July 21, 2010

Are You an Extreme Saver?


Earlier this week, CNN posted this article featuring people who have applied "extreme savings" tactics to their personal finances.  If you haven't read it yet, it is inspiring, especially since the families and individuals featured are in all different stages of their lives.

I like how the article points out the key methods that these folks have used to achieve their savings goals - I bet most of you are using some (if not all) of these methods already.

I like to think that my hubs Knute and I are pretty good savers, but maybe not as extreme as the folks in the article (although we're getting there).   I did a quick tally with pencil and paper and our savings rate of post-tax income comes in at about 26% (and I'd guess that estimate is a bit on the low side).  Here's how we stack up:

1.  Pay Cash & Avoid Debt

This is one of those goals that we've conquered at different times in our marriage (15 years - woot!) only to have our life circumstances change radically (we moved 6 times in 11 years + kids + medical bills + job changes - oy! ) and find ourselves relying on our good credit again.  I'm happy to say that we're now down to just our mortgage and a consumer loan and we're working on knocking those down a little each month. 

It really took the economy tanking (as well as the value of our investment portfolio and the crashing home values around us) for us to see the true wisdom in avoiding credit debt and striving for a more cash-based financial life.  And because it is a priority for us as a family, over the last three years we've saved the cash to pay our two older children's Catholic school tuition in full when tuition is due. 

2.  Wait, baby, WAIT!

Impulse buys are something we avoid as much as we can and we try to designate part of our budget each month to "splurging" on little extras - seeing a movie as a family, a nice dinner out as a family, or doing something fun like mini golfing.  Of course, all those adventures and splurges are much more fun when you've got a coupon for your destination!

But shopping isn't a sport and shouldn't be a form of entertainment or a means of fulfillment.  I've said it before and I'll say it again - no one ever found true happiness in the Dollar Spot at Target.  8-)

I also know I became much more aware of the example that impulse spending sets for my children once I became a mother.  We want to raise our kiddos to be financially independent with the savvy to make smart choices which includes learning how to wait for what you REALLY want and to save for it.  All three of our children get a small monthly allowance (different amounts based on their age and ability to help out around the house) for the express purpose of teaching them how to manage their money.  They know Mom won't be buying them those Silly Bandz or that Bakugan so if they want it, they'll have to part with their own greenbacks - and many times (I'm happy to say) they decide they don't want it so badly after all. 

3.  Earn Extra Money

While this blog doesn't earn a ton of cash, what I have earned here and with my other online endeavors helps our family budget (our frugal family vacation next month will be paid for out of my earnings).  Any time you can step outside of the box and earn extra money, you can apply it to your financial goals (and not indulge in a little of the #2 above!). 

While I worked full time and part time before becoming a mother (in a myriad of different jobs as we moved around the country), these are some of the top ways I've earned money while being a stay at home mom:

:: Helping at my church (I could bring the baby along)
:: Freelance writing
:: Blogging
:: Selling on Ebay (I paid my oldest's tuition for kindergarten with what I earned doing this)
:: Market Research Studies
:: Yard Sales
:: Guest Speaker (on couponing)

4.  Don't Spend it ALL

Pretty simple idea - even if you have the means, don't buy the biggest house (we'd downsize a bit from our present house if we could right now but the housing market isn't doing so well in our part of SW Ohio) or the fanciest car with all the bells and whistles.  Don't buy into the myth that happy childhood memories require an annual vacation to Disney, a cell phone plan for your ten year old, and a car on their sixteenth birthday. 

Live on less than you earn.  Easier said than done, but I do believe the idea of keeping up with the Jones' is being slowly replaced by the idea that it's cool to be frugal.

5.  Cut Day-to-Day Spending on Necessary Items

I think a lot of this goes back to #2 above; take the time to spend thoughtfully and deliberately and try to spend less on what you need so you have more money left to achieve your financial goals.

Some ways I do this are couponing (but of course!), buying clothes on eBay and at Goodwill, thrift stores, or consignment stores (when my daughter needed summer clothes for camp, I was able to get her lots of cute stuff for about $12 and I didn't care a BIT how muddy she got), swapping items with friends and family (we have a uniform swap for our school),  and re-purposing items in your home. 

6.  Monitor Your Money

This means more than just using your checkbook register.  Ideally, you should have a monthly budget that accounts for monthly expenses and has savings categories to handle annual or biannual expenses (like vacations, birthday gifts, Christmas gifts, vehicle registration fees, home owner's association fees, etc). 

You also need to have a longer-term plan for your financial life which means setting goals and asking yourself the tough questions.  Am I going to fully pay for my kids college tuition or just help them pay their way?  When do I want to retire?  Do I want to buy a house?  To own my house 100%?  To move?  Do I have enough life insurance (whole and term) for my family's needs for when I die?  Tough questions but ones you must answer if you want to build a realistic financial plan on your own or with the help of a financial advisor.

7.  Double Earners, Single Spenders

This is something I hope we can achieve as a family in the not-so-distant future: living on one spouse's income while saving the other.  We've been a single income family for the better part of a decade so I think this will be an achievable reality for us. 

8.  Make It a No Brainer

Set up your savings to come directly of your paycheck or your checking account once a month then build your budget on what's left. 

I remember when we first started investing and buying life insurance; my hubs and I were both twenty-four years old and he was active duty in the Navy.  I won't lie; the first month that our savings and insurance went out of our checking account, it seemed like a huge amount.  But by the second month, we had adjusted and discovered that we didn't really miss it after all.  I only wish I knew then what I know now about couponing!

Since then, we've increased our savings and insurance as our family has grown and our goals have expanded; putting our financial plan on auto-pilot makes it a priority and means it gets done. 

There you have it - my take on how we've implemented some of the methods of the extreme savers featured in the CNN Money article.

After reading the article bashing coupons on Yahoo! Personal Finance this week, it was refreshing to read about so many folks who are doing more while spending less. We frugalistas aren't alone - saving money is hip, peeps!

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