How to Save — Or Spend — Money
(Worked 8 hours on my boys’ love paper yesterday, and I think it’s much improved, although it still needs cleaning up and formatting. But now, on to other subjects….)
I haven’t blogged much about simplicity or frugality lately, but in this horrid economy, I’ve been thinking and reading a lot about economics and debt. I’m fortunate to have joined the debt-free, simple-living movement several years ago, so while this economic crunch is making my various investment accounts wilt, it’s not causing me any immediate stress. Nevertheless, earlier this week I decided to review my monthly spending to make sure it was in line with the guidelines provided in All Your Worth, my favorite investment advice book next to the more challenging but far-sighted Your Money or Your Life.
All Your Worth understands that most of us abhor budgeting and recommends a very simple breakdown of the monthly paycheck: 50% should go to Needs, 30% to Wants, and 20% to Savings. For the last two years I’ve been letting that breakdown guide me, although when I looked at my spending last week, I found that I spend something more along the lines of 60% on Needs, 30% on Savings, and only 10% on Wants.
Of course, this begs some questions: while I put Netflix and internet accesss into Wants, I put my cell phone — which is my only phone — into Needs; but is it really a need? Does saving $50/month toward a trip to Japan in 2010 count as Savings or Wants? Do I Need to live alone, which is primarily what’s driving up that category? (SoCal rents, even for 1-bedrooms, aren’t cheap!) The categories require making some judgment calls.
At any rate, with budgeting fresh on my mind this morning, I read a good article in The Simple Dollar on readers’ 25 Best Ways for Saving Money. If you’re trying to save money, take a look at it; I’ve been following most of these steps for several years now, and I live very comfortably within my budget. What tips do I not follow well?
#12, “Drink more tap water” — although I drink a lot of tap water, I also live on diet caffeine and enjoy going out for a margarita or beer with friends every week or two, which keeps my beverage spending higher than it needs to be. Also, #17, “Plan ahead for meals” — I don’t plan ahead very well, but because I live alone, meals don’t take much work or money — a salad or some chips and salsa is often dinner.
#24 on the list is “Sell your car,” which wouldn’t be a good idea in SoCal, where public transit is poor, but I do #11, “Ditch cable television,” one better and don’t own a TV at all, preferring to watch rental DVDs on a portable player. Not owning a TV does wonders for improving #10, “Stop looking at ads,” and renting rather than owning DVDs keeps my clutter down (I also use the library to avoid accumulating books).
One tip that I’m trying this month is #9, “Use the ‘envelope’ system.” The idea is that you budget money to things like “Food” or “Fun” and put that cash into an envelope, then pull it out as you spend it. When you actually see cash vanishing from your envelope, you tend to monitor your spending more closely. But in my case, I’m doing it for a slightly different reason. I’m pulling out money for Wants and putting it into an envelope to encourage myself to spend — so that I’ll stop thinking “I can’t afford that” and feeling deprived, and start thinking “I can buy that” and feel spoiled. Because I realized that I’ve been living so frugally that my thinking has gotten skewed; I’ve been denying myself some pleasures I can easily afford. Even if I bump up my Wants budget to only 20%, instead of the recommended 30%, I’ll feel rich, with double the amount of money I’m used to spending available.
I don’t know if this will work; on Friday I walked around Borders and the mall and the only thing I bought was a new, inexpensive $58 purse, and I’d been shopping for a new purse for the last three months, anyway. Nothing else appealed to me, perhaps because I’ve been practicing #14, “Stop shopping for fun,” for quite some time. The less you shop, the less having a bunch of bright, shiny, worthless new goods pushed into your face appeals to you. There really isn’t that much I Want; mostly, my discretionary spending goes to a handful of new manga volumes each month, which serve double duty as entertainment and research material. But this might give me “permission” to buy some utilitarian stuff for the apartment to replace things that are wearing out.
Either way, if, at the end of the month, I still have money left in my Wants envelope, at least I’ll know it’s because I consciously chose not to spend it, rather than fooling myself into thinking I can’t spend it. And that would be worthwhile, too.
drupagliassotti @ November 9, 2008