Tuesday, January 16, 2018
I’m Not Cheap……I’m Frugal!!!
I spent 14 years in the service industry and grew up with Portuguese parents. Let’s just say I know a thing or two about cheapness. Maybe that is why when I became an adult, the first round was always on me. I was probably trying to make up for feeling like I never had anything by giving away my hard-earned money. When it comes to cheapness, I always get a bad taste in my mouth. It always reminds me of the people who I would give great service, but then leave me a 2-dollar tip on an 80-dollar bill. That sort of cheapness makes me sick. On the other hand, frugality is a thing of beauty. Being frugal is far different than being cheap. I would say my life change drastically when I became frugal. Those who know me, know I tip very, very well. Probably too well, I’ve just seen too much at restaurants and bars to know servers deserve every penny. Being frugal has taught me to limit my evenings out because I spend too much when I do go out. There is a difference between the two, a drastic one. In today ’s post, I am going to explain frugality and show why it is a huge part of financial independence. It is actually the base of financial freedom so listen up because this post might change the way you think about money.
Wants versus needs
This is always the tricky one. My main lady Suze Orman is adamant about making sure you know the difference between a want and a need. In my life it’s simple. I need to pay my rent. I need to pay my utilities. I need my cell phone and internet for work. I need food in my belly and that’s about it. Everything after that is a want or a semi-want. I delay purchases of wants for so long that I forget I even wanted them after a while. Some people are so caught up in consumerism that they convince themselves that they need designer clothing. That they need the newest iPhone. That they need nights out with friends. Bullshit I say! No one needs those things. If we needed those things, the world would have about 5 billion fewer people in it because most of the world doesn’t have those things. A good exercise for you would be to take out your bank or credit card statement and pick out 5 things that you may or may not should have bought. Add the total cost of those 5 things. If you aren’t saving more money every month than those things cost than you need to re-evaluate your priorities. It’s that simple because saving for your future is a need, not a want. You shouldn’t want to save for your future. You need to save for your future. Simple.
3 keys to your financial happiness – Suze Orman
Cut those needs down
One thing that bothers me about myself is that I think I can cut down some of my needs. For instance, my cable TV. I freaking hate Bell Canada. They take way too much money from me every month. The only thing stopping me from cutting the cable completely is convenience. I like being able to have quality picture and sound at the touch of a button. That being said, there are alternatives out there and I am exploring them. This cable will get cut and very soon! Your needs are your needs, but even those can be reduced. The cable is just one example, but you can also reduce your hydro bill, drive less and save on gas, get a better cell phone deal, buy fresh food instead of pre-packaged, pay bills annually instead of monthly to gain savings and many more. I have noticed that the only need you have that might not be flexible is housing, and even then, you can downsize to save money. Everything else can be adjusted. Does that make you cheap? No, it makes you smart!
Give every dollar a purpose
My main man Dave Ramsey is a stark advocate for giving every dollar a purpose. That sounds very, very boring I know. If you look at it a little closer, it is actually quite liberating and fun. Giving every dollar a purpose doesn’t mean you actually count out every dollar one by one. What it means is that you have dedicated money to every category in your life and each of those categories has meaning to it. When you operate under this mentality, no dollars get wasted. So where is the fun part? You designate a category for fun stuff. If you like going to the movies or dining out here and there, have funds for that. Make sure that category is far less than your savings, which is a vital category. You work so very hard for every dollar that you get so it is important that you have your money work hard for you. Some of it will keep the lights on and the roof over your head. Others will put a smile on your face or the ones you love. If your dollars don’t have a purpose, then once again you must re-evaluate your spending. Oh, and by the way, there is no purpose to designer jeans.
Rule 1: Give Every Dollar a Job – From Rags to Reasonable
Save and Invest
What is the point of being so darn frugal? I believe people lack a basic understanding of what is actually going on in our society. This part may get deep I warn you, but keep reading because it is important. We all work at jobs where we are underpaid, that’s a fact. Let’s be honest, unless you are an owner someone is underpaying you, that is how capitalism works. Also, when we get our paycheques a large amount of it disappears before we even get it. That’s taxes baby and there is no use complaining because they were here before you and they will be here after you, suck it up. After we get what’s left over after the government gets ’s its cut, everything we buy has more tax on it. Food, hydro, clothing, your cell phone, gasoline, it all has tax. So, after we work hard to get underpaid, have the government take a huge chunk of our money, buy necessities that all have taxes on them, what’s left? Not much I’m guessing. That is why saving and investing is so damn important. All your money is being eroded away. Little by little your money is being taken from you. Saving and investing is your opportunity to have your money grow. You cannot avoid or control these outside forces. You will never avoid tax, well you can but you will end up in jail. You can, however, take control and have your money work for you. That is why you need to be frugal. It is so important because if you waste money on junk you will never have enough to save and invest and then when all your money is gone who will you blame? The tax-man? Your boss? Your rich neighbors? Your parents? Take control of the controllable or you will be controlled by the controllers. Say that 5 times fast….
The Power of Compound Interest – The Balance
Frugality is the base of all financial freedom. You don’t stop doing the things you love, but you may have to change what’s important to you. It doesn’t mean you can’t have nice clothes, but it may mean you take more care of the ones you have. It doesn’t mean you don’t eat good food, but you may have to cook it yourself. It doesn’t mean you never go out, but it may mean that you only do it when all your other more important obligations are taken care of. By the way, make sure you tip your waiter!
Thanks for tuning in today as FIRE Week continues at Budget Boss. Don’t forget to join us tomorrow as we discuss finding your “Why.” If you would like to learn more about frugality, please do not hesitate to message me at joe@budgetboss.ca. Have a great day Bosses!
“Without frugality, none can be rich, and with it very few would be poor.” – Samuel Johnson
Email – joe@budgetboss.ca
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