Frugal Living 
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Remember to Pinch Pounds Too

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A while back I discussed how you could save some cash by cutting just one cup of coffee a week and by brownbagging it just one day a week. That’s when, in chatting with Paid Twice, she joking said “yeah… all these years of home brew coffee and packing lunches – explains why we’re broke. :) ” She said it tongue in cheek but it’s a legitimate concern. So many people budget to a penny, diligently track their expenses, yet find themselves behind the eight ball and I suspect it has to do with expenses on the other side of the spectrum – the big ticket items. (I suspect this because that’s what happened to me!)

With respect to frugality, I see the world in two different categories. The first category is for those big ticket items where savings can be significant. Big ticket items are marked by lower frequency but high savings potential, such as a car. The second category are those smaller day to day expenses where there is a much higher frequency of expenses but lower potential for savings. Many times we focus on the small items because we deal with them every day but get panicky or pressured when we start talking major expenses, but those big expenses are the ones where the big savings are too.

Unfortunately, big ticket items aren’t things you can change overnight and they also tend to be more stressful. I recognize that. The two big ticket items most individuals have to pay for are housing, either renting or buying, and a mode of transportation, usually a car. The two are generally marked with higher levels of stress (what’s more stressful, buying a house or making your own detergent? duh!) in part because of the higher dollar values but also because of time constraints. With housing, you’re usually under the gun because you have to move by a certain date according to your lease or some other agreement. With a car, you’re usually under the gun because you need a car ASAP and the whole car sales business is a pressure cooker anyway.

So, how do you counter it? Remove the pressure and reduce those expenses as best as possible.

Remove the Pressure

Sales Pressure: With either a car or a house, there will always be a measure of sales pressure on the part of the agent or the salesperson. It’ll be far worse with a car dealership salesperson because they know they might not get you the next time in so they want you to buy now. Combat this by doing one thing… never sign anything the first time you walk into a place. If you meant to go test drive a bunch of cars, don’t buy that day. Always sleep on a decision and always get a second and third opinion from people you believe are both trustworthy and knowledgeable. You can save yourself from making plenty of bad decisions if you sleep on it and ask for second-party opinions.

Housing: You know when your lease will expire, so start your housing search as early as possible. If you’re buying, start it several months in advance of your move. If you’re going to rent again from another place, start a couple months in advance of your move. Chances are, if you’re renting, even if you can’t find another place to live, you can always go month-to-month on your lease and pay a small premium. Paying an extra hundred dollars a month for one month is far better than rushing into another lease or even a 30 year mortgage!

Car: What’s the worst thing that can happen if you don’t buy a car and your car is kaput? At best, you’re inconveniencing yourself and perhaps friends and family that agree to drive you around. At worst, you rent a car at about thirty or forty bucks a day until you settle on a car. What’s worse, overpaying a few thousand on a car or shelling out for a rental? There is no pressure to buy a car as soon as possible.

Reduce the Costs

The topic of how to reduce the costs of housing and a car, at the tactical level, is way too complex to go into in a few paragraphs here. If you want to know the best tactics for negotiating down the price of a car or a home/rental, you can find plenty of information online . I will however say a few words about how I view homes and cars from a philosophical level and I’m interested in hearing your opinion as well.

Housing: When I rented, I saw my apartment as a temporary location for, at most, a few years. Since it was temporary and I wasn’t building a long term solution, I tried to spend as little as possible on my housing. My end game was to buy a house, not rent a swank apartment, so I never painted or put up pictures. The point was to pay as little as possible so that I could put as much as possible towards a down-payment. To this end, I spent two years renting, always had the same roommate, and we tried to keep costs down as low as possible – I never paid more than $600 a month for rent. I’ve know people who have spent $1200 to $1500 on single bedroom or studio apartments because they wanted someplace nice. That’s $600 to $900 a month that person can’t put towards something else (which is perfectly alright, we all have our own tastes). However, if you are looking to save money, you have to make a lot of detergent to recover $600-$900 a month.

Car: My car gets me from A-to-B and I want it to be affordable, reliable, and fuel efficient. I know some people like to buy cars because it projects a certain image, they want to be able to drive their co-workers or bosses around in a nice ride, but luckily I never worked in industries where that mattered or could affect my future job growth.

Total Cost Considerations: This post is getting a little long winded but I wanted to throw in one last point about total cost. When you sign up for a house or a car, you’re signing up for years and years. A lease is often for twelve months minimum. When you make these purchases, remember to consider the monthly costs as well as the initial costs.

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5 Responses to “Remember to Pinch Pounds Too”

  1. Bill says:

    Great article!

    This really opened my eyes. I see how being frugal about everyday expenses isn’t enough. You really need to look at your whole money outlay, including big ticket expenses.

    I’ve cut my everyday monthly expenses down pretty significantly. But every couple of months I still feel a cash crunch when my credit card bills come for the big purchases I made.

    So, thanks for bringing this front and center. It’s something I’m definitely going to take action on.

    Great blog. Keep posting.
    Bill

  2. Glenn Lasher says:

    I like my car. It’s not flashy, not new, very efficient (confirmed 30 MPG) and still manages to look nice for the most part (some of the paint is starting to look a little funky, but for the most part it is still nice). The car is a 1999 Chevy Prizm, black.

    I think that the fact that the car is black is a major contributing factor to its aesthetics. It looks sleek, but, as I say, not flashy. It is a tad small, and is very low maintenance.

    For housing, I chose to live in a small (or maybe mid-sized) city (Schenectady, NY). Housing is cheap, and I bought a 90-year-old house on three city lots, in move-in condition, with a pool, for less than $100K in 2003. The only gotcha has been the city property taxes. On the other hand, those have gone for two years in a row now. I have been making a steady stream of improvements to the property, which will certainly raise its value, but it is not the point. We bought it because it is a nice place to live and inexpensive.

  3. Jon says:

    I can relate to feeling some frustration with the advice to cut down on various “small ticket” expenses, as my wife and I have never gotten into those habits in the first place. I’ve packed my own lunch for at least 13 years, have a mocha perhaps once a month, go out to dinner or movies rarely, buy my clothes on the Target clearance rack or in thrift stores, and so forth.
    The only debt I have is my mortgage, which isn’t out of line. The little indulgences were “low hanging fruit” for me, and I’d just like to find some way to save major amounts of money on those expenses one doesn’t seem to be able to avoid, like utilities, without investing major dollars in new appliances or home remodeling.

  4. dj says:

    I can’t wait for the day you can order a mainstream, ordinary car from the web and either have it delivered or pick it up. I think you can do something like that already at CarMax. I’d do my research on a car (Edmunds) – no flash, good mileage, safe, and then find the best total price. I wouldn’t limit the search to just my area. I would never just walk into a dealership, that’s just asking for trouble. For a house, I’d try buyowner.com. And do a lot of research in online databases first (property taxes, environmental, safety), and reference Nolo Press books. I would stay away from as many sales (middleware) people as possible.

    A house has so many more expenses than just the purchase price. The property tax and insurance. Appliances. Then repairs – roof, furnace, water heater, plumbing, electrical, etc. Then maintance/yard/appliances, which require tools. I use to have a large yard and the neighbors had similar yards. We pitched in and bought one large lawnmover and shared it. That could be done with snowblowers, edgers, and other tools :-) , even plants. If your neighbor has Hostas, and you have something they could use, exchange a plant.

    PS: Great tips on your blog. Lots of commonsense. :-)

  5. chb says:

    as for housing, location counts a lot too. In the city we’re planning on moving to, $1200 for an older, smaller, one bedroom or studio in a questionable neighborhood that’s a 10+ minute walk to public transpo (which probably doesn’t include any laundry, utilities, or parking spot) is considered an awesome deal. I’m going to fight for less cost and more quality, but everyone I know rolls their eyes when I mention my housing goals.

    but i’ve made the decision that I’d rather be closer to family than 1000+ miles away paying just $675 for a perfect 2 bed/2 bath 900 sq ft apt.


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