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4 Lessons From 3 Years Of Frugaling

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Photo: Dustin Lee/Unsplash

Three years ago I sat at my then-girlfriend’s kitchen counter, which looked out at the Pacific Ocean. The panoramic window looked on beautiful condos and homes nestled along the California coast. The weather was perfect, and there wasn’t a cloud in the sky.

Amidst this perfection, my heart sank with the weight of tens of thousands of dollars in debt. It was something that could stand in the way of relationships, compromise my job prospects, credit scores, savings, investments, retirements, and giving to others. I wanted to excise the morass of debt, but didn’t know how.

I started writing Frugaling as an aspirant — a mere amateur in the financial planning world. What could I know about saving money, making money, and changing my prospects? While I didn’t have all the answers, I had hope.

I could never have predicted what happened next.

By cataloguing my story, sharing my triumphs and travails, and being open the entire way, I benefited financially and emotionally. The former included about $40,000 in revenue. Something that would allow me to pay off almost all my debt. The latter permitted me to regain my breath — to relax once more. I was able to let go of most financial uncertainty stress.

Three years of Frugaling flew by faster than I could have ever expected. It’s hard to fathom where I was then and now. Much has changed. Here’s what I’ve learned:

The rules don’t apply evenly across populations

We don’t all start from $0, the same educational prospects, families, or social networks. We aren’t all born the same race. We aren’t each afforded a $1 million loan from our fathers.

Finance, while personal, goes beyond “personal finance.” After writing for years, it’s clear both in comments, criticisms, and critical thinking that society has great power in affording people the opportunity to succeed.

Whenever we talk about financial management, we need to consider multiple stories — not just our own.

People care deeply about food concerns

Some of the most popular articles have been about food. And I don’t think it’s an accident. When people look at their budgets, one of the highest lines is for food.

Food is often an area where people look to cut back on. Maybe you eat out too much. Maybe you eat too much. Maybe you spend too much on coffees.

More importantly, any little change in your food spending instantly affects your total spend for a month. Reduce the regular visit to your favorite restaurant, make a meal at home, and you can immediately see the benefit to your wallet.

Simple living, minimalism, and frugality are deeply intertwined

If we imagined a venn diagram, these three concepts would greatly overlap.

Those who enjoy canning, meal planning, and living simply are usually following the frugal life, too. Minimalism directly affects budgets, too. Reducing the urge to fill closets, cabinets, and stuff the remaining areas can help you save money every month.

I’m inspired from each of these concepts. I read — mostly checking out books at the library. I cook (or attempt to) at home. And I constantly look for ways to reduce extra stuff and refuse impulse buys.

Debt can suffocate its victims

Swimming in debt made me struggle for air, space, and time. How long would I have to live this way? How long would I be able to negotiate this rat race? I felt choked by the burden.

Many live like this — even middle-income earners. One way or another they find themselves in great debt and/or living paycheck to paycheck — always on the precipice of a missed house payment, medical bill, or job loss. Every day is a struggle.

Debt has a sneaky way of controlling lives and forcing people to work more, save less, and reduce time spent with loved ones. Debt can impact marriages, relationships, and family members. And oftentimes, it’s inescapable until the final dollar is paid off.

These lessons have taken years to understand and conceptualize — to convey them today. I’m honored and humbled you’ve taken the time to follow along, read, subscribe, tweet, and share.

Cheers to another three years!

Your frugal friend,

Sam

Income Power Parity Rules Everything Around Me

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How does your dollar in Colorado equal another in South Carolina? Will your dollar always be a dollar? What does a dollar equal in Russia? What will that dollar afford you in one place, but not another?

These questions are at the center of something called “purchasing power parity” or PPP. This theory allows economists to compare different currencies, along with changing relative costs. Your dollar tends to go further in more economically disenfranchised countries, and shorter in the higher economic zones. To put it simply, prepare for a tiny dollar in Europe, and a hefty one in sub-Saharan Africa.

With this statistic, we can actually understand purchasing power. Whenever we change locations, our power changes. Our relative expenditures fluctuate in tow. Sometimes it’s in our favor – other times we aren’t so lucky.

Purchasing power emphasizes the potential of a dollar spent, but what about a dollar earned?

Let me explain.

In 2015, the average American college student will graduate with more than $35,000 in loans. A horrific 71% of students will graduate with loans, too. These statistics are just the beginning for many hopeful grads.

Bankers and shockingly, the federal government, line up their coffers and wait for that beautiful “cha-ching” sound. Those students will pay for years; heck, likely decades. The interest-bearing loans will build more and more debt over time. And if they pursue a higher education – say a masters, Ph.D., M.D., or J.D. – it’ll mean thousands more.

Here’s an example: pretend “Benny” goes to undergrad for four years, and graduates with $35,000 in debt. He was a good student – some even called him great. His grades were strong, and he decided to apply to counseling psychology Ph.D. programs. Benny researched all the ins and outs about psychology. He decided that it was right for him. Benny would be able to study topics that interest him, practice counseling, and develop a teaching ability. It seemed like a win-win-win.

Years go by, and Benny has been going further into debt. By now, four years into his Ph.D. program, he has about $150,000 in student loans. But Benny has also settled on what he wants to do: practice counseling psychology as a clinician.

This much in the hole, the world appears rather bleak. But for Benny, he self-soothes by calmly reciting, “This is an investment in my future.” At least, that’s what everyone keeps telling him.

Then, he graduates and steps out into the bustling world of career opportunities! Solid five-figure salaries shine, and he gets ready to start a new future, pay off his debt, and maybe buy a new car. He finds a starting counselor position at $55,000 a year and gets the job. Now, he thinks, the good life can begin.

Remember how I started talking about PPP? Well, there’s a parallel version for income, too. I’ve never read it anywhere, though. I’ll call it “income power parity” or IPP.

IPP would represent the relative value of a salary, when you account for student debt, car loans, and other regular financial obligations. For Benny, his $55,000 salary hardly equals $55,000. Between paying the tax man, loans (car and student debt), and potentially starting a new family, buying a house, etc., his money dwindles.

It will take years to pay off these atmospheric amounts of debt. And every day that goes by, the interest ticks on. More money will be owed and/or paid off over time.

Here’s where income parity comes into play. Benny is a counselor, getting paid an average starting salary for someone with his education. If he had gone a different route and become a social worker, he would’ve graduated faster; thus, lowering his amount of possible debt. While the average salary for a social worker is less than a counseling psychologist, would it have been worth it for Benny to choose this route instead?

Effectively, social workers and counseling psychologists (clinicians) do the same work. One gets paid less than the other. But if one has to collect more debt than the other in the educational process, who actually gets paid more? Who can save, invest, and collect more than the other in the long run?

These questions get at the heart of income parity concerns. With more than a trillion dollars in total debt, students are burdened with one of the toughest economic questions ever. They need to stare at salaries and ask, like no generation before them, “Yeah but, how much am I really going to make?”

Debt: The Destroyer Of Dreams?

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Student loans ruined my relationship with money. It ripped out executive functioning of the prefrontal cortex, spit, stomped, and rolled it flat with a rolling pin. The critical-thinking components died an unfriendly, brief death. Suddenly, I couldn’t think straight or make sense of the “cost” of anything. I was the walking automaton with a mantra that wouldn’t stop: click, swipe, buy, repeat.

When you own nothing, the bank owns you. The lack of money became a thief of sleep, calm, and patience. This emotional vertigo sucked the fun out of future-oriented goals and dreams, as everything had reservations: lives comprised from decades by debt. In this confusing, cyclical spin, I temporarily lost the clarity that can be found within goals.

New questions refused to leave me alone. Why did I pursue this route in the first place? How will I possibly pay this off? Who can actually help me if something goes wrong? Where do I go for objective advice and feedback?

Then came questions about aging. How old will I be when the debt is done? What age will I be when I retire? How will I retire? Will I ever retire? How can, potentially, six-figures of student loan debt be paid off?

Lastly, were the questions about life and debt. What happens to my debt if I die before paying it off? Will it be passed on to a spouse, child, etc.? What if I left the country and never came back? What would I do if I got injured and either missed or was no longer able to make loan payments?

I briefly considered debt forgiveness plans. In some circumstances and areas of study, the federal government “forgives” debt after on-time payments after agreed upon periods of time. Debt forgiveness would allow me to wipe the slate clean, and be free faster. But I couldn’t wrap my head around the concern that might come from not graduating or being able to pay on time. What if something/anything interrupted my plans?

Debt is the ultimate restriction of freedom. From dreams at night to dreams of the future, debt knows no boundaries. It doesn’t politely wait for your day to begin or end. It’s the constant burbling and gurgling noise that confuses focus. And I’d be shocked if debt doesn’t restrain students’ ability to study and proficiently pass through school.

Nobody deserves this discomfort and stress. While many parents fork over gigantic savings for their children to attend college, countless undergraduate students pay their own way. As a culture, we’ve exalted the role of higher education and repeatedly shown statistics for success. “You’ll make more over your life as a college graduate,” they say. And they’re right, most people do.

Unfortunately, not everyone can or will take the same path. What if you aren’t excelling in college and decide to drop out? What if you get hurt in the four years of college? What if, what if, what if…?

For every student that decides to pay their own way through college, they take a leap of faith in themselves. Our culture admires their choice, risk, and self-investment. But despite this admiration, we do not reward them by heavily subsidizing their educations. Instead, we enshrine them in debt bubbles that are ready to burst.

Debt becomes the great opportunity maker; unfairly, as only some of us will carry this burden and it totals over $1.2 trillion.

As a country, we need to attack this debt — the wealthy and impoverished, together. The United States should be a leader in education for the masses. Between 5 and 18, we suggest that people deserve it. We say it’s a right. Children should receive a rounded education. Then, you graduate high school and — poof! — the right becomes a privilege afforded to the wealthiest among us.

To solve the debt crisis, we must rethink the entire privilege-based system of higher education in America. Fundamentally, we need to wrap our heads around our economic needs for an educated, working-age populace. The immoral shackles of debt that we place on hardworking students shouldn’t exist.

$200 Frugal Food Budget for May

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Why I reduced my food and drink budget

In December I sat down and said, “enough.” I needed to cut back on my food expenses. Seriously, it was embarrassing and hurting savings. Every month involved hundreds of dollars in restaurants, fast food, and snacks on the go. When I finally shared it with you all — the readers of Frugaling — I felt nervous. How would people react? It was one thing to spend the money privately, but to openly disclose it made me anxious.

As the year turned from December to January, I knew that I needed to change spending habits. It was time to start saving, cutting, avoiding, and scrimping here and there. Likewise, I wanted to avoid debt at all costs, and recognized that in the next couple years I’ll need to spend thousands in job interviews, moving expenses, and rent. I couldn’t continue spending like mad, and actually afford these future hurdles. To be clear, “affording” means spending money on something without debt.

There was little room to save on rent or educational expenses. Additionally, I had sold my car, gotten rid of insurance payments, and moved on from any semi-optional expenses. The only piece left was the food budget. Darn it, though! I didn’t want to cut back for years.

When I first started the journey, I picked a number. It was somewhat random, but I wanted something exceptionally challenging and possible. I needed to eat healthily, too. So, I chose $200. That would be more than a 50% decrease in my budget for food and drinks.

Here’s a review of previous months

Monthly Food Budget Chart

When January started, I holed up and tried to by some basics. But as the month continued, I realized I was severely underprepared and over budget. I wasn’t eating out frequently, nor was I buying lavish foods. Still, I didn’t know how to budget for this new level and ended up well over the line. Even though I had saved about $100 in one month, I knew I had more work to do.

Over the following months, I tried harder and even came pretty darn close to the tough goal. In February I was able to get within $12 of the budget through some serious cost-cutting and sacrificing. Frankly, I felt an internal pressure towards the end of the month. I knew I’d be close, and wanted the chance. My food stocks grew dangerously low and the repetition of the same foods night after night wore me down.

From then, my spending grew and it’s stayed above my $200 budget goal. It’s been one of the most frustrating parts of my budget and frugal goals. I know, understand, and see countless examples of individuals and families doing better. And there’s this guilt, as I’d like to live modestly. An expensive food and drink budget smacks in the face of that value. Plenty live on less. Plenty of live on less than they need. And I don’t want to live some lavish alternative life — above it all. I want to be in it. I want to feel the cuts.

The May food budget… Failure?

Now, I turn to May. Oh, May, you pesky month! This fifth month of my food and drink budget tired me. The middle of the month represented the end of my third year of graduate school. For us students, it was cause for celebration. And celebrate, we did.

Here’s a review of this month’s spending:

May Food Budget Table

Part of the graduate school tradition at the end of the year is to go out, eat, and drink. Soak up the momentary freedom. This can be a challenging environment to save in, but it’s challenging not to seek out these moments and live them up when you can. Busyness prevents many of us from congregating as large groups. These moments are unique and special. When possible, I tried to go without or only one drink, meal, etc.

Nonetheless, as the table shows, the final total was $247.37. While an incredible $200+ decline from when I started this journey, I still couldn’t meet the goal.

Looking forward and long-term tracking

Because I’ve shared my budget a few times before, it’s not quite as embarrassing anymore, as it is personally frustrating. I’ve seen great benefits from trying to save. Hundreds of dollars have been invested, which were previously squandered. I feel healthier and eat foods that suit my own body’s needs. I do feel like a more modest person, and constantly try to recognize that I’m still privileged to have a full meal. Many do not share that luxury.

Another piece that I’m appreciative of is the tracking. Now, I can look back on my spending and clearly see where it’s spent. There are clear totals. Month after month, I can create a better average of spending versus one month’s test. In fact, my average spending for these five months was $264.78. That’s amazing to me, as I’ve never spent this little since high school. More importantly, the average is what I want to continue to reduce.

My friends and family continue to ask about this food budget. “Will you continue?” they ask. “Are you still doing that food budget thingy?” Why yes, I will continue. And yes, I’m still doing that food budget thingy. Maybe for the rest of my life, too.

June will be a tough month, as I’m traveling much of it. I’ll track and share, but I might need to pass for some increased spending. Sorry Frugaling fans! I hope you’ll forgive me. In July I’ll hunker down even further and do everything in my power to save.

How have you been doing on your food budget? What snags and troubles have you experienced? What are your recommendations for saving more? How do you rope people into joining you for your food budget? What motivates you?

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