Many times, when I mention the term frugal living to people, they give me a look like, “Oh, you’re a cheapskate then.” This can’t be further from the truth. I don’t consider myself a cheapskate at all. I have fun spending as little money as possible and getting the most out of life I can.
I spend good money on a lot of things. I’m writing this blog post on a Mac Air. This wasn’t a cheap computer. But, I shopped around and got a good deal on a beautiful machine. It was fun hunting for the best deal.
I had a sense of victory when I handed over my money and took my computer home. People tell me I could have bought something much cheaper which will do the same thing. I don’t think so. It does everything I want to do with a computer, I love the design, and I wanted one. I shopped around and hunted for the deal, and I felt great about the purchase because saving money is fun.
Frugal Living Tip#1; Cheaper doesn’t always mean it’s a better buy.
The best way to illustrate this is to make the statement that time is the most valuable asset you have. As society and our current lifestyles seem to get faster and faster all the time, the time we have to waste gets less and less.
If we have an opportunity to buy something cheap, but the time wasted to do what we need with it is substantial, it may not be cheap after all. Let’s say I can buy a car cheap. I get the car and, since I’m pretty handy with cars, I spend a ton of time fixing it and keeping it going so I can get to work.
The traditional mindset says, “But I got an excellent deal on it.”. But, let’s look at it from a different angle. The time I spent fixing and maintaining it is time I couldn’t use to do something else. In the economics world, we call this opportunity cost. We need to put a dollar amount on our time to fix and maintain it.
If we could spend just a little more and get something that runs continuously without too much time involved, it would be a better deal. If you could spend that extra time with a side hustle making you money, wouldn’t that seem even more worth it? If our ultimate life reboot goal is to spend more time with our family, wouldn’t paying a little more for a car get you closer to spending more time with our family?
The opportunity cost you attach to good deals needs to align with your ultimate goals in life as well as having a pure dollar attached. Here is the other end of the good deal spectrum. If we buy a new car thinking the opportunity cost saved by getting a warranty and reliability would make a new car a better deal, we would be wrong in the other direction.
By the time, we factor in how much interest we pay as well as how much depreciation is in a new car sale; new cars are not good deals either. The sweet spot will be somewhere in the middle. That is where the game aspect comes in. But, we’ll get into the game aspect in a little while.
Frugal Living Tip #2; Always have an escape plan.
When looking for good deals, always make sure you have an escape plan. I look at escape plans as having the ability to walk away from a deal. And, everything will still work out in your favor when a new deal comes along. If your washer or dryer breaks down, and you live next door to a laundromat. Your escape plan is to do your laundry at the laundromat for a couple of days until you can find a smokin’ deal on a new washer and dryer.
A side note on this one is not to be afraid to negotiate hard when shopping for more massive home purchases like washers and dryers. My wife has earned the moniker ‘The Negotiator.’ I sometimes feel bad for the salesperson she works with on our appliance deals. She grew up the daughter of a successful used car dealership owner. Dad taught her well when negotiating deals. She’s so good; sometimes it makes me queasy. I can’t watch.
But, she doesn’t leave a dollar on the table if she can help it. We’ve already gone to buy a washer and dryer, and on the way home, she’s wondering if she could have gotten even ten dollars more off the price. She can be ruthless when it comes to getting the best deal. Anyway, let’s get back to the escape plan.
This is where having a good chunk of nest egg money comes into play. Not being financially pinched in situations where you will have to pay a higher price is where you want to be. A lot of sales tactics and apparent deals are focused on squeezing higher prices out of people who don’t have an escape plan.
Unfortunately, we see this crop up in natural disaster areas. When a disaster hits or is about to hit, stores or individuals raise their prices on products because specific products will be in high demand. In this case, if someone has enough financial means in reserve to say ‘no’ they can save themselves a lot of money. Always keep a nest egg on hand and concentrate on your escape plan.
Frugal Living Tip #3; Always have the power when an opportunity presents itself.
Having power when you need it is another advantage of having a nest egg of cash. I know a real estate investor who religiously buys in cash. When a quick deal comes along, you need to have the cash on hand to get the best deal. If someone has something for sale, many times you can offer a low bid and pay in cash to get the deal done quickly. If you are buying something and the seller needs cash right away, you need to have the power to make an extremely lowball offer and pay in cash.
To put yourself in the best position possible to make the best deal, always make sure you have cash on hand. This works exceptionally well for cars. Many people buy new cars only to find out in a couple of months to a year later; that the car has depreciated to the point where they owe more than it’s worth. We call this ‘being upside down in the car.’ I did tell you my in-laws were used-car people, right?
Sometimes these people have some cash but will be willing to sell other assets to get to the point of having the money to get their car note paid off. Other cars, boats, and motorcycles, can all be things you can get an excellent deal on if you have the cash in your pocket and the ability to negotiate.
Frugal Living Tip #4; Make a game out of the hunt.
Make a game out of frugal living. How can you find the best deals, negotiate the best deals, and live the best life using the least amount of money? The game is where the fun comes in. If frugal living seems like torture, you probably won’t stick to it for long, and some may fall back into the deep trap of going into debt. To make something sustainable, it needs to be fun or need to have more willpower than most people in the world.
I know when I go to tackle a new adventure I need to find ways to make it fun. This is why most diet and exercise routines don’t last too long. When they become more like a voluntary job … no more diet. I don’t want to imply that frugal living is entirely ‘living without.’ My thought about frugal living is having everything you want while still living within your means. Have you always dreamed of having a fancy car? I’m saying to go out and make it happen within your budget and make a game out of getting one as cheap as possible. The better angle or deal you can put together, the better the win at the game of frugal living.
Frugal Living Tip #5; Make the reward, money in your pocket.
Well, every game has to have a winning aspect to it. The money you save with frugal living will be your prize. Set a goal for yourself to achieve. Let’s say you are doing a small remodeling or decorating project in your house. If you set a budget of $1,000 and you come in at $800, that is a win. If you come in at $500, it is a big win. Try and make the adventure as much about the remodeling job as it is to have a stunning room in your house. At this point, every purchase you make toward getting that room done will end up being a challenge in the game.
When I’m doing a project, every dollar I can save without sacrificing usable quality is a win for me. I never used to be as frugal as I am. I used to spend money without a care in the world. After buckling down and paying off some debt, I found ways to live well below my means and still get everything I wanted. Saving money has become so much fun … I love playing the game.
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Talk to you soon,
Kevin