Frugality:Getting Started in Two Easy Steps
This week our discussion on The Complete Tightwad Gazette
) way of dealing with your money.
Step One - Record ALL Spending
According to The Complete Tightwad Gazette, the place to start with getting a handle on your finances is here:
“…record spending habits for a period of 3 months” (p9)
Personally, I try to record all of our spending all of the time (with the exception of “petty cash” and “personal spending money” which are unaccountable amounts).
But if you don’t feel you can make a commitment to record all spending long-term, it IS helpful to at least do this for a period of time every now and then. It gives you a more *honest* look at where your money is going. If you don’t know where it is going then it is very difficult to make changes to how you’re spending.
Step Two - Separate Expenses Into Essential and Optional
Once you know WHERE your money is going, it’s important to look at what items you consider to be “essential” and what items you might consider “optional”.
I found this quote in The Complete Tightwad Gazette quite interesting:
“No one but you can say exactly where the line between essential and optional expenses falls. That depends on your value system”. p9
I’m not 100% sure I agree with that statement. I feel that particularly in Western cultures, we have a skewed idea of what really IS essential spending and what is optional. While I do agree that our own values system may cause some variation, I feel that many of us need to take a long hard look at what we consider “essential” when it comes to spending.
Discussion Questions
Do you track your spending and if so, how?
Do you track all the time or just periodically to check on where your money is going?
What are your thoughts on the debate between “essential” and “optional” spending. Have we gotten our ideas on “essential” a little “out of whack”?
Feel free to add any other thoughts and/or questions to the discussion in the comments section below.
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I don’t track spending at the moment but I always make sure I come in under budget which was carefully determined before I bought anything. So it is in effect tracking since I know what amount of money will be going where. But when I started this, it definitely DID help to track because it made me more aware of sticking to the budget. I think you need to start strict to develop the good habit then you can relax a bit if you’re disciplined enough to stick to it.
On the whole, I do think society does have many items deemed “essential” that would have been considered luxuries even ten years ago. I think the thing with essential spending is anyone can talk up something enough that it sounds like you can’t possibly live without it, marketers are very good at it. But as my own personal example, I consider our new sofa (still on order, argh) essential even though I know that in the scheme of things, it isn’t. We’re not exactly bums on floors up here!
I track my spending. Using debit card is also great because your bank statements serves as your tracking device online.
I track all my spending using financial software and have for about 10 years. I find it works really well for reminding me when bills are due and planning for expenses that are coming up, plus it helps us to set our budgets because we’ve got lots of data to work it out with. I try to use cash as little as possible because its much harder to keep track of. I use a credit card for just about everything and then pay it off every month and it gives me a good record of what I’ve spent. A debit card’s a good option if the credit card is a bit of a trap.
I think what is essential and what is optional spending is a very personal thing. Everyone has different priorities as to what they want to use their money for, but I agree that working out what’s essential is a important first step. If you can be confident that all the essential expenses are covered, then you are free to “enjoy” the optional.
I think another way to look at it is essential, important, valued and non-important. So essential is food to meet our bodies nutritional needs, access to clean potable water, shelter (ie rent, mortgage, whatever), heating and cooling, electricity, health and medical spending, basic education.
Then important is things that you could give up if you made a major lifestyle change but that you don’t want to. So car and petrol - I mean this depends where you live too, if you live in the country a car might become essential whereas if you live in the city, it’s most likely not. Childcare, extra money on food so that it becomes a delicious and varied diet rather than just a meeting the needs diet, extra education or extras in education. Maybe a few other things - extra savings, investing, etc.
Valued are those things that are important to you, that you value but you can do without. When I say “I save money on this so I can have or do that”, the that falls under my valued category. So for us it’s going out to eat occasionally, travelling, the internet, camping, dancing, whatever, whatever, a bit of fun money.
And non-important are your money wasters so too much takeaway, wasting food that has to be thrown, paying excess fees and charges, etc.
That’s how I look at spending. We always make sure we have money to cover the essentials and important first. If I need to cut back I always attack the non-important first but if things were tight, the valued would also start to go. Thankfully we’re in the position that so long as we continue to monitor our non-important spending, we have enough leftover for everything else.
Great Post Lightening .I informally track our spending through the credit card statements - which we pay off automatically each month.
I was planning to do a three monthly review (Jan to March) but have had other things more important (2007 Tax) so it is on my to do list.
I agree with what Cat & Guera said - it is very individual what are important to each of us and where we spend our money or save to do x y or z instead.
My husband doesn’t always follow my plans though and uses cash more than I would like… I can’t track his spending.
We’re pretty lax with the budgeting. Once a month, we sit down and really nit out all the bits and pieces; and then set up a budget for the month. Eg. xxx for groceries each week (we get paid weekly which is easier). Anything under that gets put into a jar, and anything over that gets taken from something else. eg. nights out. Our savings is not touched if we go over budget & we feel that “nothing is for nothing” - so it’s also our way to teach ourselves what we really want; and is it worth forfeiting xxx for some stupid thing at the supermarket?
We don’t use the credit card either. Occaisionally, one of us will put somethign on it - but it’s only ever a re-imbursable expense for work. As soon as it’s reimbused, it goes straight back onto the credit card.