Small Changes, Big Results
The Small Stuff Really Matters
This article is the fifth of a fourteen-part series that explores the core tenets of Get Rich Slowly.
Getting started with smart personal finance isn’t always easy. It’s one thing to read about the steps you should take, it’s another thing to actually do them. Your debt is so overwhelming or your saving goals seem so lofty that you begin to believe that the only way you’ll ever get where you want to be is by winning the lottery.
Part of the problem is that we live in a society that idolizes the Big Winner. Nobody celebrates the guy next door who bikes to work, grows his own food and cooks his own meals, shops at the thrift store, and gets all his books from the library. That sort of life isn’t glitzy. Yet it’s that sort of life that can (and does) lead to true wealth.
I can still remember the first thing I did when I decided I was tired of being buried in debt, have you ever seen a penny, dime or some denomination of change in the parking lot on your way to your vehicle or as you are walking along? Of course you have, I started picking those up and placing them in a jar and it is amazing how fast that money grows. I still do that to this very day, even if I am on my bicycle headed to the refuge. Sometimes I will see a dime, penny, etc. at a stop light or in the middle of nowhere and I will pick it up put it in my jersey and thank God even as I put it in the jar upon my arrival home because I believe that if you do not respect money it will not respect you and you will forever be a slave to the money instead of the money working for you.
When I became concerned about my finances, it was months before I had any big decisions to make even though there were tons of small changes I made everyday that led to big results.
It’s true that it’s important to save money on the big stuff, like a home or a car. Any time you make a large purchase, your opportunity to save is magnified. However the large transactions are rare. How often do you spend more than $100 on anything?
You have more opportunities to save when shopping for groceries. You can clip coupons, buy in bulk or shop for store brands or compare unit pricing. And you can do it today. Saving fifty cents a week on almond or coconut milk might be inconsequential as a one-time occurrence, however, over the course of a year, it amounts to $26. Taken together, many such small economies make a real difference. It’s these small changes that will lead to big results.
Maybe you save fifty cents a week on laundry detergent by using a less expensive brand, save $4 a week by clipping coupons, save $2 a week by riding a bicycle to work on Fridays, save $25 a month by dropping to basic cable, save $47/year by canceling your subscription to a magazine or two, and save $100 during the summer months by growing your own vegetables. These are small changes, and these choices alone would save you over $750 a year.
Remember: A penny saved is far more than a penny earned. You earn pre-tax dollars, yet you spend after-tax dollars. So what does this mean to you? Well, depending on your tax bracket, you might have to earn $111 or $133 or even $150 to actually put $100 in your pocket.
Assuming you’re in the 25% tax bracket, saving $750/year is like giving yourself a $1000 raise!
Starting small has an interesting side effect. As you get in the habit of cutting costs on one thing, you find that you can transfer that skill to other parts of your life. One small step leads to another.
An uncertain future
Some folks frown on frugality. They equate it with being “cheap” and consider it beneath their dignity. Others are unwilling to make sacrifices today when the future is so uncertain. They’re not willing to “live like that” when they could get hit by a bus tomorrow. I think this is crazy for a couple of reason:
First, spending is not the same as happiness. Second, most of us are likely to live a long time and with advances in medical sciences we are expected to live a very long time. Which would you rather do?
Prepare for a long life by saving and investing, and then die tomorrow.
Spend money you don’t have now, and then be unable to afford what you need when you’re older.
Recently, I had a chat with an acquaintance who runs an adult foster home. She told me anecdotes about her elderly residents who’ve run out of money. Their quality of life is not high. If you think it’s a burden now to give up your cell phone or to take the bus, try having to pinch pennies on necessities when you’re 70. Or 80. Or 90.
Remember: Don’t confuse frugality with depriving yourself. If pinching pennies makes you feel lousy, then loosen up. Spend a little more. I am not advocating “retail therapy” or spending above your means what I’m telling you is that it’s okay to spend more for your favorite brand of yogurt or to get your favorite cut of beef. If you don’t like shopping in thrift stores, don’t.
There’s real value in boosting your income, I don’t deny that, I strongly believe frugality is an important part of personal finance, too. And for each of us it’s different, I might be able to cut back on clothing and transportation and still realize I’ll probably always spend a lot on food. On the other hand, food may be a perfect place for you to cut costs because you’re not willing to compromise on your wardrobe.
Frugality doesn’t mean living like a pauper. Frugality is a good thing. Thrift is a responsible choice. When we restrict our spending on the unimportant, we’re able to indulge ourselves on the things that matter most in our lives.
Don’t Confuse Frugality With Depriving Yourself
Jonni McCoy’s Miserly Moms: Living on One Income in a Two Income Economy lists eleven miserly guidelines designed to help families reduce expenses. The first of these is: Don’t confuse frugality with depriving yourself.
This is the most important aspect of being successful at saving money. If any money-saving activity makes you feel cheap or tight, you will eventually abandon your efforts. That is not the price we need to pay to reach our goals.
If you have adopted a lifestyle of thrift or frugality, you are not being cheap when you buy generic food at the grocery store. You are not being cheap when you don’t purchase Tide or the latest trend. You are not being cheap you are choosing a different set of values. You are working toward a greater goal. You are not depriving yourself, you have elected to live debt-free, or to follow a spiritual ideal, or to save for a trip around the world.
When you adopt a frugal lifestyle, you change your value system. You acquire less Stuff, but you gain more time, more freedom, more peace-of-mind. Making any lifestyle change through acquiring a frugal mentality, beginning an IRA or starting a diet, requires that you keep your goal in mind constantly.
If you lose track of why you are making sacrifices, the sacrifices become a burden.
McCoy recommends that you track your success as you work toward your goal. Make a chart to graph your savings effort because what gets measured gets achieved. Keep statistics on how much extra money you save by walking to the store instead of driving. Compete with yourself to see how small you can get your grocery bill. McCoy also advises that frugality does not mean deprivation:
When I first started my frugal lifestyle, I feared what it would involve. I believed that frugal people lived undesirable lives: wearing stained or torn clothing or reusing plastic wrap. I refused to participate in any of that. But such a definition of a frugal lifestyle does not have to be yours. There are many different degrees of frugal lifestyles. I was determined to maintain a sense of class and still be frugal.
I’ve said this before: Frugality isn’t an all-or-nothing proposition. There are different degrees, and it’s important to find what works best for your budget and your situation. Keep your eye on the goal and make conscious choices that make you happy. Don’t bankrupt your future for gratification today and don’t live so abstemiously that you cannot enjoy life now.
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