On Frugality

Over the years, I have seen many families who are “gadget-rich/cash-poor” (Big-screen TV, Kitchen full of appliances, all the latest toys, video-games and diversions… but no money). I am related to some of them.

And every Christmas, I see good folks running out to buy the latest must-have gadget for their children, whether they can afford them or not; they are unable to tell their children “No” — but this is hardly surprising; they are often unable to tell themselves “No” either.

They are ruled by impulse, and easily-manipulated by shrewd marketers. They watch the news, and believe everything that they see, and as a result are horribly depressed and prone to hysteria. Not surprisingly, they adopt a “victim” mentality, and often expect the Government to fix their problems.

These days, frugality is a dirty word. But some of the wealthiest people I know are frugal — that may be why they got wealthy in the first place.

Here are a few pointers and principles that I use that help me save money.

  • Never buy anything on impulse. There is a multibillion-dollar industry that is dedicated to separating you from your money. It is called the marketing industry. Like the WOPR in “War Games”, the only way to win that game is to refuse to play. Quit watching TV ads. Quit reading ads in magazines, Quit clicking on web ads. You don’t need what they are selling.
  • Learn to say no to yourself. For most of us this means finding someone who will hold us accountable by asking questions like “Do you really need it?”. That usually means a spouse or a really close friend – but not someone you are trying to impress.
  • Know your weaknesses and avoid temptation. I am a sucker for shiny things, so I have to stay away from places like Best Buy. You may be a sucker for makeup. Or cute shoes. Or sports memorabilia. If you spend too much money in the mall, don’t go there.
  • Eschew plastic. We pay our regular bills online, but for groceries and personal purchase, we use cash. We hit the ATM once a week for grocery and “blow” money, and when it’s gone, it’s gone. The hard fact is that you spend more when we use plastic. When we first went to cash, we was uncomfortable. But we stuck with it, and now we wouldn’t have it any other way.
  • Hide money from yourself. I don’t know about you, but when I see a large sum of money in my bank account, my inner six-year-old goes “WOO-HOO!”, and starts thinking of ways to spend it. To combat this, I have my salary paid into a savings account, and each month I transfer enough money for that month.
  • Pre-spend your money. Know what your expenses will be and when they are due, and put enough money in the bank to cover them. That makes it much easier to tell yourself: “We can’t afford it”, as that big hunk of cash in the bank has already been spent.
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