found that our local library system is partnered with a service that enables it to offer digital downloads to anybody with a library card.

What’s more, it looks like this service, called “Overdrive”, has partnered with many many libraries throughout the world. Search their site to see if your library is offering this sort of thing. And if necessary, pick up a library card. They’re not expensive, I promise.

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Local Libraries Still Innovating

When Wal-Mart announced that it will be lowering its expectations for 2009, CEO Lee Scott believes that this country is experiencing a “fundamental shift in spending,” in which consumers have adopted frugality as a way of life.

There is no fundamental shift. Any widespread frugality we are currently experiencing in the United States is temporary. For better or worse, unfettered consumerism drives the economy. Once the economy begins to improve, people will find new jobs, head back into the stores and car dealerships to buy products they don’t need, buy real estate looking to sell it to someone else later for a higher price, and take vacations. This “fundamental shift” is nothing more than a blip, at least so far.

It’s too early to say whether we’re due for a prolonged recession. But even five years isn’t enough to signify a philosophic adjustment. It would take a generation before we can say that we’re experiencing a fundamental shift in consumerist behavior. We won’t know whether frugality is the norm until the children of today’s shoppers inherit a new approach. Wal-Mart must like the way the idea sounds, however, because the company does want a shift. Rather than blaming the company for low profits, they want analysts to blame the economy.

If there were a fundamental shift towards frugality, Wal-Mart and every other company would have to adjust their marketing strategies to be appropriate in this supposed new era of conscious consumerism. That would require more than just advertising campaign emphasizing the ability to save money through shopping, it would change the way retailers do business. It’s more likely to see Wal-Mart ride out the turbulent times and just wait for consumers to get through their temporary frugal phase.

Wal-Mart CEO sees no quick rebound for US economy

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Wal-Mart: Consumers Have Shifted Fundamentally To Frugality

When the economy is growing and consumer confidence is high, it is common not to think twice about saving money and reducing expenses. If you are saving money every paycheck, investing in a 401(k) or other accounts for retirement, and spending less than you are earning there isn’t much motivation to reduce your expenses further.

I have experienced this first hand. As my personal economy improved through earning more money than I was accustomed to, I allowed my expenses to increase. For example, I moved into a more comfortable (and more expensive) apartment.

It’s hard to find a news story today that doesn’t comment on the current economic decline in the United States. Companies across all industries are not profiting. Many are declaring bankruptcy or laying off employees. With unemployment rising and the country in recession, there is less available spending money in the hands of consumers. Less spending leads to lower profitability again, and the cycle is complete.

Those who have lost jobs in this economy have found it tough to find new jobs at their old salary levels, and many have not found new jobs at all. I would hope that while the economy was prosperous, many families worked to form an emergency fund, but I recognize that many other families did not. For some, the loss of income will thrust a family into an emergency mode in which debt will escalate or savings will be depleted.

In this emergency mode, families and individuals should consider some tactics which may have seemed unnecessary, and in some people’s opinions, cheap, during happier economic times. Reality strikes hard, and desperate circumstances call for desperate measures.

Here are some tips for scrimping and saving through a recession.

1. Keep track of your spending. There is little you can do to cut back your spending if you are not sure how much money is going out the door. When you know that you’re spending less than you earn, you may feel the urge to not worry about every single dollar that escapes your wallet. I use Intuit Quicken but there are other options for tracking your money. Once you know how much you are spending, you can make intelligent decisions about where you can cut back.

2. Reduce your ECRD factor. You may have heard of the Latte Factor™. This infamous concept suggests you stop spending $5.50 on gourmet coffee every morning and replace this expense with a $1.50 basic cup. Saving $4 each workday translates to a savings of $1,000 per year. I’ve written this concept off in the past as a way to focus on small change while ignoring the bigger picture, like making sound decisions about buying real estate, cars, and education.

But your Expensive Coffee-Related Drink (ECRD) is not meant to be taken literally; it may not be a latte for you. The ECRD factor is any recurring expense that can be reduced. Yes, look at your morning drink habit, but also look at your smoking habit, your cable bill, your tendency to dine out, and your choices in the grocery store. Generic brands and store brands for certain products can be good substitutions.

Without much effort, I saved $360 a year by optimizing my cell phone plan and have the same service.

3. Revisit your budget. For those who don’t have a budget, this suggestion should be “Visit your budget.” When your spending is naturally well below your income and you’ve been saving comfortably, budgets are less important. I’ve never been a fan of budgets in the first place, but I’ve used them at certain times in my life when my financial situation warranted. In an economic recession, a budget will help you stay on track. This is something you can control, and managing what is within your control is more worthwhile than worrying about things you can’t control, such as the financial health of the large corporation that employs you.

If you’ve tracked your spending, and cut back on a few reducible expenses, consider formalizing your budget by writing down what you expect to spend each month in certain categories. Here are my thoughts about budgeting and an example budget I established for 2008.

As you budget, consider some of the tenets of frugal living. Use filtered tap water rather than buying water bottles. Use vinegar mixtures for house cleaning rather than buying chemicals. Cook your own food rather than dining out. Don’t drive a car as often as you do. Want to go farther? Eliminate an extra telephone plan. Downsize your car or truck. Downsize your house.

Prevent the need for panic next time

“An ounce of prevention is worth a pound of cure,” according to Benjamin Franklin. Alternatively, “The best defense is a good offense.” Whatever your adage, take advantage of the more fruitful economic times. When you are fully employed and have excess income, this is an opportunity to shore up your emergency fund, pay off debt faster, and invest for the future. Historically, economies tend to operate in cycles, oscillating between periods of exuberance and recession. Level out the volatility by planning for the downs during the ups and refraining from getting carried away in bubbles.

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

3 Major Ways to Scrimp and Save in an Economic Recession

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?

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

How I Could Find $10,000 Per Year if Necessary

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

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The Frugal Lifestyle: Are We Missing Out on Life?

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.

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Living Paycheck to Paycheck (On Purpose)

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.

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My Favorite Source for Movies? The Library

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]

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Case Study: Multi-Millionaire Made on $11/hr Job

Here is the second couple featured by CNN Money in their series about five couples living on an income of $46,000 a year. Michael Thibault is an insurance claims adjuster and Lisa Thibault works part-time. Together, they may earn about $60,000 this year in Indianapolis, Indiana. That seems to put them at an income significantly higher than the rest in CNN’s series, but this couple has three children.

They had to apply for food assistance for their children. The Thibaults are earning more than the median household in the United States, but still can’t afford to feed their children.

With a family of three and fluctuations in their employment status, the couple spends about $1,700 per month for full insurance and medical visits.

As Hazzard noted, 42% of their income is spent on health care. To me, this seems high, even for a family with three children, but I have no personal experience. Perhaps this will stabilize as the children get a little older. Their medical issues are not entirely clear from their profile.

Regardless of their struggles, the couple still tithes to their church an undisclosed amount. The article says they have asked for public assistance in order to pay for food; I wonder how much they receive in assistance and how much they give to their church.

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Five Couples Living on $46k, Number 2: The Thibaults

CNN is featuring five couples living on about $46,000 a year. How do they do it? The first couple is Matt and Ginger Ogle. Matt is a public school teacher and speech coach making most of the bread, and Ginger adds a couple thousand a year as as part-time assistant speech coach.

The Ogles manage fairly well on their household income but they are having trouble getting ahead. “It’s very difficult to save,” said Ginger. “I keep a mortgage payment in the bank…If there are big expenses that aren’t expected we use the credit card.”

In Salem, Oregon, they were able to find a home that fits their budget. If they were to transplant to New York City, Matt would earn a $5,000 to $10,000 raise, but Ginger wouldn’t be earning much more.

This hypothetical salary increase will definitely not making up for the cost of living difference between Salem, Oregon and New York City. To maintain their lifestyle, the couple would need a salary of $85,000.

It sounds like the Ogles are just getting by now. They don’t have an emergency fund larger than one mortgage payment and sometimes need to put unexpected big expenses on a credit card. They also want to start planning to have children. They might have to find other ways to cut back in order to take on the expenses of having kids.

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Five Couples Living on $46k, Number 1: The Ogles

A few months ago, television watchers like myself were bombarded by commercials featuring a young man attempting to “live” out of his car for a few days. However, this guy has been doing it since July 2005. Andy Bussell lives out of his pickup truck, sleeping in the back. He wakes up, showers at the university gym, attends classes, then goes to work at the Apple Store. To keep himself from going insane, he is a yoga-practicing, guitar-playing rock climber. Always pushing him towards insanity are the voluntary living conditions:

What he misses most are a kitchen and a bathroom. To deal with the former, he buys food such as yogurt and fruit in small quantities; for as regards the latter, he takes advantage of public facilities. On occasion, he has resorted to employing an empty Gatorade bottle.

Andy decided to lean towards the simpler life when his credit card debt kept piling up. Now that he has been able to save some money, his debt is almost all paid off.

This adventure takes place in California; living in the Northeast, you would need to leave the heat on in order to survive in your car. The frequent gasoline fill-ups would negate any savings you’d manage to keep. [via Consumerist]

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Extreme Frugality: Living Out of Your Car