Updated on 02.14.10

When Living Cheap Catches Up With You

Trent Hamm

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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  1. Chris says:

    Trent, good post. I too like to set aside money for specific goals (using ING) and then once the goal balance is achieved, simply transfer it to my main checking account to pay off the purchase in full(which I make with our credit card, to get the reward points and double the mfr warranty). It seems to psychologically be better to set aside the money in a specific account, rather than just lump it into the main emergency fund account. I’ve tried the latter approach before, and then I find myself in a situation where I DO feel guilty about spending it.

  2. Molly says:

    Good post. I like to make a list of things I want to fix/update, and we do one of those a year. Last year it was buying a new bed (a really nice one that I’d been wanting for a few years, and it’s nice enough that hopefully we’ll never need to replace it); this year it’s a new computer; next year it will likely be a new sofa. One “big purchase” a year. It helps that we rent, though, and things like the dishwasher are not really our problem.

  3. Molly says:

    Oh, and in 2008, it was a new set of pots and pans. Very high quality. They’re now on display in our living room and look fancy. We use them weekly.

  4. Excellent post! I have been laid off for almost a year…we have really learned that prioritizing/saving is a must. Actually, we should have done this all along. Even with just one income, we have been able to get a new computer, had some roofing work done and replaced our vacuum with a better than we had in the past year. It wasn’t even that painful….

  5. Kate E. says:

    I’m curious as to what kind of pots and pans you are saving up to buy. Maybe a future post someday about how you decided to buy what? :)

  6. NMPatricia says:

    Not much else to say except a great post. Since money has become a big deal in my life because I don’t have nearly what I did when I was working, it is a constant battle to figure out what is OK to buy and what isn’t. I sympathize with Julia as to the psychological aspect.

  7. Nicole says:

    This is one of those Your Money or Your Life questions. I’d read the book (with spouse) and think in general about all priorities. Is financial security more or less important than a new carpet? How much would that carpet set you back, is it small in percentage terms or substantial? Do you have all your ducks in order in terms of emergency funding so that YOU feel comfortable. Once have hard numbers that make you feel secure, it will be easier to think about how you want to make your life more comfortable in other ways. It’s a lot easier to replace things and prioritize their replacement when you know you’ll still be fine if you get hit by an emergency.

  8. Rosa Rugosa says:

    If it’s not an acute need, I often will decide to save up and pay for it out of my allowance. My husband and I are each budgeted $60 per week of personal spending money. That money can be spent guilt-free however we choose. I find that this strategy often forces me to decide if I really, really want something. I am more loathe to part with my little cash stash since it isn’t very much and takes a long time to accumulate a substantial amount.

  9. Jenny says:

    This is also a good time to look for sales, craigslist, yard sales, thrift stores, etc. If you know what you are looking to replace before you absolutely need to and have some money set aside, you don’t have to rush out and buy it new and at full price. Just make sure you have researched what models are good and what to avoid (for something like a dishwasher or other appliance), and make sure that furniture like an entertainment stand is good quality (made of solid wood not particle board, sturdy not wobbly). People are often giving entertainment stands away for the price of you carrying them away (on freecycle, kijiji, or craigslist). If you are lucky enough to get something that you are looking for at a low price, you can roll the money in that savings account into one for your next purchase.

  10. asrai says:

    SOunds like Julia is having frugal burnout. It gets tiring during hard times to worry about every cent. You just want to go out and spend some money without planning. Like you could before the layoffs.

    To combat this I try to budget a little bit of spending money each month for us to just splurge on something. even something small like a DVD for my husband.

    Trying to keep the long term goals in mind as well. Not getting in more debt is important. It will get easier. Eventually.

  11. Debbie M says:

    Ha, I thought you were going to say that living cheaply caught up with you because all your stuff broke at once!

    Sometimes replacing things now means you won’t have to replace them later, or at least you are putting off when you next have to replace something. So, it’s like a kind of short-term insurance. It’s a lot easier to get through a rough spot if none of your stuff is about to break, so you only have to worry about food and shelter.

    And if you can replace something with something that will never have to be replaced in your lifetime (like a cheap shingled roof with a metal roof or a teflon pan with a cast-iron pan–if you never cook eggs), that’s definitely an investment, and one that won’t lose value just because of inflation, plummeting markets, whatever. It’s the safest form of investment I know.

    Plus, the great thing about replacing something that still works, especially during a recession, is that someone else in trouble who needs one can afford to get it (from you).

    I’d say keep a big emergency fund (and/or contribute a fair amount to it every month, no matter how big it gets, which is what I do), and then use your other money to replace things that you would like to replace. This can help you feel safe in spending some money because it doesn’t feel so much like it’s coming from money that should be saved.

    Or maybe your priorities have changed. Maybe you now realize that many of the things you would have spent money on the past are not actually important to you. “Old” isn’t necessarily bad; that’s why someone invented the word “antique.” So if it feels dumb to replace stuff just because it’s old, maybe that’s because it is dumb.

    But if some of your older things are becoming irritating, I find that it can really increase the quality of life to get rid of irritants when possible. I like to prioritize replacement of irritating things based on the level of irritation!

  12. kamilaji says:

    Like others, I make a list, prioritize and save my money for the purchase. I would begin with items that might affect your health first. For example, if you’re suffering from a poor night’s sleep because of an older mattress, then I’d buy a replacement as soon as possible. If you’ve got a sticky drawer or something that causes you to strain yourself to use it, I’d consider replacing or fixing that.

  13. Nicole says:

    Debbie M– That’s a great way to put it!

  14. Mike says:

    What kind of pan are you looking at for replacement Trent? Anodized maybe?

  15. done that says:

    @Debbie – is there a problem with cooking eggs in cast iron? It’s been working fine for us.

    Otherwise, I agree with this post. It does seem that everything needs replacing at once. Sometimes it feels like everything in the house has a quirk that requires special adjustment or careful using not to fall apart. It does help to prioritize and be able to point to something new to know we will not always have broken, on its last legs stuff.

  16. SP says:

    I have funds for everything. In this case, I’d start up a “home” fund and buy things one by one from the prioritized list you suggested.

  17. DB says:

    I agree with SP (#16) – we also have many sub-savings accounts. The first personal finance book I read, although not a great book, actually steered me on a course to be debt-free and really turn my life around financially. The author suggested setting up multiple sub-savings accounts and automatically funneling savings into those accounts based on personal priority.

    Besides free checking, we have the following sub-accounts at our credit union:
    1) general savings
    2) debt elimination
    3) permanent wealth
    4) future growth
    5) income security
    6) emergency fund
    7) family fun
    8) future auto
    9) auto maintenance
    10) family health
    11) home improvement

    With automatic deposits each payday, each fund has a dollar goal amount (although some are open-ended, onging until needed) and is growing steadily (except the EF, which sits at just over $1000). Each also has a very specific purpose. We have bought into the specificity of each account, and wouldn’t think of using money for anything other than its intended purpose. For us, this works GREAT – and helps us spend guilt-free within each category.

  18. Like others have stated, I think making a list works well. My husband and I make a list of priorities for each year, and some of those including new purchases and/or replacing some major items. This list includes everything from new beds/mattresses, to new hardwood floors in the living room. As money becomes available, we review the list and see which goals can be accomplished with it. Sometimes we go with the cheapest goal, other times we hold out until we have all the funds to accomplish a big goal. Using this plan ensures that we go on at least two family trips per year, because they are always on our list each year.

  19. Maureen says:

    If your entertainment centre truly is “falling apart”, I would give it a high priority. A TV toppling onto a toddler can have tragic consequences.

  20. Michele says:

    Good post, Trent. Debbie M- I second the question about what is wrong with cooking eggs in cast iron…my cast iron pots are all non stick from so much use and seasoning and cook up beautifully, be they fried, scrambled or poached. And they work great on both my glass (electric) cooktop and on the gas BBQ and charcoal BBQ. (Summer time for us!)
    Also Trent- why worry about replacing the dishwasher? I wash most dishes by hand since the energy efficient and quiet dishwasher I’d LIKE to have is about $900 on sale. It’s way quieter and faster to do the dishes by hand and let God dry them overnight and put them away while I’m waiting for the coffee.

  21. Jules says:

    If you have the money, sometimes you just have to take a deep breath and jump in. I find that for big purchases that I’ve planned, the longer I delay making them the more anxious I get. But once I’ve made that big planned purchase, I usually wonder why I waited so long to make it.

  22. deRuiter says:

    Except for appliances and cars, EVERYTHING we own is old, they’re called “antiques.” Oriental rugs, and beautiful newish Chinese wool rugs cover floors, flatware, dishes, light fixtures, accessories, table linens, glasses, furniture, quilts, paintings, prints are all “used.” Other things are also bought gently used at yard, tag and estate sales: towels, great older wool blankets, beautiful bed spreads, fabuoously expensive chintz drapes used a short time and the owners became bored with the color, 75% of our clothing (beautiful classic, natural fiber things which may need a trip to the tailor), books, an occasional board game, Christmas ornamwents. Just before Chrismtas a neighbor vigorously pruned a row of pine trees, I picked up the trimmings, added a bit of holly trimmed from our tree, and dug out a dollar roll of wide velvet red ribbon which was one dollar at a yard sale. For that dollar, we made six grave blankets for the cemetery and two sprays for the two front doors. To me, “new” is mostly over rated. I do buy new appliances when the old ones die, have bought new vans, which have lasted 219,000 and 276,000 and then been sold off to others to use, and new jeans and shoes from the outlet because of size constraints. I adore resale! By buying antique or used, you give money directly to Americans, by not buying new foreign stuff you don’t send money to enemy countries, you keep land fills empty, you don’t require new raw materials which improves the environment, you paying less and don’t pay sales tax. What’s the benefit of most new stuff? A slur in the super rich, old money class is, “They buy their rugs from a store.” The old rich prefer antique things, and they take down Grandma’s rugs which were stored in the attic when Grandma no longer needed them, and they give the antique rugs to the newlyweds. Get that “old money aura”, buy preowned. PS, you’ll save a fortune which can be put in your savings account!

  23. Claudia says:

    I went through a lot of various kinds and priced frying pans before I went to the cast iron my mother used. They last forever and if seasoned correctly, work great for cooking and frying everything. I have one Calphalon saucepan and the rest are Martha Stewart’s from Kmart. The Kmart ones were very, very reasonable, are made from heavy duty steel and the same quality as the Calphalon which was on-sale for about the same price as all 3 of the Martha Stewart Kmart ones.
    Spending more money does not necessarily mean quality. One would assume if a something costs $20, then a $40 one would be twice as good, a $60 one, 3 times as good… but I have found many times that price often has nothing to do with quality.

  24. Claudia says:

    I also agree with #22, most of our furniture is antique. The quality is far superior with most furniture made today, even some of the very expensive. I recently purchased a beautiful couch table and a wood trimmed loveseat at garage sales. Paid $17.50 for both. With some elbow grease the table is gorgeous. The loveseat, I’m not done with and it will cost a bit more as I am recovering it, but when I’m done it will look great for under $100.

  25. colleen c says:

    Please do not wait to replace that Teflon pan. It’s really not healthy. Teflon is bad enough but when it is PEELING you really need to get rid of it and NOT wait. Do some research on the health hazards of non-stick coatings and even if you do not get a NEW pan soon, get rid of that old one NOW.

    I have one non-stick pan in perfect shape and I use it as little as possible. Bought some good stainless that I will keep forever. Reading about the Teflon scared me. Still trying to figure out a good option to get rid of ALL the Teflon for good.

  26. Tammy says:

    @ #10 Asrai

    I totally agree with your definition of frugal burnout. We’ve been operating on 60% of our pre-job change income for over a year now, and I’m so tired of counting every penny and not feeling able to go splurge on lunch or getting a new pair of cheapy shoes, even though my current shoes have holes in them. We’re working hard to eliminate our debt and not go into any more debt, but it is turning into one loooooooong slog. Is there light at the end of the tunnel?

  27. teresa says:

    I find that it is better to replace things when you need to not when you have to. We just but $700 into our roof because water was coming in through our light fixture. We knew it needed work but kept putting it off, well it would have saved us at least $200 if we could have waited for my dad to get the materials from his supplier. So waiting till we HAD to fix it was a big mistake. I am currently researching dishwashers(we have 5 kids and I NEED a dishwasher) so that we don’t spend more than we have to when we do replace it.

  28. CindiCCC says:

    I love all these ideas. Just a little to add: on the pots and pans, we are also looking to replace and I now carry with me the measurements of our stove burners. The better the pot/pan fits the burner, the less energy/heat is lost. Since we have a flat-top, this makes a big difference. I’ve found something I like at IKEA (their FAVORIT line) but since the need isn’t immediate, I keep my measuring tape out when I shop used stores to see if I can find something even cheaper. On the appliance replacement idea, we had a scare with a refrigerator stopping a year ago and went with the quick fix of repairing it because it was full and we didn’t want to spend the week shopping for a new one. Now I’ve realize we should have bought a new one for significant energy savings so I am fully researching a new one (and new dishwasher and freezer too) while I have the time, knowing I might not use my research for another year or so while our “appliance replacement” fund builds up. My husband is using his time to learn how to make a few quick fixes or maintenance steps to make our dishwasher last a little longer and clean better.

  29. Debbie M says:

    @done that and Michele – I’ve heard that eggs are the one thing that sticks in cast iron. Maybe I heard wrong? Awesome!

  30. Tony says:

    For me when it comes to replacing things, I would rather wait longer to replace it, but when I do replace it I like to buy something that’s high quality. I scrimp and save as much as I can, I save on all the little things, buy store brands over brand names for many household products, save as much as I can on eating, etc etc. When it comes to bigger things I’ll usually wait as long as I can to replace them, but when I do replace them, I avoid getting the cheapest replacement. My laptop is an example… It was beat up from heavy use during and after college. Many of the plastic pieces on the laptop were broken… the vents that covered the fans on the laptop were broken, i had to tape a piece of paper with holes in it to the bottom of the laptop so the fan wouldn’t spin and make a loud noise when i sat it on my couch. It had a permanent black palm mark from years of use, and nothing, not even magic erasers would remove it. I was due to get a new laptop and I had been thinking about it for a whole year. Many times I saw cheap laptops for sale and I almost bought them. They I saw my cousin’s macbook pro… he’s had it for a while and it looks brand new, it’s made out of metal and it’s easy to clean. it has less moving parts, no removable battery… this thing is built very good – you can just feel the difference when you pick it up. And I thought… I could buy a cheap laptop, use it for a while and end up with the same problems, or I could spend a few hundred more and get one that’s high quality, built out of metal.. something I can use (hopefully) for years and years to come. I didn’t hurry to replace what I had, as I normally stall on purchases like this. I’m a very frugal person, but I have to say there is something very satisfying about this computer. It wasn’t an impulse purchase, and I don’t feel I wasted money. I saved longer, waited longer, and bought something high quality. Living cheap doesn’t mean everything you own has to be the cheapest model possible, for me it’s having less things, but the things I do have are well-built and last a long time. Personally this has worked well for me… there is something very satisfying about saving up for something you need for longer than you need to… and then getting something good. Maybe it sounds wasteful to some but for me I see it as a higher form of frugality!

  31. Nicole says:

    re: cast iron and eggs: eggs are no problem on heavily seasoned cast iron (one that’s been used a lot and become really non-stick), but if you’ve got a new pan that hasn’t been around forever, they are a nightmare.

  32. Debbie M-the cast iron has to be properly taken care of and it works great for eggs! Mine is smooth as can be!

    I love this post because there are things in our house we’ve been seriously looking at taking care of. We didn’t set up a separate savings (though we should for other things because that’s an awesome idea) but basically when we had some extra money, we started taking care of things. Like our bathroom, the caulking was bad so we needed to redo the shower. We looked at the options and decided to go with tile and so far we’ve not spent much but completely fixed the problem. Next, painting!

  33. Lisa says:

    To #27 Teresa ~~You already have dishwashers, in fact, 5 of them. Doing dishes will teach responsibility & do what needs done whether they like to do them or not. Teach them to remember that dirty dishes mean someone has been blessed with food to eat. As for using energy saving appliances it can be good or bad, sometimes those stickers don’t mean much. Some are tested when they are turned off. There have been several articles about that lately. My parents had 5 freezers & refrigerators old ones & when replaced with new, the electric didn’t change.

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