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Lessons of Frugality and Savings

Some people may label me cheap. I say, “No. I just want to make well-informed financial decisions.” Well, I don’t really say that, but it is what I mean.

To me being cheap and frugal are two different things. Cheap, in my opinion, is compromising the value, quality, and function of an item, product, or service to obtain the lowest possible price – at the extent to which the whole point of saving is undermined. Frugality is a skill, a graceful one at that, which attempts to find the best usage of money for its user.

Committing to either one can be a burdensome undertaking, but if we would like to move closer towards financial freedom it’s going to require some financial constraint. It may sound counter-intuitive, but it makes sense (no pun intended!) once you think about it.

There are many ways people cut corners, save pennies here and there. Our concern is saving dollars. Here is an example of one person has lived frugal.

*Marushka works as an assistant for a high-powered talent agent in Beverly Hills. She makes decent income, but would like to save up for the down payment on a house [Hassan says it’s always good to establish an obtainable financial goal]. She wants to watch her money, however, working in the entertainment industry has equated to a lot of extra expenses that she initially didn’t anticipate. For one thing, networking mixers and afterwork cocktails are standard. Marushka imagined she has spent hundreds on drinks alone. So, where can she cut corners?

The first step Marushka did was analyze her desireable expenses. What were the areas where she was spending on non-necessities? That was easy: shopping and eating out. Marushka used to go shopping at her favorite boutique store in Westwood almost every week. Now, instead of waisting gas trying to find parking only to buy an overpriced dress that will collect dust in her closet she uses that money to contribute more to her Roth IRA [Hassan says, you need to save for retirement]. And for eating out, she only allows fine dining once a month. This is all good, but we’re not hitting frugality yet.

Marushka then took a look at her necessary expenses: gas, cell phone, food, and even afterwork cocktails, which she felt was important for her career. Using the nifty site BillShrink.com she created an account that alerted her to the cheapest gas in her area as well as the most competitive credit cards. Along the same lines she researched cell phone companies and switched providers to an all inclusive plan that was much cheaper then what she paying for before (she switched from Sprint to MetroPCS). The best part, after the savings, is that her bill would always be the same each month – easier for budgeting. The cellphone switch alone saves around $70 a month. Now, we’re getting closer.

Marushka used to turn her nose up at discount stores until she realized there can be real savings to be had there. Everyday products like toilet paper, paper towels, cleaning supplies, dishwashing soap, and detergent she could find at the 99 Cents store for good quality [Hassan says, find ways to cut down on everyday/regular expenses…because they’re most frequent]. On good days she could even find name-brand items cheaper for they would be at a competing store. But becareful. Sometimes the 99 Cent store can be more expensive. I know, shocker right? For items she couldn’t pick up at the discount store she exercised her Ralph’s Club Card and cupons. Sure, she was shaving a little of her bill, but that quickly amounted to significant savings.

And what about her cocktail/networking hours? Well, Marushka understood in order for her to not overspend on drinks she would have to anticipate how much she could alott herself to spend. We all know how hard it is to make sound financial decisions when we’re “in the moment” and temptation is staring us in the face. The best solution for her was to open up a separate checking account with ING Direct, which allowed her use of a MasterCard debit card. She then would transfer a weekly allowance of money to that card, she called “The Fun Card”. Anytime she would go out for drinks she would bring The Fun Card and leave cash and other credit cards in the car. Now, she can only spend up to the pre-determined amount she set for herself. This way she won’t overspend. [Hassan says, you gotta protect yourself from yourself].

After following this routine for some months she has quickly amassed a sizeable fund. She was amazed at how much extra pennies and dollars she accumulated. Now she’s hooked! [Hassan says, one of the extra benefits of saving..is that it can be addicting. Once you see how much you’ve saved you get excited and want to save even more.]

*Name changed for privacy. Not like she would sue us or anything…

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