Understanding and Controlling Your Finances
by Marshall Brain
This article is one of a series of financial articles and calculators
entitled "Understanding and Controlling Your Finances". The
Table of Contents contains a complete list of all of the articles in the series.
fru'-gal, a. [OFr. frugal, from L. frugalis, economical, temperate]
1. economical; not spending freely or unnecessarily; saving; sparing; not profuse or
- Webster's Dictionary
Frugality is an old-fashioned concept. When you hear the
word you might think of solid New Englanders from the 1800's.
But the word has many applications in today's world. For example,
buying items on sale and using coupons are both marks of frugality.
Perhaps a better, more modern way to talk about it
would be to call it creative saving. That's all it is.
Frugality is the attempt to save money when you can, rather than spending it.
Why might you want to be frugal? As discussed in the article entitled
"Incentives", most people start down the road of creative
saving because there is something they would like to have. They have set
a financial priority or goal, and they are willing to save in other areas in order
to reach the financial goal faster. The goal might be something as immediate
as a new bedroom set, or as long term as early retirement.
Other people begin
down the road to frugality when they realize that Ben Franklin was wrong: A
penny saved is not a penny earned. In fact, a penny saved is today's highly taxed
environment is something like 1.4 pennies earned. Here is an example. Let's say that you want
to buy a canoe that costs $1,000. If you go out and earn the money to buy it
by taking on an extra weekend job, you are actually going to have to earn something
like $1,400 to buy the canoe. The extra $400 covers federal, state and FICA taxes.
If you buy that same canoe by saving in other areas, then you only have to save $1,000
because you have already paid the taxes on that money.
In addition, your weekends remain free for relaxation. Frugality is a great way
to "earn" money.
In many cases it is easier to save money than it is to make more. For example,
if you are home taking care of three young children while your husband is at work,
it is probably not economical for you to get a job. The cost of child care and
commuting can burn off all of the extra money a second wage-earner generates. In many cases
a spouse's job actually costs a family money. Plus it can add an incredible amount of
stress to your family life. In that case, instead of earning money focus on
saving money. Make meals from scratch rather than buying prepared foods.
Cut coupons. Grow a garden. You may find that you can "make" just as
much money with savings as you would with a job, and enjoy life more in the
We have identified four different classes of frugality. By reading the list below
you can determine where you are on the frugality scale, and you can get some
new saving ideas from the lists in each category. Here are the categories:
The sections below give you examples of each of these types of frugality.
- Non-frugality - No attempt is made to save money.
- Obvious frugality - When a method of frugality is obvious to the
casual observer, it is called obvious frugality
- Serious frugality - Serious frugality involves the use of special
knowledge or research that is perhaps not widely available to save money
- Aggressive frugality - Aggressive frugality involves extra effort and
A non-frugal person is someone who lives his life without regard to prices.
When a non-frugal person wants something, he buys it and that is the end of the
story. There are very few people in America who are strictly non-frugal, but probably
half of the people live a majority of their lives in this way.
Obvious frugality involves very little effort. You simply pay minor attention to
the advertising messages swirling all around you and you become aware that many
of the messages are offering you opportunites to be frugal. The most common
examples of obvious frugality include the following:
- Sales - A sale is a sale. If you are looking to buy a new chain saw
and a store is offering a 20% sale on the one you want, it would be silly to
pay full price.
- Coupons - Most Sunday papers are full of coupons (and sales for that matter). Using
one 20 cent coupon can seem pointless, but if you have ten 20 cent coupons and five
50 cent coupons and two $1 coupons, you are saving $5.50. Do that every week and it adds up
to almost $300.
- Discount Outlets - Many items can be bought at discount outlets at lower price.
Even a 99 cent movie falls into this category. Keep these stores in mind whenever
you make a purchase.
- Calling in off-peak hours - Everyone knows that you pay less for a long distance
phone call at night, but not that many people take advantage of it. Call your long
distance carrier and find out when the rates change.
- Special credit cards - Many credit cards now give you free incentives. Discover
cards pay you money for each dollar you spend. Ford and GM give you discounts on new
cars. Some gas stations give you free gas. Shop around and find a rebate card that
suits your lifestyle. There is no reason to use a card that does not give you some
sort of rebate.
Serious frugality requires extra effort on your part. You have to go out
of your way or think long-term to earn these discounts, but the savings can
- Comparison shopping - Any time you buy something significant (anything over $50),
call around and see who has the best price. Many stores (especially discount appliance
and eletronics stores) have a "Lowest Price Guarantee". By pitting one
retailer against another you can get the price even lower.
- Power discounts - Many power companies support programs to reduce peak demand.
For example, our power company (Carolina Power and Light) has two programs. In the first,
the power company installs a receiver that allows it to shut off your air conditioner
or water heater during times of excessive demand (typically the hottest summer days).
You are paid a lump sum amount
(on the order of $70) each year for this privilege, and the power company agrees to
follow specific rules. In a second program, called the "Time of Use" program,
CP&L installs a special meter than can record two different types of power usage: on-peak
and off-peak. In our area, a normal kilowatt-hour costs about 7 cents. Under the time
of use program a kilowatt-hour costs about 14 cents on-peak and 3 cents off-peak (plus a $10
monthly surcharge). Surprisingly,
you can move a large percentage of your power consumption to off-peak hours if you are willing
to pay attention to your consumption patterns. For example, if you move 80% of your power
consumption to off-peak hours and your monthly bill is $100, then you can save
$15 to $20 per month. Your power company is probably able to
produce for you a statement showing how much money you could save based on your
usage patterns in the past. Call the power company in your area for details.
- Discount airline tickets - By calling 30 days in advance you can get massive discounts
on airfare. Call a travel agent for details.
- Extra bonuses - Many companies will waive fees or give you extra bonuses if you ask
nicely. For example, many credit card companies will waive the annual fee if you ask them
to. If you call your long distance carrier and threaten to switch they may give you something
to stay. It can't hurt to ask!
- Stock up - When something you need comes on sale, stock up. For example, say you
have four or five dogs. When their favorite dog food comes on sale, buy a several month supply.
You know that you will use it eventually. At 3 bags per week and up to $2 off per
bag by combining the sale with coupons, you can save a lot of money. Do the same thing
with any item that you use regularly and that has a long shelf life: breakfast cereals,
kleenex, soft drinks, and so on.
- Make your lunch each day, avoid eating out - Eating out is expensive. You can make a meal
for about a quarter of the cost of buying a meal in a restaurant. If you are trying to save
big money, restaurant meals should be the first thing to go.
- Grow a garden - If you have the time, the space and the right personality,
you can save a lot of money with a garden.
- Exercise with friends - Health clubs are expensive. Many cost over $300 per year.
Instead of paying to exercise, organize a group of friends and run or ride your bicycles
as a group.
- Upgrade your home's insulation - If you have an older home, you can save a lot
of money over the long-term by replacing your furnace or adding insulation. Your power
company may provide a free analysis to tell you how much you can save, and may also
have special low-interest loan programs. Call and ask.
Aggressive frugaility requires that you search for creative ways to save money. You
will have to put in some extra effort to make use of these techniques, but if you are
willing to move to a hard-core stance against spending these techniques can save you
hundreds of dollars each year. These techniques can be especially useful if one
spouse is at home while the other works.
- Use a Clothes Line - It sounds old fashion, but... If you have an electric dryer, it probably costs you $1
or more each time you dry a load of clothes. If you run five loads a week, that's
about $250 a year. You can save that money by drying most of your clothes with free
- Make Powered Milk - Powdered milk, if you don't mind the taste, costs about 50
cents a gallon less than regular milk. If you have a large family that consumes
four or five gallons a week, powdered milk can save you over $100 per year. In addition,
you can store it in the pantry so you never run out.
- Shop at Consignment stores and yard sales - Most large cities now have
consignment stores that sell used clothing and houshold items at 50% to 75%
discounts. If you don't mind buying something used, then this can be an easy
route to big savings.
- Organize your shopping - By organizing your shopping ahead of time
and planning a weekly menu you can avoid impulse buying, a major source of
- Buy no name brands or prepared products - Name brand items cost
more because of advertising
expenses. Buying store brands eliminates these costs. In addition, most prepared
foods charge a premium for convenience. For example, go look at the price of
Rice-a-Roni some time. It carries the dual price of advertising and convenience.
You can make it yourself for about 25 cents. If you were to buy nothing but staple
items like flour, sugar, salt, rice and meat and make everything yourself from scratch,
you could potentially save hundreds of dollars a year.
- Do it yourself - Any project, from changing your oil to painting your house,
can be done yourself at significant savings. All it requires is that you
take the time to learn how to do it, and then have the patience and discipline
to complete the job and do it right.
- Lower the heat and A/C - Heating and air conditioning are expensive. Adjust your
thermostat to adjust your savings.
- Put it on your Christmas list - If you want something and you know your
family is searching for a Christmas gift for you, put off purchasing the
item and instead ask for it for Christmas or a birthday.
You can certainly save some amount of money
with these techniques, and there are any number of books and web sites that will give
you more ideas than you can imagine. One place to start is the
misc.consumers.frugal-living newsgroup, which offers a wide variety of
frugality tips from all of the different classes listed above. Enjoy!
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