When Living Cheap Catches Up With You

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!

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