Adopting a frugal lifestyle has many short- and long-term benefits - you can dig yourself out of debt, save for that emergency fund, improve your credit score and put a larger down payment on your next house.
But one of the biggest pros has more to do with your pillow than your wallet, says Donna Freedman.
"You sleep a lot better!" she says. "Seriously: You don't lie awake wondering how to pay the rent or put food on the table."
And Donna should know. The blogger got her start writing about personal finance on guest post for MSN Money titled "Surviving (and Thriving) on $12,000 a Year."
In addition to the better REM cycle, Donna says pinching pennies might also mean you can buy a vehicle with cash rather than financing, fund your retirement and help your kids pay for school.
The staff writer at Money Talks News and founder of Surviving and Thriving recently checked in with us to share a variety of tips and takes on the world of money management. Read on to learn how you, too, can survive and thrive:
Can you tell us about Surviving and Thriving...when and why did you start your site?
I started the site as my playground for words on May 1, 2010. At that time I was writing full time for MSN Money and was a staff writer at Get Rich Slowly, and also freelancing for magazines from time to time. You'd think that would be enough, but I wanted a place where I could write about all the stuff I couldn't get on MSN or GRS.
Some days I write about money, some days I write about midlife. I might also write about the day I spent driving Dr. Demento around town, or report live from the Talkeetna Bachelors Auction and Wilderness Woman Competition. Since I believe that personal finance is where you find it, I also turn out articles like "8 Personal Finance Lessons from 'Gotterdammerung'." And sometimes I just get pissed off and write articles like "Who Would Jesus Strafe?" or "Think You're Broke? You're Probably Not."
Like I said: playground!
What's your background in personal finance? How did you become interested in writing about it?
Backed into it, utterly. I went broke during a protracted divorce; at that time I also decided to return to college to earn the degree I couldn't get as a young woman. A former newspaper colleague (Liz Weston) suggested I do a guest post. "Surviving (and Thriving) on $12,000 a Year" got more response than anything else MSN Money published that year. The editor invited me to write a bunch of other articles and ultimately hired me to start the Smart Spending blog, back in September 2007. I was the only writer, producing three articles a week; Karen Datko, now also at Money Talks News, edited me and dealt with the blog partners.
The timing was pretty good because the recession started with a bang not long thereafter. A whole lotta shell-shocked people were looking for ways to make ends meet - my specialty! That came from growing up fairly broke, being an unwed mom and then, as noted, going broke during a divorce and deciding to go back to college. (Incidentally, I didn't pay a dime for my education. Scholarships and grants, baby! I would have stopped after the first year if I'd had to borrow money, since I simply couldn't picture myself graduating at age 52 with big debt.)
In spring 2009 I was switched to a biweekly personal finance column. Then in February 2012 I was asked to start a second blog, Frugal Nation; at the end of March 2013 Frugal Nation went dark and I was back where I started, at the Smart Spending blog. Six months later, on Sept. 11 (could they have chosen a better day, do you think?) MSN Money fired all its writers simultaneously.
I lined up the Money Talks News job within a couple of hours and have been contributing to other sites as well. But I've cut back on writing a bit, just to be able to enjoy life. (And I do!)
Over the years, what have been some of the most useful money-saving tips you've come across?
Track your spending. Sorry to trot out that old warhorse, but it's vital. Time and again I've talked with people who were shocked,shocked to learn that they were spending one-third of their take-home pay on meals out, or who had no idea that the reason they couldn't get ahead is because they were piddling away so much money on non-essentials. Find out where your money is going so that you'll be able to redirect it where you'd like it to go.
Save an emergency fund. Yet another old chestnut, but it's vital. As Liz Weston points out, even a $500 padding can help with many common issues (e.g., car repair or minor illness). When people who say they can't save one, I always ask (gently), "Then what is your plan for paying off the next emergency that arises? Because that will happen."
Spend intentionally. I call it a "frugal filter," this asking of questions about each potential purchase. Do you really need it? Do you already have something that might work in its place? If not, could you borrow it, find it on Freecycle or look for it in thrift stores or yard sales? Will having it make enough of a difference in your life that it's worth the expense? Note: I am not saying it's wrong to spend money. You can spend it all on Reese's Pieces and pull tabs if that's what you really want. Just do it mindfully.
Save for retirement. For a whole bunch of people, the only retirement they'll get is the retirement they set in motion and fund consistently. Start when you're young, even if it's only $25 a week, because your new best friend Compound Interest can't wait to start growing your wealth.
What are some of your favorite resources for reading about personal finance and/or learning how you can manage your own money better?
What do you think are the most common concerns individuals and families have about money today?
The rising costs of basic necessities. This one scares me to death on behalf of people already living on the ragged edge. If you've just about balanced the books and the price of gasoline or heating oil - or milk and bread - jumps up, you're hosed.
College costs. I think too many people are still playing by the old rules, i.e., "Apply to your dream school because everydiv takes out loans - it's good debt!" For the love of heaven, please go to the school you can afford rather than the one you wish you could attend. Otherwise you're setting yourself up for a miserable decade (or more) of trying to keep up with loan payments while still wanting to have a life. This is especially true if you can get only part-time work after graduation.
Identity theft/financial fraud. During a Tweetchat last week, someone mentioned that her debit card was hacked and $3,500 disappeared from her account. It took a long time for the issue to be resolved, but she still had to meet basic expenses during that period. Scary. And identity theft can dog you for years and years and can really do a number on your credit score as well as your peace of mind.
What do you think are the biggest misconceptions about living frugally?
That it's joyless deprivation 24/7. Not true! My life partner and I have a wonderful life together, egging each other on to see who can produce "stirring tales of thrift." Both of us are willing to spend on things that matter: our families, season tickets to the symphony and opera, charitable donations, a piano tuning (him), a massage (me). And therein lies my oft-repeated frugal mantra: I save where I can so I can spend where I want.
Please note the difference between frugality and cheapness. Cheap behavior adversely affects the quality of life for you and/or your loved ones. Frugality means you're getting the most bang for the buck, which means you can actually afford niceties like those symphony tickets or that massage. Neither is technically necessary - but because we use our money carefully, we can have whatever we want.
Which brings me to the best part of frugality: Once you get control of your finances and start spending mindfully, you may find that you want less than you once did. You're not chasing your tail, financially speaking, always looking for the Next Big Thing or trying to buy your way out of boredom or depression. You're making every dollar work for you - and making it work hard - so that your life can be full and satisfying. Right now I have everything I need and most of what I want, and that is a blessed place to be.
For someone who's had bad spending habits in the past, what tips can you offer on easing into a more frugal lifestyle?
Again, track your spending. Budgeting software like Mint.com will help you find out where your money is going. That little pie chart that shows almost half your income is going toward meals out and entertainment? Great virtual splash of cold water in the face. Not that budgeting should be seen as punishment, mind you. It's actually quite freeing, because you know what you can afford and, with luck, you'll be watching your money grow toward future goals.
Start slowly. Implement one or two tactics at a time. Too many changes too fast can lead to a feeling of deprivation and a fall off the frugal wagon.
Consider hybrid approaches. For example, if you're unwilling to take public transit, perhaps you can carpool with a coworker or neighbor; this at least reduces the cost. Can't seem to do without your restaurant lunches? Look for coupons and other deals on social media and in the famous Val-Pak blue envelope; that way you're at least spending less than you had been. If you're a really social person who likes to stop for drinks after work, use apps like BiteHunter to find places offering drink specials and/or free appetizers (which could become your dinner).
Get creative. That is, find ways to meet your needs other than simply heaving dollars at them. If you're not using the pricey gym, drop the membership and find a workout buddy who will join you for walks, runs or weightlifting at the no-frills gym or the YMCA. Get together with a friend to do batch cooking, using recipes that create some of the flavors of your favorite meals out (Thai, Italian, whatever). Instead of going out every weekend, invite people over once or twice a month for movies, games or whatever you like to do, and have them bring their own bottles. As the host, you provide mixers and a few light snacks - whose total costs will likely be less than the tab for a single cocktail at some clubs.
What advice do you have on creating a family budget? How often should families/couples sit down to discuss finances? What numbers should we be looking at?
I've heard that a monthly "money date" works well. Make it like a real date, e.g., a glass of wine to start and some pleasant conversation about anything but money. Then segue into talking about your shared goals, say, or how the two of you coped with the unexpected setback of the month. Visit those goals, e.g., "We're down another $500 on our consumer debt, yay us!" or "The car needed work so we weren't able to pay extra against the mortgage - but on the bright side we paid cash vs. putting the repair bill on a credit card."
As for creating the family budget, definitely use software like Mint.com because it shows you how to make your money work for you. When setting up the budget categories, I would advise at least one shared goal ("next car paid for in cash," "larger down payment on a home three years from now") - and I would urge you to include a personal splurge fund for each adult. Even if it's only $10 a week, that's money you can use for whatever you want, without answering to your partner. You'd be amazed how much splurge you can buy for $10 a week (especially if you use a coupon!).
How can parents help better prepare their children when it comes to managing money? What advice can you offer on how to include them in family finance discussions? Why is it important to do this?
Funny you should ask: I just did an article for Consumers Digest called "Life Lessons: How to Raise Money-Smart Kids." It will appear in the August issue.
Today's tykes are affected by a buy-buy-buy culture, and there have never been so many ways to spend money. College has gotten far more expensive that many families can afford out of pocket; the average debt on graduation is $29,400. Your kid needs to build a strong credit score because it will affect the interest rate he pays and may even influence whether he can get a job or rent an apartment. (Scary, huh? But there's more! Read the article when it comes out.)
A 2013 study from Cambridge University indicates that money habits, including the ability to defer gratification and plan ahead, are formed before age seven. You must teach your kids about personal finance, starting as early as age two or three. I strongly recommend Mary Hunt's book Raising Financially Confident Kids, which is full of strategies.
Kids need to understand that their parents earn only X dollars and that certain essentials plus future goals must all be funded by that money. You're not being sooooo mean when you won't buy the latest game system - you're thinking that those dollars would be better spent in, say, a college fund or in extra payments against the mortgage. That said, let them brainstorm ways to make fun things happen; for example, if you want to take a family vacation, perhaps the kids can help come up with ways to trim expenses or, yes, chip in with proceeds from a lemonade stand or a yard sale.
I hire my great-nephews (ages 7 and 12) to do chores so that they can have spending money. (But I also expect them to do some things without pay, because family members help one another.) I remind them that you can get working papers at age 14 here in Alaska, so they should look into getting jobs in order to save for college. And I've also told them that if they open Roth IRAs I'll match whatever they deposit; it can be as little as $10 a week, but it will get them in the habit of saving.
Of course, there's the chance that you'll do everything right and the kids will crash and burn financially. After that they may (or may not) decide to seek a more sustainable lifestyle. All you can do is your level best and hope they'll figure it out eventually.