Why Live Cheaply?
If you are like Jean Railla, you live cheaply cause you have no other choice. But here are some reasons why you might want to live on less than you currently do:
1. So you
can work
part-time.
2. To pay off debt.
3. To buy a house.
4. So that you can buy art.
5. So that you can make art.
6. So that you can travel.
7. So that you can afford children, grad school, or a night class.
8. Save for retirement.
9. So that you can splurge on a local designer whose clothing you love.
10. As an environmental protest against consumerism.
11. As a protest against capitalism.
12. So that you can gloat to all your family and friends about how little you spend.
13. So that when someone compliments you on a dress, you can boast: "It only cost me three bucks at the Salvation Army."
14. So that you can righfullly call yourself a slacker.
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It's Sunday evening, just before "King Of the Hill," and I am looking at an ATM receipt with a balance of negative 47 dollars. Once again I have spent more than I've earned. My throat tightens, shoulders droop. I had promised myself that I was going to run a tighter money-ship: balance my checkbook, never over-spend, live more frugally. Instead I am sitting at my kitchen table, trying to figure out how to pay all of my bills.
| I am broke not because I am particularly extravagant, but rather because my approach to spending and finance is warped and unrealistic. |
That was six months ago. Since that time, I have totally re-organized the way I approach money and finance. I'm still not saving money, but I no longer spend more than I earn, or have Sunday evening freak-outs over stacks of bills and bank machine receipts. Years of being broke and in debt have forced me to develop a financial plan. Curbing my spending did not work; I had to completely restructure the way I think about money. Like most people, I am broke not because I am particularly extravagant, but rather because my approach to spending and finance is warped and unrealistic.
My first step in developing this plan was to read the available literature on the subject. After reading Your Money Or Your Life and other financial self-help books, I came to realize that none of their plans would totally work for me. Although I could borrow some elements from each of these frugal financial tomes, I needed to create something for myself that included a little more fabulous-ness — something based less in the Puritanical work/save ethic. Something that wouldn't involve me changing who I am, making some adjustments. Out of this I developed the Living Large/Living Cheap plan.
The Living Large/Living Cheap Plan
This three step plan is simple — based not on rules but rather on acts as a guideline to help you develop your own plan — based on your individual relationship to the almighty dollar.
Step One: Create a budget
Sit down and figure out how much you earn, what your expenses are, and break up where you think your money should go. This might seem boring but it's the easiest way to stay on track. If you don't know how much money you have, you are more apt to guess or err on the side of over spending.
In this budget, you should make categories for rent, gas, utilities, car payments, health insurance, credit card bills, food costs, etc. Whatever is left over is your free money. You can do whatever you want with this — go out to dinner, buy clothes, pay off debt, get a massage. You could further budget your free money into categories and put aside money every month for special treats or savings, stock, or to buy property. For me, there is never enough free money to really break it down any more. Plus I like having a lump sum that I can be frivolous with.
Step Two: Develop your own philosophy on money
Some folks think having a lot of savings and a 401K is the way to go. Other folks like to live well and don't worry about the future. In my early twenties, I never thought of saving. Currently, I am too much in debt to think about the future — I am only motivated to spend less because I am in financial crisis due to my credit card debt. Even if I wasn't in debt, at 27, saving money wouldn't be a big priority for me. There are too many things that I would like to spend my money on now — like healthcare and organic food, creating art, having decent sheets, etc.
This step requires you to look at your life and analyze your values and desires. Do you want to buy a house or rent an apartment? Do you want to retire young? Buy designer clothing? Travel? Have a fancy career? All of these decisions will effect the way that you spend your "free money."
For me, one of the most important aspects of this process has been realizing that I spend money on things that I don't really want or need when I am unhappy. After a couple of years of high salary and high spending, I realized that I would rather work less and write than have designer clothing and expensive dinners. This realization forced me to adopt spending strategies from my early twenties: buying clothes from the thrift store, cooking at home, making gifts, and not going to bars. I also keep a list of things that I want to buy in my backpack. Whenever I feel the need to buy something, I consult the list so at least I can get something I really, really want.
At the same time, it is important to be realistic about who you are. For instance, I am never going to be able to completely forgo dining out with friends; dining out is a big part of my social life. In order to afford this habit and stay afloat, I cut back to dining out only two or three nights a week. I also plan the meals better, researching inexpensive ethnic restaurants. I bring my lunch to work every day in order to compensate for the money spent.
Step Three: Create your own list of money-saving tips.
I have had extensive conversations with all of my friends (and even a few strangers — I've been obsessed) about how they spend their money. This really helped me figure out how I could cut corners. After I spoke with everyone, I compiled a big list and sent it out to everyone whom I had spoken with as a thanks.
Warning: Once you have implemented all these steps and are following your own Living Cheap/Living Large plan, don't freak out if you mess up and buy something super-extravagant. It's not a moral issue. It doesn't mean you're a failure. The drawback is that there are consequences for crazy spending behavior. I should know: I have over $10,000 in credit card debt, and if freaking out helped, I would be debt-free.
Why Live Cheaply?
Unless you are fabulously wealthy, you probably need to live in a way that you consider cheap in some area of your life. I think living cheaply is a way of having more; more time, more freedom. It's about being clear about what you want, not just aimlessly consuming something on your every whim.
I talked with three young professionals about their financial philosophies — here's what they had to say:
Ann Faison
Age 34
Occupation: Director, George's Gallery, Los Feliz, CA
Christi Delarco
Age 30
Occupation: Part-time business manager for a technical recruiting firm, and full time accupuncture student in NYC
Kate Kirtz
Age 29
Occupation: Filmmaker, film distributor
And here are my Twenty-One Tips for Living on Less culled from these interviews, my own experiences, and those of my friends and family.
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