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Sunday, October 24, 2010

Living the simple, frugal lifestyle—a matter of lifestyle modification Part 1

Over the last year, many old friends have asked us how we are capable of living on the limited budget that we have chosen. It is no secret that, in monetary terms, we are living just over the poverty level and loving every minute of this new way of living. Our lives are richer today than they have ever been.

This feature is specifically designed to give you a little insight on how you can begin the transformation to this simple frugal lifestyle. When it all boils down to it, this way of living requires a significant lifestyle modification. Believe it or not, we are still in this transition after living it for over a year and a half.

Ask yourself a few simple questions. Are you dissatisfied with your current job? Do you feel like you are slaving away at your job and can never seem to get ahead? Do you find yourself purchasing things you desire rather than need? Do you find yourself deeper in debt than you were 5 years ago? Are you genuinely happy in life or do you surround yourself with material possessions in an attempt to find happiness? Do you find yourself trying to create or maintain a social status or image you can’t really afford? Are you driving around in a new car? Do you purchase things to keep up with the Jones? Are you sick and tired of this way of living that only gives you temporary gratification? Great, read along and we will share with you some of our experiences to assist you in making your own transition to this way of living a little more pleasing.

We can not possibly look at all of your own personal spending habits, this is where you will need to take a real hard look for yourself. The key here is the willingness to make the necessary changes in your current lifestyle in order for your own plan to work. Depending on your current financial condition, your plan could possibly take a significant amount of time to finalize.

The most important factor in your success will be your commitment and the commitment of everyone in your household.

First, you will need to learn how to create and maintain a realistic budget. There are many free, yes I said free budget guides available on the internet. You will notice that we will be discussing as many free options during our journey through this transition. After documenting all of your household income, you will need to document EVERY expense you have. If you have found one of the free budget guides, you will notice that it is pretty comprehensive, but how do you come up with realistic figure to put towards each category. After all, can you tell yourself right now how much you spent on groceries last month? I didn’t think so. Start at the beginning of next month. Keep a log of every single expense you make for the month and save your receipts. This goes for every gallon of milk you buy, every gallon of gas, every cup of coffee etc… And we do mean every expense. If you pay your insurance every 6 months, you need to factor this into a monthly expense. This will be the foundation to your success.

After keeping track of your expenses for the month, you will have your budget of expenses.

Now comes the challenging part. Take a hard look at all of your outstanding credit. Be sure to list these and your current interest rates. Add up all of the interest you are paying each month. This is money you are throwing away every month. Yes, throwing away. After looking at some of the money saving tips we will present, you will take every penny you save and apply it to pay down these debts. When paying these debts down, you will apply every saved penny to the highest interest debt you have. Only focus on paying off one debt at a time. The sooner you pay off your first debt, the sooner you can apply the money you were paying towards that debt to the next. And this process begins until you pay off all of your debt.

Your goal will be to become debt free. This will be a significant challenge for some of you, but we are confident that you will succeed if you remain committed. We will address budget and debt reduction in greater detail in a future feature, but you get the idea. One note of caution, stay away from those debt consolidation services you may find on the internet. Many of these will only take advantage of your debt situation and keep you trapped and not pay down your debt as quick as you can do yourself. Also, contact your creditors and negotiate a lower interest. Yes, it can be done.

The only way you can effective eliminate your debt is to STOP using your credit cards. Put them in an envelope and secure them at home, don’t keep them in your wallet or purse. It is too easy to use them when you have them available. A wise old timer once said “when you find yourself in a hole, QUIT DIGGING”.

Now let’s look at a few tips on how you are going to save money to apply towards paying down your debt and putting a few dollars a month into a savings account.

Housing is typically your largest single monthly expense. It is recommended that your housing expense should never exceed 25 percent of your monthly income. If you are a homeowner, you will not have much latitude to lower this expense except to consider refinancing while rates are low. If you are presently renting, consider downsizing when your lease expires.

The next largest budget item is typically car payments. Avoid any temptation to go out and buy a new car. If you have a brand new vehicle, consider selling it or trading it in for a reliable older vehicle that gets good gas mileage. If you have a high car payment, this is one way to significantly reduce your expenses. You will also save money on your insurance. Be smart about your vehicles. A vehicle is not a status symbol. It is a functional need that serves as your means to get to where you need to go. If you are going to live a simple, frugal life, you must stop thinking of things as status symbols and think in the terms of functionality.

Next thing to take a hard look at is your monthly budget is food expenses. Many Americans spend nearly 45 percent of their monthly food expenses out of the home. This is rather alarming, but you need to evaluate your own eating habits. How often do you eat out at a restaurant? How often do you stop at a fast food establishment? How often do you buy your lunch at work? These are all areas to cut back on or nearly eliminate all together. Pick one night a month to eat a nice restaurant dinner. Limit yourself. Instead of stopping for fast food, plan ahead and pack a picnic type meal when you know you will be away from the house. Eat at home before you hit the road to avoid the temptation and pack some snacks for the road. Don’t forget to keep a cooler for cold beverages or a thermos for hot beverages in the vehicle when you hit the road. Buying drinks on the road can be rather expensive. Look at all of your options for packing your lunch to work. Sandwiches and leftovers are perfect to take to work with you. Oh, and stop buying bottled water. Buy a water filter and reusable water bottles and take them everywhere you go.

Buying groceries is a totally separate topic. There are so many tips and tricks to saving money; we are dedicating the next segment just on this topic.

OK, here you have the first tidbits of information on how you can begin your transition into the frugal lifestyle. These tips and recommendations will take many more segments to adequately cover them in detail.

Look for all of our future features to assist you in this transition. We encourage you to look for related topics on the internet. There is some really great information out there.

Thrifty: Living the Frugal Life with Style

Frugal Living - How to Live Comfortably on a Tight Budget

The Complete Tightwad Gazette

Suddenly Frugal: How to Live Happier and Healthier for Less

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