Friday, May 15, 2015

Frugal living: Tips to live on a budget

Frugal living is not being mean and tightfisted but it is a principle/discipline aimed at understanding the difference between wants and needs and arriving at an optimal solution to maximize benefits! 

Now-a-days, there are many articles in the internet on frugal living. While, I take some hints from them, I do have my reservations. For one, these articles seems to propound tight-fisted approach bent on saving money, with no concern to health or other aspects. As a person, who has been successfully practicing frugal living since 1999, I share my thoughts in this article: 

1.       Differentiate between a ‘need’ and a ‘want’:

This is the primary key for frugal living. A cup of coffee, for many, is a need to get your horses kicking. However, a coffee from Tim Horton’s or Starbucks is more of a want than a need. The amount of caffeine that gets you started is also available in store bought instant coffees. I used to buy a pound of Nescafe from Walmart for ~10CAD; with 4 teaspoons per day the coffee lasted for over 5 months. In other words, the cost of my coffee/cup was ~7cents. While a cup of coffee from Tim Horton’s is ~ 3CAD!!!

Similarly, smokes and drinks are wants, not needs. Some wants can and will be deleterious to your health like smoking and drinking. There is a study that links ageing to alcohol consumption1.

My strategy to identify want and need:
Need: “Could I survive without this?” if your reply is ‘no’, it is a need!
Want: “Could I survive without this?” if your reply is ‘yes’, it is a want!
Needs need to be fulfilled, but wants can wait!

2.       Health is your greatest asset:

While I buy coffee from Walmart, I never buy vegetables or fruits from Walmart. For one reason, they tend to go bad soon. Another reason, it is hard to find organic or non-GMO products there. While some may argue that an anti-GMO stance is Paleolithic, as a scientist, I’m personally not satisfied with assurances of the companies based on statistically insignificant study samples. Further, there seems to be direct correlation between the number of allergy and cancer cases and the amount of GMO products used by countries. The causality or mechanism has not yet been established behind the correlation, it also happens to be their defense.

I don’t consume alcohol or smoke for the same reason! - Health

While life is not that valuable, health is! Why take risk? (Ask a life insurance personal the value of your life…J)

3.       Babies:

Having babies is among the most difficult both emotionally and financially. It is a dilemma. Every parent is emotionally guided to buy beautiful clothes and toys for them, though we know that they’d out grow them quite fast. It is smart to use hand-me-downs for clothing. Similarly, it is smart to buy toys from second-hand stores (But don’t forget to sanitize before use!). Sometimes, we buy toys that we think the babies would like but we would only find them showing least interest in them. My baby is a great teacher for me in this regard. For babies, the most lovable toys are its parents, don’t ever forget that…!

4.       Set weekly budget targets:

We live on a 100CAD/week budget (for 3) on groceries with a 10% margin. While my wife is the implementation chief on that, I set the targets based on our consumption characteristics. Living with 100CAD is pretty tough, but not impossible. Such targets have also helped us to stay away from temptations, such as cookies or other snacks doused with cornstarch and corn-syrup, produced from GMO crops. Good for our health. In the last 2 years, we haven’t been to any restaurant but we buy only organic produce. If there was some amounts left due to some promotions are stuff, we would indulge ourselves with a cup of ice-cream shared between us. We share ice-creams more because of the health concerns than because of financial concerns.

5.       Source your supplies:

This is quite tricky and requires some knowledge of your locations. Some products are always cheaper in certain stores than in other. Before each week grocery shopping we try to compare prices of produce from different stores and then plan our trip so as to minimize our walking and cost of shopping. Networking is also a great idea to identify sources. My wife’s networking enabled us to find new sources, which we expect to reduce our costs further.

If interested in gardening, small vegetables grown at home are another good source of food practically free!!!

6.       Exploit coupons:

This is a key idea, if you’d like to save some money and most web sites would advise the same. However, sourcing the coupons and timing is the extremely important. For example, when we go for shopping at Bulk barn, we usually buy a pound of Almonds and if it costs less than 10 CAD, we would buy some other things until our bill amount is exactly or slightly over 10 CAD to take advantage of their coupons. We use 6 almonds per day (more almonds mean more fats), which would last until the next coupon is issued. Buying the same amount of almonds from any other shops in our locality is extremely expensive.

7.       Clothing- Trim your wardrobe:

Women would take particular exception at this. Anyway, I have exactly one boots, 1 pair of sneaker and 1 flip-flop. I have exactly 14 pairs of underwear. I don’t mind wearing the same clothes (but not underwearJ). It saves money not only in accessories but also in laundry. Technically, since we don’t have a washing machine in our apartment, my budget target for yearly laundry is 100CAD max. So far so good and I don’t smell like a fish.

8.       Take Transport, only if you have to:

We go by walk to all places within 5 Km radius. Advantage is that we walk at least an hour and it is the best exercise one could have with a baby, who is more than content to enjoy the view outside. Running may not be option to everyone. I damaged my ligaments by trying to run. So, if you have not been practicing sports, it is better you don’t take damaging sports but take mild ones. To save money, try to integrate them with your daily chores like shopping, etc. For me, I really don’t have the patience to wait for the bus, which works in my favor. By walking, you may end up saving over 9000$, an average annual cost to own a car2.

9.       You are not cheap:

We don’t take bus, if we could. However, we don’t walk 5Km to an organic store if their sales for the weak doesn’t break-even our cost of time to walk to their store. Time is more valuable than money.

10.   Dump your gadgets:

This includes TV, Xbox, iPhone, etc. Having TV makes you pay more taxes in France. Xbox and iPhone are more likely to waste your most valuable asset – Time. Further, TV is not really good for babies/toddlers. It is better avoided altogether. Think about the amount of subscription charges you may save2!

I hardly have had any cell phone. In my perspective, the phone itself is cheaper in comparison to the amount we have to shell out every month for the data plans and services. I would happily invest that money in something, like I did it on my education and would do it on my children’s education. 
Remember, by throwing off your smartphone you might save around 1700$ per year3!

11.   Small is sweet:

When it comes to living, smaller apartments or homes are sweeter. For one, they keep the family closer. On the other hand, reduce you electricity and maintenance costs. Smaller living space also means kids have to go out to play, where there is no TV, which would greatly benefit their fitness and reduce your headache in cleaning their mess...!

The amount of savings that you could realize is directly proportional to your place of residence. However, these principles had never let me down since 1997, when I started to save money to buy books for engineering entrance exams! Hope, they help you too…J


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