All of us use a lot of household products every day. Soap. Shampoo. Conditioner. Toothpaste. Hand soap. Dishwashing detergent. Laundry detergent. The list goes on and on.

Many of these items are used so routinely that we don’t even step back and think about them. We squirt some toothpaste on our toothbrush. We use a big gulp of mouthwash. We dump in laundry detergent up to the line.

Almost every time, though, we use way more of this stuff than we need.

Take toothpaste, for example. If you actually read their suggestion on how much toothpaste to use, it’s substantially less than the amount you probably use. It’s less than the amount I’ve always used, and I use far less than other people I know.

If you go a step beyond that, the back of the package is going to suggest using more than you actually need. Why? If you use substantially more than you need to get the job done, you’ll get the job done and run out of the stuff faster, sending you back to the store to buy more and to cause the company more profit.

I decided to really look at the amounts I was using in my own life and came up with some interesting results on several different things.

Soap I use liquid soap in the shower. I usually squeeze out a pretty big glob onto my washcloth and wash away, not thinking about it. However, if you read the back of pretty much any bottle, they encourage you to use a “small amount” (or some other vague amount). So I experimented a bit. I put just a tiny dot of soap on the wash cloth, about the smallest dot I could make. I lathered it around for a bit and it made a surprisingly large amount of suds. Two dots made as much lather as I would make from a huge squirt. In fact, I found that if I used one of those hand soap dispensers, a single squeeze from that dispenser gave me plenty of body soap for the shower. Using 80% less soap had the exact same results.

Toothpaste I used to squirt a line of toothpaste from one end of the bristles to the other. Reading the back of the tube, they suggest a much smaller amount than that. So I tried different amounts. Eventually, I found the perfect balance for me – an almost circular dot on the toothbrush. This resulted in pretty much the same amount of foam in my mouth (with a lot less over-the-top minty flavor!). Using 66% less toothpaste had the exact same results.

Mouthwash I would usually just pour myself a good mouth full in the bottom of a cup, rinse it around in my mouth for a minute, and spit. However, I was using far too much of it. Using about half as much got the same “burning” effect (yes, I use Listerine). Using 50% less mouthwash had the exact same results.

Dishwashing detergent My dishwasher has two different spots for detergent. Instead of filling up both slots with detergent, I tried filling up just one. I couldn’t notice a difference. What about filling up one slot about halfway? This didn’t quite cut it – it seemed to not work as well. I’ve actually been filling up both slots about halfway now. Using 50% less dishwashing detergent had the exact same results.

Shampoo and conditioner I used to just fill up my palm with shampoo, scrub it deeply into my hair, and rinse. However, my hair is really short. It turns out that just the tiniest dot does the trick – a huge reduction in the amount of shampoo I use. The same is true with conditioner. I’m going to adopt the same “squirt bottle” tactic I use with the soap. Using approximately 85% less shampoo and conditioner had the exact same results.

In fact, the only household product I tried that didn’t succeed just as well without a significant reduction was dental floss. A shorter strand just didn’t cut it.

Each one of these things changed nothing with my quality of life. I just found that if I used a little less up front, I didn’t miss it at all. This means more uses per container of household product – and that means that each container lasts longer.

And that, of course, means money saved without changing a thing about my life.

That’s a win, my friends.

Take a look at how much of this stuff you use. Don’t cut it below what you’re comfortable with, but give it a shot with a bit less. Don’t squirt quite as much shampoo onto your hands in the shower. Don’t put quite as much detergent into the wash. Quite often, trimming a little bit from what you use won’t make any noticeable difference except that you’ll be buying that item a lot less frequently without any change in the way you do things. That means money in your pocket.

One big problem that many people have when they adopt a frugal lifestyle is the perceived reduction in enjoyment they’re going to have in their hobbies. Entertainment spending is one of the obvious places to cut in a budget because it’s not a base need, but it is a very painful cut. If done recklessly, it can certainly reduce one’s enjoyment of day to day life.

This is certainly something that has challenged me over the past few years. I’ve got several hobbies that could seemingly be very expensive on their own but, with some footwork and forethought, I’ve found ways to trim their costs down to almost nothing while still retaining what I enjoy about each one.

Over the last week, I’ve also talked to several people I know who simultaneously have seemingly expensive hobbies yet enjoy them with minimal cost. I made a list of many of these hobbies and the methods used to reduce their costs. If you don’t see your hobby listed below but have a great idea for how to reduce the cost of it, mention the hobby and the cost-cutting method in the comments.

Antiquing Focus on really mastering how to value particular types of items – vintage toys, etc. Save your buying impulses until you’re absolutely sure you spy an underpriced item that you can turn over.

Board games Hit thrift stores regularly as you’ll often find great, complete games for almost nothing. Before you buy new games, attend sessions at your local game store where you can demo such games and try them out. Build friendships with other people who enjoy board games and play their games as often as they play yours.

Camping Buy equipment that will last and will work in lots of environments (so you don’t have to buy multiples). Don’t get too much equipment, as you can make a lot of things with what you find on hand – a tent, a sleeping bag, and a utility tool will work for many people. Don’t buy stuff because you think you might use it or need it.

Coin collecting Know your hobby. Know what rare coins have value, particularly ones that look similar to coins made today. Sift through change you get and find ways to accumulate more change without spending (like getting rolls of pennies or dimes at the bank). Understand what you really enjoy about coin collecting and focus on that.

Comics Check your local library if you enjoy reading comics – they often stock annuals and other collections. Start a “comic circle” where you each buy certain comics then swap them around the circle. For collectors, know the market cold and look in unusual places for bargains, like yard sales.

Cooking Minimize your equipment – you don’t need dozens pots and pans. Cook for yourself, not just to impress others (this improves your skill and saves money on meals). Master the use of ingredients you can easily grow (like our chive patch and our asparagus patch, which require no maintenance at all and just produce free food for us).

Gardening Compost as much as you can as it will reduce your fertilizing costs. Build friendships with other gardeners and share equipment. Harvest seeds and save them for spring.

Golfing Try golfing at the community courses near you instead of at the country club, as municipal courses are often far less expensive and yet still a lot of fun. Once you have a set of clubs, stick with it and only “upgrade” when there are liquidation sales or something else that’s completely exceptional. Don’t be afraid to use “lost” balls – balls hit out in the middle of nowhere and considered “lost” by other golfers – pick them up and toss them in your bag. Get a golf bag with wheels or a pull cart and get some exercise instead of renting a golf cart.

Hunting Handle the meat packing and processing yourself. Don’t buy “special clothes” for hunting beyond what’s required to keep you safe – just add layers in the winter. Focus on specific types of hunting instead of buying a weapon for everything.

Magic: the Gathering Instead of playing in the expensive competitive Standard environment, play Limited instead. Build a “draft cube” (basically, a big, diverse pile of cards) and play using that, particularly when you attend events. Ask to borrow full decks from players that have lots of cards.

Movies Eat a snack and drink a big glass of water before hitting the theater. Don’t buy a DVD unless you’ve already watched a movie multiple times in a theater or as a rental. Swap DVDs (temporarily) with friends. Go to discount theaters instead of “first-run” theaters and you’ll save most of the cost of a ticket.

Pets Volunteer your time at a pet shelter, as it will allow you to bond with lots of pets, help to make sure those most in need are cared for, and also help you to find the perfect match. Learn what an animal’s true dietary needs are and focus on meeting that instead of just buying a big bag of Ol’ Roy – not only is it better for them, it’s often cheaper.

Reading Join your local library – or even volunteer there. Swap books with your friends. Join a service like PaperBackSwap and swap online.

Scrapbooking Keep in mind why you’re scrapbooking – it’s to preserve memories. Don’t spend your money on expensive decorating elements that don’t really mean anything at all. Use highly inexpensive or throwaway items for your decorative elements instead – let that be another channel for your creativity.

Video games Trade games with friends. Play through games all the way before picking up a new one. Buy used games – and trade in any games you have that you won’t likely play again. Never buy new releases – wait until the price starts to drop and you save money while still enjoying the same game.

There are a few themes that run through many of these tips that bear repeating, because they help save money with any hobby.

Build friendships with people who have the same hobby. You can share ideas and equipment with them.
Minimize your equipment. Don’t buy stuff just because you think it might have a use. Go minimal, then expand if you have a true need.
Avoid the “cult of the new.” Never buy a new release. If you wait a little while, you can usually get the same item for less.
Understand what aspects of the hobby you truly enjoy. Maybe it’s just the collecting nature. Maybe it’s just the act of what you’re doing. Whatever it is, spend some time figuring it out, as it will often lead you to savings.

Monica writes in:

I don’t understand how you can recommend that people shop in thrift stores for clothes. The stuff there is usually worn out and just looks bad and outdated. I would never wear that stuff to work.

It sounds to me like you’ve made up your mind about thrift stores and secondhand stores before even stepping inside the door. I’ll make the case anyway.

First of all, I won’t buy the vast majority of clothing on sale at such a store. I’m with Monica on this one – most of the stuff there can be pretty worn out. I’ve seen lots of threadbare sweaters, worn out dress pants, and other items that, if they were in my home, would be meeting the rag bag.

Those aren’t the items I’m shopping for. The reason I go is to look through a long rack of clothes and find two or three items that are barely worn. How do quality items of clothing get to the secondhand store? A person gains or loses a lot of weight. A person passes away. A person decides they just don’t like how the item looks on them. A person is a clotheshorse who only wears an item a couple of times before getting rid of it. Each of these cases can result in some very nice clothes on the rack at the secondhand shop.

If you don’t like the item, don’t buy it. However, there are a lot of gems buried on the racks if you’ll spend some time digging through them.

Second, my biggest focus for clothing buys – once they meet a minimum standard of quality – really is cost per use. Yes, unquestionably, I could go to a store like Men’s Wearhouse, find a high quality article of clothing, and wear it, say, sixty times over the course of several years. That article of clothing might cost me $60, so the cost per use would be $1 per use.

On the other hand, I might find a nice item at the secondhand store. It might have been worn a few times already, so I might only get fifteen wears out of it instead of the sixty I might get from the new shirt. However, that secondhand item only cost me $3. That’s $0.20 per use.

I will take the second item of clothing any day of the week.

What about the time cost? Time cost is one of the first things people mention when they hear a money-saving tactic that they’re unsure about. Human beings are creatures of habit and if we can find a good reason to retain that habit (or even a not-so-good reason), we’ll use it. Time cost is often that reason.

However, in this situation, time cost matters little. I go clothes shopping twice a year, period.

In the spring, I’ll dig out all of my summer clothes (in fact, I’m intending to do this this weekend), determine what needs to go and what can stay, and then figure out if I need to add some clothes to the mix or if I have enough. I do the same thing in the fall with my winter clothes.

Once that’s done, I actually make a shopping list for clothes. I need some number of dress shirts, some number of jeans, some number of shorts, some number of khakis, some number of underwear – you get the idea. Then, I go shopping.

If I use secondhand store clothes in this process, I still just rotate them out at season’s end if they’re too worn, the same thing I’ll do with clothes that are purchased new. I’ll still go clothes shopping twice a year, regardless of whether I’ve bought new or used clothes in the past.

What this comes down to is simple: spending control. I keep a pretty tight rein on my clothes shopping habits. I simply don’t go clothes shopping more than twice a year. Because of that, I don’t devote much time in a given calendar year to picking out new clothes – and I don’t spend nearly as much money, either.

At its heart, an awful lot of frugality and financial success comes down to control over your spending. If you have firm control over how your money leaves your wallet, it’s often shocking how many ways there are to cut your spending without cutting your quality of life one iota.

Every time I visit the grocery store, I’m amazed to see how much of the fresh produce aisle is taken up with prepackaged fresh foods. You know what I’m talking about – bags of prewashed lettuce, pre-cut apples, pre-cut celery, pre-cut pineapple, and so on.

I understand why such items are for sale – they’re convenient. It’s easier to just grab a bag of prewashed romaine lettuce than it is to grab a head of romaine and deal with it when you get home.

Yet, when you look at the prices, you’re actually paying a significant markup. Two bags of Dole romaine lettuce at my local grocer costs about the same as a single head of romaine. The bags cost about $4.50 together, while the head costs about $1.60 (with some variance, of course, due to weight, sales, and so on). By buying the head, you save $2.90 – or, from a different perspective, you’re paying $2.90 for the convenience of someone else washing your lettuce.

Is that really worth it? I bought a head of romaine lettuce myself, put it in one of those handy bags that they provide, and took it home with me. Upon arriving home, I set a stopwatch for myself, then chopped the leaves off of the head of lettuce, rinsed them thoroughly, rinsed the bag a bit (leaving some moisture inside), then put the leaves back in the bag, tying it. I then tossed the knife in the dishwasher and stopped the stopwatch.

Total time? Three minutes. Actually, it was just a bit shy of that.

Let’s say over the course of the next year, I repeat the same action twenty times. I buy a head of romaine, put it in one of those bags from the store, take it home, chop it myself, and store it in that bag. Each time, I’m saving myself $2.90. Over the course of a year, I spend an hour chopping up the lettuce and save myself a total of $58.

The same holds true for all of those convenience foods.

Apple slices? I found apples I like at the store for $1.29 a pound, whereas pre-sliced apples added up to $4.76 a pound (I found four four-ounce bags of them for $1.19 each). I have a nice little apple slicer, so I’m able to slice up a few apples at dinnertime and completely clean up from it in about thirty seconds. My estimate on this is that buying un-cut apples saves me about $80 for every hour of apple-slicing I’m willing to do.

Celery sticks? I can buy a bag of celery for $1.49 or I can buy about three containers of pre-sliced sticks for $1.99 each. I spend about four minutes cutting the sticks and it saves me $3.47 – or about $52 over the course of a full hour.

I can go on and on with these items, but in each case the central idea is true: the convenience has a really, really high cost, much more than it might seem at first glance.

To me, this type of convenience food is a perfect example of how the little things really add up when it comes to personal finance. There are so many little conveniences that we pay for in life, whether it’s pre-sliced apples or take-out food or a lawn care service. When you actually step back and calculate the hourly rate that these things are costing you, it’s truly astounding. Yet people fill their lives with these conveniences and question those who skip out on them, then they wonder why it’s challenging to make ends meet.

Take a stand today. Slice your own vegetables. Then put that saved money aside for something for yourself.

Every Sunday, The Simple Dollar reviews a personal finance book or other book of interest. You can check out my reviews of hundreds of personal finance books (and other related books of interest) all on one page.

Bargain Junkie is an unabashed frugality book, focusing mostly on maximizing your “bang for the buck” when spending money.

The book itself is broken down into a large number of very short sections covering specific frugality issues, often written in a humorous and often self-deprecating tone that’s pretty appealing.

Obviously, when you read a lot of frugality books, you begin to recognize that some of the central points in each book appear in all the books – which is fine, since there’s a very good chance that this is the first book on frugality that the person has picked up and many of the repeated ideas are the very good ideas that a person should use. Bargain Junkie follows this pattern and spends a significant number of its pages on what I would call Frugality 101, which makes it an equally good “starter” book as many other frugality titles out there.

What sets it apart, though? Instead of doing a section-by-section review of the multitude of short pieces in the book, I picked out ten short sections that really stood out to me.

Television Is A Model For How Not To Live
Instead of looking at how people live on television as something to strive for, use it as a guide for something to avoid. After all, do you want a unique and wonderful life or do you want to just be a pale imitation of that guy in the television commercial? Do you want to live by your own rules, or merely imitate the crass consumerism of The Real Housewives of East Overshoe?

Extended Households
Living quarters are one of the biggest expenses in our lives. Yet, quite often, large portions of our living quarters go completely unused as we often get into the routine of using just a room or two in our home for most of our activities. So why not share that extra space? Consider a more communal living arrangement, where you actually live with friends and family and split the housing cost appropriately. It works surprisingly well and it can save a truckload of money.

Collecting
Collecting can be a worthwhile venture for frugal people provided two things are true. First, you’re quite willing to sell off what you’ve collected. Second, you’re willing to keep up with the hobby and stay abreast of prices and information about it. If you do both of these, you can often find a very lucrative hobby from hitting thrift stores and the like. I actually have a friend who buys and sells vintage video games who claims to have bought games at many thrift stores for fifty cents and resold them for hundreds (think Chase the Chuck Wagon). I’ve even done it myself with trading cards of various types.

Try It Yourself Before Paying an Expert
Home repairs? Try it yourself by reading documentation online and giving it a shot. Exercise? Try home exercise before buying a gym membership and paying a trainer. Virtually everything you do that you hire someone else for can be done yourself. So why not try it and make sure you actually need to shell out the money for someone else to do it? Exercise at home first and make sure you’re willing to keep up some routine before hiring a trainer, for example, and you might find you don’t even need one.

Go Monastic
Why do you have to live the same life everyone else does? If you live cheap and build up a bankroll, there’s no reason you can’t sell everything and live out of your kayak for a couple of years. The only thing keeping you from doing something completely different in your life is your own fears. Most of the big dreams people have are usually really cheap when you get right down to it, so it’s rarely the cost that keeps us from doing something like driving around the country in a solar car talking at public libraries.

Buy Your Own Presents
Quite often, gift-giving occasions come down to giving other people stuff they don’t want and you receiving stuff you don’t want. Why? Sit down and have a heart-to-heart with the person and, instead of just exchanging gifts, pledge to do something fun and unique together that you both want to do. You’ll probably save money and almost always wind up doing something much more memorable, enjoyable, and long lasting.

Craigslist/Freecycle First
Whenever you need anything, it’s usually worth your time to check the local Craigslist or Freecycle before going out and buying it. You can often find great stuff for pennies or for free. Heck, I’m learning how to play the keyboard on a free Craigslist item. Similarly, if you have something you’re getting rid of, put it up on that list with a low price tag. Quite often, it’ll be off your hands without breaking a sweat.

Large City Travel
If you’re traveling to a large city, study the public transportation information for that city online before you go. In many large cities, you can have a wonderful trip there without renting a car or paying for a taxi by simply knowing and using their public transportation system. My wife and I spent a week in London several years ago without renting a car or taking a taxi, even from the airport.

The Biggest Element of Dressing Well
The biggest element in dressing well isn’t buying clothes from the expensive stores. It’s self-confidence. You have to be proud of yourself no matter what you’re wearing. If your confidence is the same no matter what you’re wearing, then it really doesn’t matter much at all what you’re wearing. A person’s confidence and personality always comes through.

I used to be fairly nervous wearing things bought at thrift stores. “Won’t people look down at these secondhand clothes?” I would think. I’d be more self-conscious and then I’d find that people did think less of me than I would have liked. But it wasn’t because of the clothes – it was because I was so self-conscious, nervous, and shy. The clothes don’t make the person.

Hit Ethnic Restaurants – Hard
This is something I did myself in college and still do on occasion. In terms of the quantity and quality of food you get for the dollar, few places beat ethnic restaurants. Go there, order something intriguing, and you’ll find yourself leaving with a doggy bag containing enough food for two more meals or so. I can’t tell you the number of times I’ve eaten leftover sauteed vegetables over rice where the price of each meal I actually got from the restaurant dish was cut down to the $2 level. I know some professors at my old college who almost exclusively eat (even to the exclusion of home food prep) at local ethnic restaurants.

Is Bargain Junkie Worth Reading?
Bargain Junkie feels very much to me like a collection of posts from a frugality blog with a very good writer and entertaining voice. The sections in the book are quick reads that usually each convey a central point or two or provide a checklist of highly specific tips and are packed with anecdotes that either make you laugh or breed familiarity with the reader.

Annie should start a blog, period. I would happily link to some of those entries and she’d probably end up earning more revenue from it than she would from this book over the long run. If you enjoy reading well-written, occasionally humorous blog post length articles about frugality and maximizing your buying dollar, you will enjoy this book.

My biggest problem with the book, actually, is in the design. To me, the design of the cover is poor to the point that I would have not picked up this book had I not had a vested interest in reviewing it. There are thousands of great books out there to read – I would probably walk on by this book on a bookshelf simply because there are so many other great books that I could be reading that didn’t give me a “go away, this book isn’t for you” vibe right from the cover. Yes, I know the cover was shooting for a certain demographic, but you can reach those people without giving a “go away” vibe to others outside that demographic.

Still, once I got past the cover, the book inside was quite worthwhile – an entertaining survey of frugal ideas.

Yesterday, while in the middle of a conference call, our home telephone dropped dead.

The phone’s small screen went black, came back on, and then refused to connect to the base. I switched to another phone – and the same problem occurred. I called back into the conference call using Skype, but afterwards, I continued to investigate. I ran through every diagnostic in the manual and a few more I found online to no avail.

Something was simply broken with the phone.

I needed a functional replacement quickly. The very next day (yes, that means today), I was scheduled for two additional phone calls that I needed to be on, plus we were receiving regular updates about an ailing relative.

This would have been a perfect excuse to just run to the store, pick up an imperfect quick replacement, and muddle through using it.

Instead, it was an opportunity to figure out what the best method is when you need to buy an immediate replacement for an item.

First, I researched the item thoroughly online. What phones were out there that had the options I needed? I hit Amazon. I hit a few other sites that offered many reviews of cordless phones.

After some deliberation, I found myself with a list of models that I would consider buying. This took about half an hour.

I then hit the websites of various retailers in my area. I searched to find out if they had any of the models in stock in the stores near me. I actually found several different options when doing it, as certain phones were carried by certain chains and a few were carried by multiple chains.

This gave me a list of phone models, prices, and locations in my area from which to make a decision. This list, made in a spreasheet, took about fifteen minutes.

Once I had that list, I read through a few reviews again to help me make my final decision and then moved forward with the purchase by selecting a store and a model to buy. I verified it was in stock before I went to purchase it.

One other big step: I made this trip into a multi-errand stop. I also needed to pick up a few groceries and stop by the post office, so I got those things in order as well. I finished up my shopping list before I left and collected together all of my mail, too.

The end result? I wound up with a pretty good phone at the best price I could find. In other words, for about fifty minutes’ worth of work, I maximized the bang for the buck from my phone purchase (with the caveat, of course, that I needed to pick it up quickly). I also focused on maximizing the value of my trip by compounding it with other stops.

Sometimes, life hands you unexpected expenses. That doesn’t mean you have to stop, throw your hands up in the air, and just pay out the nose for an inferior product. Even if you need to have something quickly, you can still take the time to improve the bang for the buck you’ll get with your purchase.

Good luck!

I have discovered a surefire way to drastically increase the returns you get on all of your investments, no matter what you’re investing in. If you follow this advice, I guarantee that if you have a winning investment now (even if it’s just barely in the positive), my tip will strongly improve the cash that investment puts in your pocket.

Even better, I’m not going to sell you this sure-fire tactic in some sort of two-day seminar or an investment kit. I’m going to give this advice away!

Are you ready for it?

Here is the one guaranteed way I’ve found to increase your investment returns.

Live cheaper and direct that saved money into your investments.

It simply works. You can spend years and years studying investments to squeeze another percent out of your returns by getting just the right mix of investments without overshooting your risk tolerance. Or you can simply spend less each year, bump up the raw amount you invest by 10%, and quickly start seeing a 10% increase in your investment return.

The truth of the matter is simple: frugality and saving/investing are deeply linked to each other. Living within your means and spending less than you earn lets you use that excess money towards whatever goals you have in life – which is exactly the purpose of investing. The less you spend, the bigger the “gap” between your spending and income becomes, the more you have to invest, and the bigger your returns are.

There’s a reason Warren Buffett lives in an older house in Omaha, Nebraska, after all.

Another important thing to remember: investments don’t have to be stocks. Cash in a savings account is an investment – it’s simply a very secure one with a low, fixed rate of return. Virtually anything you buy or any account you place your money into where you expect to recoup some of what you put in and hope to recoup more than you put in is an investment. Vintage baseball cards can be an investment, for example.

Here’s an example of what I’m talking about. A 25 year old person wants to start investing so he can open a business in his later years, but he can’t see where he can possibly afford to start doing it. He’s happy with his life and most of the “frugality” ideas he’s heard sound unenjoyable.

Instead, he finds just a small handful of money-saving tactics, the type he can do once and save a lot of money from over the long run.

He installs a programmable thermostat in his home and programs it, saving $20 a month on his energy bill.
He also spends a weekend air-sealing his home to reduce air flow to the outdoors, saving another $20 a month on his energy bill.
He decides to give up soda, mostly as a way to lose weight, and starts drinking water instead. That saves him another $30 a month.

That’s it – no other changes. He then sets up an automatic savings plan and transfers that $70 a month into a savings account for investing purposes. Over the next twenty five years, he averages a 5% rate of return on his money – yes, 5% is really low, I know, and he could likely do much better than that. At age fifty, he has $43,000 in the account to seed his small business with. If he gets an 8% return, he has $67,000 to start with.

That money came from the magic of frugality leading investments. By cutting back your spending and channeling the money you’re saving into investing, even if it’s just into a savings account, you start building for whatever dreams you have for the future.

That’s the secret of bumping up your investment returns.

Julia writes in:

What do you do when frugal living catches up with you? As a family we had a much lower income from 2002 to 2007 (layoffs in the IT industry led to trying to survive on short contract work). We did not move home as that would have cost a fortune in fees here in the UK. Instead we bought nothing beyond the essentials. No holidays, outings, clothes, entertainments, etc. What we needed beyond food and fuel came from Salvation Army shops, garage sales, etc. We hung on to our cars as they had done low mileage but were not worth a lot in resale value.

We no longer work in IT but have found alternative permanent jobs. The problem is that now there is a reasonable amount of money coming in but lots of possessions are very old. For example, the carpets in the house are of good quality but 24 years old.

This is the second time I have seen a financial bad patch – my parents had a big setback when I was a child – and I am now scared of it happening a third time. I want things but I dare not buy anything beyond the essentials. I am constantly anxious about money.

I often have the same problem myself. Rather than wanting to buy a replacement for something that still works but really needs a replacement (like our entertainment center in the basement, which has a broken board on it and is actually held up by a hidden wooden block on the floor), I usually talk myself out of it, arguing that what we have is functional and so there’s no real reason to replace it.

I’ve found that the following things really help with this.

First and foremost, I clearly identify the things I want to replace in my home. I would like to replace our entertainment center. I would like to replace our only television. I would like to replace our dishwasher. However, all of these things are still functional enough to do their job (most of the time) so they’re not immediate needs. It sounds to me like you’re in a situation where there are a lot of things in your home that fall under this category.

Next, prioritize among them. Figure out which one is the highest priority for you. For us, the highest priority is probably the falling-apart entertainment center in the basement. Next would probably be the incredibly energy-inefficient dishwasher with the messed-up door. Both of these things still work, but there are times where it feels like they still work by the grace of God.

Then, set up a savings plan to take care of this highest priority. Calculate an amount you can afford to save towards that goal each month. Then set up an online savings account (or a separate savings account at your bank) to collect savings for that goal. Then, set up an automatic transfer that moves an amount of money you can easily afford into this account each week. Sit back, wait until the account is full, and make the purchase without guilt. I often use SmartyPig for such savings.

This is the exact pathway I use to take care of these types of purchases – things that are still functional but sorely need an upgrade or a replacement. Right now, I’m saving to replace a few of our pots and pans – our large skillet is a Teflon one and is starting to peel and I intend to replace it properly with something that’ll last forever (instead of the 3-4 years this one lasted).

What about the psychology? I find it’s much, much easier for me to go ahead and spend on such things if the money is “set aside” from our main finances. When I know I can make this large purchase without touching our main finances at all and not dinging our emergency fund, either, I don’t feel any guilt at all.

Good luck!