Frugal Living:
How to live the best life
with the least money

The Frugal Mindset

(Sample article from The Scrooge Guide™)
by Robert "Scrooge" Lunan
© 2004 Lunan Corporation

It's not easy, or natural for everyone to think like Scrooge. For most people, frugality does not come without some effort. But everyone can achieve it. It really depends on how much you want it. The rewards of frugality are many: getting free of debt, paying off a mortgage, having cash in the bank, buying a car with cash, etc. It also means you can be more certain of your financial future and less dependent on the charity (or tolerance) of others.

For some people the frugal mindset is forced upon them at an early age through family poverty. These people are denied credit, have a difficult time getting a proper education and are often caught in the endless cycle of poor education and poor wages. Some of these people learn frugality as a way of survival. Some others may develop an "I want more" mindset.

On the other side of things some are born into affluence and have so much money that they could never be in want unless they spend it like a total fool.

But the vast majority of people are born into the middle class. They work for a living, are moderately well educated and employed at better than average wages. They have easy access to credit. So easy in fact that over the past few years they may have been offered dozens of credit cards, bank loans and credit accounts.

Their combined credit limits on the credit instruments they were granted may be in excess of $100,000. And most of these people have never had a single course, seminar, class or a "talk with dear old Dad" about handling credit. Naturally some of these people get in trouble by buying too much and then having difficulty paying for it. Just like the very poor, they too get caught in a trap, but this trap is a consumerism-credit trap, and the misery it brings can be as tormenting as poverty.

The answer is to change the mindset. The way one thinks must be changed to control the spending urges and plan for the future.

In lieu of a talk with some favorite relative or friend, I offer the following points:

1. Everyone really does need to plan their income and expenses.

   Budgeting is a dreadfully boring exercise. It is also one of the exercises that will make the difference between poverty and riches in your later years.
   
   

2. Once you know what your income and expenses are for a year, then you can plan your purchases.

   Don't forget to allocate some of your money to charity.

   
   It might sound odd for me to be recommending giving away some of your money, but believe me, the good you do to others will always come back to you. Some charities will even be able to give you tax receipts so you can get some of this money back when you file your tax return. (But please don't make the availability of a tax receipt the determining factor for which charity you choose - go with your heart.)
   
   

3. Don't buy what you don't need.

   If you think you need something (other than food, clothing, housing or medical care), detach yourself mentally and have a good long talk with yourself to find out exactly why you need it and determine where the non-credit money is coming from.
   
   

4. Always pay with cash, check or a direct bank debit.

   But don't use your debit card like a credit card, spending now and paying off the overdraft protection later. If that's what you intend to do it is better to go and get the cash first from a bank. At least that way it forces you to have a cooling off period when you can really think about the purchase you are planning to make.
   
   

5. Always look for ways to lower your expenses.

6. If you must buy something look for the best value (combination of price and quality).

7. Never own more than one credit card.

8. Never use the credit card unless it is an emergency.

   If you think you need it for online purchases try using something else like PayPal and have the money sent directly from your bank account.
   
   

9. If you must use the credit card, pay it off in full before the statement due date.

   Never, never, never carry a balance on a credit card!

   The interest will suck you dry!
   
   

10. Force the bank to keep your credit card spending limit low.

    Is there any reason it should ever be over $1000? The bank will want to increase your limit. Don't let them do it.
    
    

11. Each payday, as part of planning your purchases, transfer money from your checking account to a savings account.

    The amount you transfer should be what you determined you need to save for future purchases.
    
    

12. Keep three running balances posted in a prominent spot in your house (like on the refrigerator door).

    The first balance is your checking account. The second balance is your savings account. The third balance is your credit card (which 99.9% of the time should be zero ... right?).
    
    Having these balances in plain view several times a day will keep you mindful of the importance of keeping your financial affairs in order.
    
    

    Money will mean nothing the day you leave this earth, ...but until then wise money management will mean the difference between a miserable and a comfortable existence.

    
    

13. Read point 3 over and over and over again until it sinks in!

Robert Lunan publishes The Scrooge Guide™, a monthly e-magazine offering common sense money tips, frugal living tips, and lots of great articles like this one to help you get out of debt, stay out of debt, beat shopping compulsions, spend less and get more out of life.

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