These past few years we have seen a high level of unemployment, countless numbers of foreclosures, and many American citizens hitting hard times. While many people are learning how to make ends meet, there can often be a struggle with how to have fun and live frugally at the same time. Since many people define frugally different, I think about the term frugality by using phrases such as 'economical', 'avoiding waste', and 'careful and diligent in the use of resources'. Being frugal is about making good business decisions rather than the popular image of being cheap. If you are thinking about entering the frugal life, here are three ways to begin thinking the right way about smart money decisions.
- Don't be the first adopter of something 'new' - One really easy way to blow a bunch of money is have to be the first to own a new product when it hits the market place. A good example of this is to look at the evolutions of the televisions over the past decade. Literally every few months you see a new version with higher clarity in the picture screen, more bells and whistles, and recently even 3D over the past couple of years. Truth be told, most of you don't use hardly any of the hundreds of different programming and screen features on your TV's, and my guess is not many are sitting home every Friday night with 3D glasses in your living room. Recently, I saw ads for a 40 inch flat screen TV for less than $300 on Black Friday. Just a few years ago you couldn't touch an HDTV for less than a grand. Being a new adopter will ultimately cost you a lot of money over the long run since companies quickly figure out their mistakes and bring out versions two, three, and four right down the road. Let the technology companies work out the kinks and then buy the new model or better yet get a steal on the old model which will be as good as 90% of the newest model on the market place. This is one way to become more frugal.
- Make lists - Generally, you wouldn't put the term frugal shopper and the store Whole Foods in the same sentence. Since everyone has a certain income and budget, you might shop at a brand name grocery store, a Trader Joe's, or a place like Whole Foods. No matter where you shop, one smart money step to become more frugal is to simply make a list of what you need before you start shopping. For less than five dollars, you can even get a pad of a pre-made list for things like grocery shopping, clothes shopping, or just a general laundry list. People who waste money tend to make unnecessary purchases because the brain is largely irrational with its decision making. Since we are predictably irrational with the way we make decisions, places like grocery stores set up their aisles and specials to ensure they will capture our lack of planning. While I make sure to sample every free dish in Whole Foods when I go there, I most certainly can still be frugal within that store by buying only what I need and capitalizing on the deals they have within that store.
- Make your own what the term 'the best' means - No matter who you are, it always feels good from an ego perspective to own 'the best' of something. In the world of diamonds, people have a little strut in their step when they buy something from Tiffany's because they feel it is the best brand when it comes to diamonds. Whether it is or it isn't is really in the eye of the beholder. It's important before you start to buy something that you can classify from an ego perspective what the best means to you. If you define best from a public and media perspective, it can be a real dent in how you spend your money and make it difficult to live a more frugal life. If you make yourself a good framework of the word best, you can often save money and still feel like you have the best. A good example of this is owning an automobile. We own an old Volvo and I think it is the best because Volvo is the safest in my mind for your family. There may be other car companies that claim they are the safest, but that is how I have defined it in my mind. Since we don't need the latest and greatest model and Volvo's last for a long time, we can buy a used car that is 2 to 4 years old and still have the best of both worlds. It's important to get these definitions in your head so you don't always feel like you have to keep up with Paris Hilton or your neighbors down the road.
If you implement these three ways of thinking, this could help you transition into living a more frugal life without feeling like you are being cheap. Being frugal is about making smart money move decisions, and you can still have the best in life. Contact Ted Jenkin at www.oxygenfinancial.net to request a free consultation to learn how to become more frugal with your money.
Written by:
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder of oXYGen Financial, Inc
Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice and Smart Money Moves to the X and Y Generation.
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