Recently, a reader contacted me via instant messenger and expressed some deep sadness as a result of reading and trying to do the things she had read on The Simple Dollar. For two months, she scrimped and saved and managed to pay off almost her entire credit card debt, but at the end of it she began to feel like she was missing out on life. So she called up a friend of hers, they went out on the town, and she blew $1,200 splurging on clothes, CDs, and other stuff, putting her right back where she was at the beginning.
Here’s the problem: if you’re going to do a “money makeover,” which is effectively what this lady was trying to do, you either need incredible willpower or you need to follow a strategy of moderation, especially at first. Why? By jumping head first into a highly frugal lifestyle directly from a lifestyle of living beyond your means, you’re engaging in a truly major lifestyle change that will have day-to-day ramifications that you can’t even imagine yet, let alone the psychological ramifications.
Think of it in terms of a diet. Dieting works best with a framework of support and a framework of moderation. If you commit yourself to switching from eating fast food completely to eating lots of salad, and you don’t have people supporting you, what’s the likely outcome? My wife likes to refer to diets like these as “Sara Lee poundcake diets;” in short, you end up splurging because of the physical, emotional, and psychological factors.
In short, if you’re in need of a solution to your financial problems, don’t try everything at once. Instead, try something like this:
Read through The Simple Dollar (or another personal finance resource) and find those things that seem compatible with your life. I might talk about doing things like making your own laundry detergent or saving $20 a day for a year, but let’s face it: large things like that aren’t for everyone. On the other hand, you can easily trim your grocery bill by making a shopping list, and perhaps socking away $5 a day is more your speed. You do not have to follow every piece of financial advice you read or hear; in fact, doing so is a bad idea. Instead, find ones that seem compatible with your life and go for it.
Set lots of short term milestones that you can actually reach. Commit yourself to using the savings from more efficient grocery shopping to making a double payment on your credit card. See if you can accomplish a money free weekend or a week of frugality. At first, don’t make enormous goals that seem unapproachable; you’re learning to walk, not learning to climb mountains at this point.
Reward yourself a bit. That doesn’t mean go and drop $1,200 on stuff like our friend did. If you like books, reward yourself with a new selection – even better, go to the library, sign up for a library card, and check it out from there. Like to eat out? Allow yourself one dinner out for every so many dinners you prepare yourself at home. Small rewards like these won’t undo your progress and, even better, they begin to feel like real treats instead of part of everyday life – your enjoyment of things like eating out will go way up.
When things are running smoothly, add more things to the mix. If you’ve been saving $5 a day for a few months and have built up a nice emergency fund, how about kicking it up to $7 a day? If you installed CFLs and saw a big drop in your electric bill, why not spend a few hours looking at other energy savers, like programmable thermostats? If you finally paid off your car loan, how about keeping that car for another year or two and making those payments instead to a savings account so that when you go to buy the next car, your loan is much smaller (or maybe you can just write a check for it)? Keep adding little pieces to your frugal lifestyle.
I’ll share one final anecdote that I hope will inspire you. When I was first figuring out that I needed to make some major changes to my life, I tried making tons of changes at once and it failed miserably – and very quickly. However, I did pull some very nice pieces out of that train wreck: I discovered the local library (which I’m now almost addicted to), I learned how to use a shopping list, and I had switched all my light bulbs to CFLs. Two months later, when I sat down and did my bills, I was almost stunned to find that I suddenly had a few hundred dollars left over at the end of the month when I would have been scraping two nickels together. In short, it was by just doing a few things in the beginning that I began to see the power that it had – and soon I was trying all sorts of things that I would have never dreamed of before.