Money Saving Chronicles #2: The Frugal Mind
Posted by Adam Graham in : Money Saving ChroniclesYogi Berra once said, “Baseball is 90% mental, and the other half’s physical.” The same thing is true about saving money and frugality.
Its possible for anyone to run around to different stores and find cheap stuff online, but we rarely do it unless we understand WHY we’re doing it. Saving money is 90% mental and to save more money, you have to begin with some thought.
You Can’t Have Everything
First thing you have to do is get the idea out of your head that you can have everything. You can’t buy new cars every year while spending more than what you earn while putting nothing into your 401(k) and hope to retire at 40 unless you win the lottery. (And Financial Plans that include winning the lottery need to be rethought.)
Sacrifices must be made. The only thing you get to choose is what to sacrifice. Short-term sacrifices are required for long-term success and prosperity. So, it means living with less so you can save for retirement or for a child’s education. On the other hand, long-term sacrifices are required for many short-term pleasures. You can have the best of everything without saving, but if you do that, you may be stuck working longer and unable to provide for your children’s education.
The greatest thing you can do for yourself financially is ask two questions:
1) What do I want out of life?
2) What am I willing to do to get it?
If you want to retire at 45, its going to take doing without some luxuries, putting aside large amounts to save. It may also mean working overtime or second jobs to save and hasten that day of retirement.
If you want to retire at 75, its going to require less effort and sacrifice, because you’re working an additional 30 years, but you’ll still want to plan for providing for your children’s education.
Also, think of how little things can impact your ability to save and your financial health. If you buy 2 lottery tickets a week at $1 each and you give that up to save, by the end of the year, you’ve saved $104. Even if you can’t quit smoking, if you go from being a 2 pack a day Smoker to a 1 pack a day Smoker, if you’re paying $2.50 a pack for Cigarettes, that’s going to save you $912.50 a year.
Begin to look at your life, scrutinize your spending, and find the money you need to achieve your financial success. However, it all starts with thinking about your finances and dedicating yourself to getting where you want to go. Until you do that, any other advice you’ll read will be moot trivia.
Comment by Michael [Visitor]
Compare and contrast two people of similar income. The first spends his Friday nights at the local bar or at the movie theater. The second sacrifices for several years and invests his money in a conservative manner. Eventually those savings will be used for a small down payment on a house while the other will continue to rent.
Five years later one will have built up equity in a home and enjoyed appreciation of his asset. In addition, he will benefit from the tax incentive as well.
As real-estate values rise the renter will pay increased housing costs while little in return. Consider the position each will be in 10 years down the road and then later when both are ready to retire.
Wealth is built incrementally and small differences are magnified over the years. That’s the greatest reason why so many Americans enjoy such disparate experiences in later years.
Comment by Adam Graham [Member]
Your exactly right, Michael. Its really about choices. Its possible for someone earning $30,000 a year to retire a millionaire if they’re consistently plunking money into the good old 401(k).
You’re right that income doesn’t determine everything. I think even on a more basic level, we knew somoene once who struggled to keep food on the table and was hitting us up for food and money quite a bit. They had no car, they lived in a poverty mentality, but she also bought a lot of stuff she didn’t need.
It made me think of my dad who was on disability after his military service. We never lacked food. We always survived. We had food on the table, clothes on our back, and a roof over our head. We had our hard times and our ups and downs, but fundamentally he knew how to manage his money. He knew how to shop for bargains. After spending some time talking with this lady, I called my dad up out of the blue and thanked him for keeping us afloat and making sure our needs were met.
I’m not a huge guru, but in my short life, I’ve learned the basic thing that your thoughts have a huge impact on your finances. Your attitudes toward money and your understanding of it are going to have an impact on how you manage it.
Comment by Michael [Visitor]
You have a good start . Keep focused.
Setting aside the main discussion for a second, let me say that I am blown away by the comment you made about your dad. I hope you can call him again soon. For the values he taught you are worth a fortune. They are the greatest inheritance anyone can get. As my atheist father always said ,” Give a man a fish and he eats for a day, teach a man to fish and he eats for a lifetime.”