That’s far too extreme for me.
However, like most bloggers from back than, I have a central area where you can save money on almost anything. (Those articles may be outdated now. I bet a Google search for “save money [x]” will get you better results until I can update it.)
The reason why so many people wrote about those things was simply because there wasn’t a lot written about it before. Also, it’s much easier to write something concrete like “avoid the artisan grocery store” and “bring your own lunch to work” than “work harder and hope for a raise.” It was especially easy for me to focus on the frugal aspects because I had control over many of my expenses. When I put together the case that I was being paid less than 95% of all software engineers according to Salary.com, the answer I got was, “Sorry, there’s nothing in the budget to do anything.” They couldn’t even get creative with stock option compensation or vacation time.
I didn’t have any control when it came to the company’s business or how they were managing their finances. In this new coronavirus world, many people are feeling the same way. The days of asking for a raise are probably gone for awhile. If you are able to keep your income, you are doing well (financially, at least). There’s talk of potentially a 30% unemployment rate which is something I can’t remember in my lifetime.
This is the time to take control of the things you can control. It may not be much, but it might be the best you can do. It’s time to be a little cheap. Or, if you prefer, frugal.
(Side Note: If you have the means to be financially generous, please do so. Support local businesses like restaurants. They need that support. This article is geared towards those who aren’t fully financially secure.)
I was laid off in the dot-com bust of 2001. I was only out of college for a couple of years. Software engineering jobs were impossible to find. I remember on one interview the hiring manager essentially wanted me to rewrite TurboTax from scratch. He’d pay $2000 when it was completed.
During those tough times, being frugal saved me. Or to just call it like it was, I was cheap. From a very young age, my mother taught me to save money. I had always been a saver at heart anyway. I’d save all my Halloween candy until it went bad. I got more comfort knowing that the candy was there for me if I wanted it than actually enjoying the candy itself.
A month ago B.C. (Before COVID-19), there was a lot of talk on personal finance Twitter about earning more money. I understand why. Life is too short to not enjoy it. People love the idea of being able to have everything they’ve ever dreamt of. It’s easy to sell a “earn more money” message if it fits what people already want to hear. I have also seen some bloggers follow it up with, “Buy my book or buy my course.” To put it simply, by its very definition, it is hard to sell products or training to cheap people.
Making more money is certainly half of the financial success equation. I don’t want to dismiss that. However, it’s a difficult half to write actionable advice about. No writer knows what kind of job your are in or what your education is. Maybe making more money is extraordinarily difficult for your situation. I can suggest adding a side hustle, but that’s not what “Lazy Man” is about. I hope everyone can work smarter and get to the point where their money works for them.
I’ve always been an equal fan of both sides – make more money and save money wherever possible. I’ve known people who make crazy amounts of money, but don’t save or invest much. I’ve known people who don’t make a lot of money, which means they can’t save or invest much.
One of my favorite things to do is to thinking about how to be cheap. Not really cheap, but spend less money as a general habit. For example, I looked at my electric bill and thought, “I wonder if solar power makes sense in Rhode Island.” It does! We’re almost on our 5th year of solar power now. We paid a lot up front, but we’ve saved more than half of what we spent. After around 8 years, any electricity our panels generate will be “free” (compared to what we would have paid if we didn’t get the panels).
The other thing I like to do is save money on groceries. Soon after we moved to our house, we lost the local Best Buy. That was terrible for a technology geek like me. However, Aldi moved into the space. It is one of the best grocery stores for cheap, quality food. That’s a great financial trade-off for us. For example, they have so many chicken deals that I’ve been able to write some creative articles like, “McFly, Are You Chicken?” and Rich Chicken, Poor Chicken.
While I’ve had the best luck with Aldi, but occasionally, I can find some deals at our local Shaw’s. The local military base is a good source as well. I don’t go to different stores looking for great deals. I’ll only give it a look while I’m doing the rest of our shopping. It’s easier to “shop our chest freezer” from previous deals.
Why Being Cheap Matters
Here’s an example that many people can relate to. Let’s say you have a $60 cable bill. (Mine is over $100 and I don’t have any premium channels.) A cheap person might say, “Netflix has more television than I could ever watch at $10 a month.” I’m going to cut my cable bill and save $50 a month.
You might be thinking, “Big deal. That’s nothing.”
That $50 a month is $600 a year. This is where we need to apply the Rule of 25. The Rule of 25 states that in order to afford a $600 annual expense, you need to have 25 times more saved. It’s mathematically derived from a bunch of economic analysis that shows people can live on 4% of their saving mostly indefinitely by investing a large sum of money.
At the risk of putting an example in an example, if you have $1,000,000 you can roughly take out $40,000 to live on. And with the rule of 25, if you need $40,000 to live on, you should have $1,000,000 in savings.
When we convert that $600 annual cable bill into Rule of 25 terms, we realize we need to have $15,000 in our investments.
That’s just one bill. If you multiply it by many extravagances you’ll have a hundreds of thousands of dollars in your savings. Being cheap always makes a big difference when it comes to reaching financial freedom.
A bunch of small savings can add up. They have a snowball effect. It is very difficult to try to make an extra percent or two investing in the stock market. Even if you do, it’s likely to be mostly luck. However, by saving 75% on something like food it gives us more money to invest. Getting that money in the market early has been critical to our secure financial position now.
A lot of that started with being cheap.
Edward Wallace says
I say the same thing all the time. If you pay 100 dollars a month for a storage fee, that is $1200 bucks a year. Same thing with the Netflix, it adds up. Thanks for the article! You get a chance check out my multi level marketing blog and my new math for Advocare. http://advertisetruth.blogspot.com/p/normal-0-false-false-false-en-us-x-none_2.html
Lazy Man says
It’s a good article and it seems like what is going on with every company I’ve seen an income disclosure of. However, I’d prefer if you write it on my Advocare article or just send it to me privately using a contact form. Not looking to get into an MLM discussion here.
Justin @ Root of Good says
Thanks for the link back to Root of Good! I couldn’t agree more. For us, the small incremental efforts to frugalize and streamline our spending led to more savings while working.
But you’ve illustrated the bigger picture well. Cutting a $50/mo bill equates to not needing $15,000 to cover that expense during retirement. In a way, switching from cable to netflix “saved” us $15,000. Do that 7 times over and we just “made” $100,000.
It would have taken me 1.5 years to earn that much money while working, yet all I had to do to earn the equivalent purchasing power of $100,000 is to find seven small $50/mo expenses and ditch them.
And that $600 you save goes into the 25x fund for the other bills you can’t or won’t reduce.
On the other hand, you do have to keep in mind that you are giving up cable for the rest of your life, for a mere $15k. (You can change your mind later of course, but then you don’t get to “keep” the money.)
I’m with you. IMO, being frugal is the first step. If you put earning more first, it’s way too easy to inflate your lifestyle. So learn to live frugally first, then earn more.
Nice deal on those chickens. I wish we have an Aldi here. It’s pretty rare to get chicken under $1 here.
Lazy Man says
That’s a good point about starting with frugality. I hadn’t thought about it, but we’ve started off being more frugal and now just inflating our lifestyle a bit. (Of course the chicken example, is not part of that inflation.)
Doreen Taylor says
Great stuff Lazy man! Let me add a tip for you here as I too do the chicken thing for my dogs. If you can get the skinless thighs cheaper than the breast. Feed the thighs to them, raw instead. Thighs have the highest taurine and l-caritine in them. This will give them all they need and keep them from getting DCM from the dry kibble. Start slowly,wash hands before and after and just a few pieces is plenty to give them all they need. They will have more energy too!
Lazy Man says
Thanks for the tip. I don’t like to handle raw chicken any more than I have to, but I’ll give it a shot.