Frugal Friday - Is Frugality a Fallacy?

Crystal is hosting a Frugal Friday. Here is my Frugal Friday tip - does frugality even work? Is it a fallacy? Fallacy is defined as "a misconception resulting from incorrect reasoning ". Is your reasoning on pinching pennies incorrect?

Let me begin by saying that we do try to live frugally and responsibly with our money. We try not to waste food, spend inordinate amounts of money on fleeting pleasures, or to spend money to keep up with the proverbial Joneses. Once in awhile I do re-use my ziplock bags or my tinfoil (only if it’s been on dry foods). I shop at garage sales and thrift stores and I even used cloth diapers (though I was never totally convinced of the savings vs the work and hassle).

It seems like so often people that are trying to save money/make money – get out of debt - get so caught up in the little things, little ways to save money, to live frugally, that they miss the forest for the trees.

They become fixated on the nickel and dime stuff but they do not tackle the bigger issues. They give themselves the illusion of frugality but it doesn’t amount to much.

No one ever avoided the poor house b/c they washed their tinfoil, turned the thermostat down at night, saved every extra packet of ketchup from fast food restaurants, recycled their Christmas cards or made their own cleaning products from vinegar. These all are good things, “waste not, want not” and all that – but if you really want to make a difference – your whole lifestyle needs to change and you need to focus on the major issues.

Again to avoid offending anyone – I am not saying that you shouldn’t do the little things too, I’m always happy to save a couple of dollars – and I realize that some people are doing the little things because they have no control over the “big things”, and every penny does count. That’s right – but the bigger pennies count for more.

For a few years, my dh and I were financial counselors through a Christian organization. There was only one case that I can remember – where the financial problems were due to a lack of money (a young couple starting out, lots of college bills, and wife newly pregnant). Most of the financial problems were due to the following:

Too many cars – or expensive cars
Too big/expensive of a house
Paying for private school education or kids’ college

For the most part, the people we saw were not spending too much money on entertainment or on gifts or on vacations or in savings accounts – because they did not have the money to do so. Some of them had budgets, some did not – some probably kept track of every penny but it didn’t help.

The decisions you make on the choice of a house can mean hundreds of dollars a month once you consider all the costs of housing (more taxes, more work, more furniture needed, higher utilities). And a difference of $5,000-10,000 a year. If you are not right on the big stuff, saving $5 a week on brown-bagging it – isn’t going to make a difference. If you are buried 10 ft deep in debt, a spoon isn’t much help.

Nickel and diming will never make a difference when you are up against too much house, or too many cars, or monthly tuitions that are above your means. Take care of the big issues and then all the small things WILL make a difference.

Frugal Friday - Teaching Kids To Be Money-Wise

Crystal is hosting a Frugal Friday/Making Your Home a Haven...my "Frugal Fridays" post is about teaching children to save money, and about the concept of interest.

For the past 2 or 3 years we have been giving our 2 children a small allowance. It’s based on a flat figure plus their age – so the older child receives a bit more than the younger.

The allowance is not given as “payment” or reward for doing chores – we want them to realize that the chores are just something they do based on the fact that they are part of the family and that we all work together.

We came up with the purpose of the allowance interest plan first – to teach the benefits of saving and growing money. And in order to teach them about money, we had to first provide them with some money.

This is what we do. Each month the children receive their allowance. The money is given to them in cash. Then they have the option of depositing the cash into “The Dad Bank” (DB) aka “Fridge Money”. Any money that remains in the DB at the end of the month, we gives them an additional 5% interest on that amount. The kids can either take the interest in cash or deposit it back into the DB, thereby increasing their interest the next month.

If they receive any additional money throughout the month it is also deposited into the DB.

When we are out shopping and the kids want a treat (a toy or book or ice-cream etc) they know it comes out of their DB account – and if that money decreases, there will be less interest that month. If they want to buy presents for the rest of the family on birthdays, or Christmas – this is where there money comes from. Most of the time physical money is not exchanging hands – but is all kept track of in a spread sheet.

Each month the children are informed of their savings total in the bank, their allowance and their interest for that month.

Not only does this method teach the children about interest, but also to be responsible for some money and to have to be the one to decide whether or not it's a "wise decision" to take out some money from their DB and spend it. There have been numerous times when one or the other child has asked me whether I thought it was a "wise decision" for them to buy something and if I answered "no" they would put it back. Sometimes they will put it in the cart, think about it for awhile and then decide for themselves that it wasn't a "wise decision".

The amount of the allowance and the amount of the interest doesn't matter - you can choose whatever amounts you are comfortable with. But also remember that in order to learn about money, children need to have some that is considered their own. You can't expect a 16 year old with their first job to automatically know how to handle money - they need practice.

Frugal Friday - Lowering Your Expectations

Crystal is hosting "Frugal Friday" which consists of many links to helpful tips on living frugally.

Even though my posts are primarily about food and eating exotically (which may sound expensive but it isn't), I thought I'd join in and post a tip.

Lowering your expectations.

Settling for something less. Here is one way to be happy living a frugal life – lower your expectations. Be content with less-than-perfect. Easier to say than to do. The new dining room table you desperately want is $1500. It would look fabulous in your new dining room and you’ve never had a dining room before…so you REALLY want it.

But then you find one second hand for $250. Maybe a listing in the newspaper, maybe a friend is getting rid of hers. It’s not EXACTLY what you want and it’s not new – but you know what, it’ll work. Might have a few nicks and scratches, but so will the new one in a year.

You’d really like to buy your son that new bike for Christmas. He is 7. It will be his first “real” bike, so you want it to be special. A new bike is $140 – the thrift store has one for $50. The $50 one is a few years old, needs it’s tires pumped and a wash-down. But it will do. What your son really wants is the bike itself.

Now there are times when you don’t want to “settle” for something less. Obviously something that would comprise your health or the well being of your family isn’t any good. “Settling” for a prospective husband or wife is not a good idea either.

Set an example before your kids of having “lower expectations” when they are young. The other day we were out shopping at the mall and my dd saw the prices of mall clothing. “Wow” she said “no wonder you shop at the thrift store.”

It’s not a new tip to buy something used – the tip is in lowering your expectations of what you really need or want.