Save Frugal needs Eliminate Substitute

Extreme saving plan If you are in a dire financial situation and have to go to the extreme with savings, re-defining what a bare necessity is becomes unavoidable. In this case, you will have to cut out everything discretionary and focus on finding the cheapest solutions for your basic needs. If you have to be really radical you can try to get your groceries in the cheapest stores or food banks, grow most of your own food, severely restrict energy use to minimum lighting, heating cooking and no cooling, keep no or only the basic communication service, cut back to the minimally required insurance, give up driving, purchase every absolutely necessary item at the cheapest possible price in consignment stores or yard sales and not spend a dime on anything beyond what is absolutely necessary to survive. Establish new saving-conscious patterns of consumption and investments You can use such an extreme saving plan as a temporary solution in an emergency, but it will not work as a long-term strategy. Fortunately, most people do not need such radical plans. Nevertheless, everyone can benefit from establishing a saving-conscious pattern of consumption, spending and investments that goes beyond one-time, ad-hock savings campaigns and leads to a more economical, yet still satisfying lifestyle. Researchers studying the most successful ‘frugal’ companies that compete on efficiency identified four positive economical behaviors: keeping costs low by spending on the necessary functions and products only, using resources efficiently and creatively to find alternatives for expensive purchases and investing in project and equipment that reduce long-term expenses. Taking a page from the book of the frugal giants of the likes of Wal-Mart and Southwest Airlines can help you build and maintain personal financial health and wealth. It requires significant upfront work to assess your spending and develop new approaches to spending and buying. You will also have to make lifestyle adjustments and sacrifices, but it can have a big positive impact not only on your future finances, but also on your ability to live a good life at a reasonable price. Review your spending habits and routine To identify what expenses you can eliminate and where you can find alternative solutions for needs you want to continue to cover, you have to review your spending habits. Bank statements for card transactions, saved receipts for major purchases are a good starting point, but to get a complete picture including the smaller, but frequently purchased items such as coffee, magazines and lunches you have to keep a more detailed spending log for a few months. You may also benefit from thinking through your routines: when and how often you drive, where and how you make your purchases and how you use the products and services you bought. Closely observing and recording your spending habits alone may make you more self-conscious about saving opportunities. Develop a plan Based on your detailed and comprehensive spending records, you can develop a sustainable saving plan. Set up high-level categories for grouping your expenses: energy, groceries, transportation, clothing, entertainment, services and discretionary. Within in each category, where it is possible and makes sense based on the total spending, you can create sub-groups: produce staples, meat, drinks for groceries, various types of clothing for the different family members for apparel, books, magazines, travel, restaurants, theatre, sports, hobbies within entertainment etc. You can start by assessing the overall level of spending for each category and set up targets for them. Alternatively, you can start by scrutinizing the expenses in the various groups. You should try to understand what general needs your purchases target: i.e. convenience, social life, timesaving, basic utilities of life etc. Cut out unnecessary or unimportant items Once you have an understanding of what you spend on and what satisfaction your purchases give, you can start eliminating items that are not necessary or important. Unused gym or other club memberships, hardly utilized extensive cable or cell phone plans, too much insurance coverage, useless, randomly acquired services attached to credit cards, subscription to magazines or newspapers that you never read are easy targets. If you find that you do most of your grocery or apparel shopping on impulse, end up throwing a lot of food or have a stockpile of never-worn clothes, you may find that using lists for such purchases can help you can consistently reduce the money you spend here. If shopping around, coupons and sale hunting are not something you currently do; you can consider incorporating them into your necessary purchases for more savings. A closer look at the energy use of your household may also identify easy saving opportunities. Electronic devices left on or plugged in, a liberal use of heat or air conditioning and a house bathing in continuous, bright lighting can add hundreds of dollars to your electricity bill every year, turn everything off and down. For more energy savings, you can eliminate or curb the sue of certain appliances: air dry the laundry instead of running the drier for hours, consolidate the dishes in fewer dishwasher loads or just wash them by hand. The entertainment and discretionary spending categories could be ripe with opportunities for cuts. If you look at it pragmatically and are eager for big cuts, you can eliminate the entire categories: no more restaurants, trips, vacations, shows and new editions of video games. Look for alternatives However, you may not want to give up everything not even from the nice-to-have’, discretionary list. There is no need to eliminate all good things from your life, but it could make you feel better both about your life and about your finances, if you found cheaper ways to satisfy your needs. You should consciously build your ability to find creative substitutions or smart alternatives. Voracious readers could satisfy their appetite for reading materials from a library instead of the bookstore. Movie enthusiasts can subscribe to inexpensive DVD rental or online download services instead of buying highly priced discs. If you crave social interaction and friends, you can set up barbecues and house parties for fun instead of meeting up in expensive bars or restaurants. Browsing in consignment or discount stores for unique, one-of-a-kind, affordable clothes can be fun and still help you build a nice closet. Filling the kids’ drawers with hand-me-down or second-hand T-shirts and shorts for the one season that those clothes still fit them should be a good enough alternative. If you find yourself driving around often and for short distances, hopping on a bike or walking instead could help your wallet and waistline, while consolidating your errands into fewer trips could save you both time and money. Almost everybody has many potential, big-impact substitution opportunities, you just need to consciously look for them and consistently integrate them into your routines. Once they have become ingrained, you will barely notice a difference in your life except that you will still have most of the things you want, they will just come cheaper or even free. Invest in products and services for long-term savings Sometimes you may have to spend a little more upfront to save a lot later. There are some basic things where investing for savings makes sense for everyone: paying for routine medical check-ups to avoid serious and costly medical conditions or periodic car maintenance to get ahead of an expensive breakdown. Apart from these general invest-for-savings strategies, there are many bigger and smaller opportunities where a smart investment can help create a winning saving substitution for a basic or even a nice-to-have’ need. You can buy a bread machine to substitute weekly bread purchases. To supply the whole family with custom, unique clothes, you can invest in a sewing machine, fabrics, supplies and maybe a sewing class. You may have given up your costly gym membership, but you can continue to exercise for your fun and long-term health by purchasing a home exercise machine and picking up running. Opportunities abound For most people there are many opportunities for a more inexpensive life style. However, establishing and sustaining healthy and economical spending habits requires a systematic and periodic overview of your needs, wants and spending habits, a conscious and continuous focus on elimination of waste and a constant search for and committed use of creative substitutions. Building and maintaining a frugal and saving-conscious mindset can help you create a fulfilling and affordable life in which you can at least bake your own cake and eat it, too.