“That’ll be forty seven dollars and fifty nine cents.”
I blinked rapidly in surprise, surveying the half-dozen or so items on the conveyor belt. I had volunteered to cook dinner for the members of my group house that evening, and a variety of diets, allergies, and preferences made the chain health food store in Asheville seem like the way to go. I pulled out my wallet, cranky about paying a three hundred percent markup on refried beans.
The $3 can of beans rankles me for a reason. The first class of every course in economic theory imparts the lesson that our most valuable and limited resource is time. Lottery winners and the independently wealthy notwithstanding, most of us earn money by trading our time through paid work, so money literally = time. (This probably seems like an obvious axiom to most, but the number of people who don’t understand basic economic principles always surprises me.)
My mom taught me another principle of economics (or maybe more like an immutable law of nature) when I was young, though you probably won’t find this one in an economics textbook: spending expands and contracts as a function of income. If you make more money, you spend more money. If you get a raise, it’s easy to transition to that three dollar can of beans, or that six dollar chia seed smoothie, or the nine dollar package of quinoa. (Plus, it’s easy to rationalize. This is health food, isn’t it? You’re practicing self care. You *deserve* that Paltrow-esque green smoothie fortified with moon powder, bee pollen and activated cashews.) And that principle expands far beyond the scope of the health food store to unnecessary discretionary spending of all kinds: from the resort vacation, to the new set of skis that you use three times, to the Prius that comes straight from the dealership.
Let’s face it: many Americans are terrible at managing money, and those who think they’re “careful with money” often still retain a lot of unnecessary flab in their budgets.
Let’s face it: many Americans are terrible at managing money, and those who think they’re “careful with money” often still retain a lot of unnecessary flab in their budgets. It makes sense: spending money feels good, and it’s also the quick and dirty way to improve your quality of life. Bored on a Friday night? Go out for tapas and designer cocktails with friends. Three day weekend? Book a B&B at Hilton Head and go jet-skiing. Beyonce’s in town playing a stadium show? Better grab those tickets before they’re sold out.
Full time employment leaves us with limited free time, so we try to enhance that time by filling it with expensive experiences and products. Some people (Kanye, maybe. Or extroverts. idk.) might genuinely enjoy that lifestyle. For the rest of us, the crammed schedules, wasteful spending and lack of free time can feel draining. (The only thing I love more than going to a swanky club at the end of a busy week is…not doing that.) By learning to manage money well, you can escape the cycle of spending your time working to make money and then using that money to buy dumb (or simply unnecessary) stuff.
(The other element that can hold you back from reducing your spending is debt. Occasionally, taking on debt is a necessary evil, but many people accrue debt, again, because they suck at managing money. If you don’t have debt, you’re in the lucky minority. Do everything in your power to keep it that way.)
To summarize, here’s the plan: First, adopt a low cost of living, regardless of your income.
If you get a raise, pretend like you didn’t. If your spending is out of control, get it in check. If you think you’re already good with money, read on for some tips to become even better. Second, don’t take on debt unless absolutely necessary. (“Absolutely necessary” means, like, an immediate family member contracted a flesh eating disease and he needs your help with a number of urgent medical bills. It doesn’t mean that this year’s Lexus looks cool.) If you already have debt, pay it off as fast as you can.
One of the most impactful ways to scale back your budget is by utilizing economies of scale.
First, don’t live alone. Rent is the largest bill most people pay every month, so dividing that number in two or three is often the easiest way to pick the low hanging fruit on the metaphorical budget tree. Right now, I live with five other people in a quirky house within walking distance of downtown Asheville and I pay about $200 a month in rent. Living alone in a one bedroom apartment would cost me four or five times that. Large scale group living is not for everyone, but even finding one roommate (or living with a partner) can significantly reduce monthly expenses. (Not only is living with others good for your pocketbook, it’s also good for your health. Studies show that people who live alone are more likely to die of a heart attack.)
Next, choose where you live carefully.
For goodness sake, bypass New York City and the Bay Area. If you can pick where you want to live, choose a place with affordable housing, access to good public transit, and a short commute to work, if possible. (This one can be a balancing act, because moving closer to work often means paying higher rent, but by shortening your commute you’ll save time on travel and money on gas or other transport, plus studies show that long commutes make people unhappy.) If, like many people, you’re tied to your current location because of work, family, or something else, consider whether the part of the town or city you live in is a good fit for you. I’m not suggesting you move into a hovel in the red light district, but sometimes non-glamorous but affordable areas in a city can provide the compromise of factors that you seek.
It’s so easy to walk into Whole Foods and spend more money than you can afford and more money than you need to in order to feed yourself fresh, healthy food.
Keep a food budget, shop sensibly, and don’t spend too much money on food.
To be clear: I’m not advocating feeding yourself Ramen 4 nights a week, or simply opting for the maximum number of empty calories per dollar. On the other hand, it’s so easy to walk into Whole Foods and spend more money than you can afford and more money than you need to in order to feed yourself fresh, healthy food.
Check out this great blog post for tips about eating well on a budget. Also, here’s a cool calculator to see how your food budget stacks up against other Americans. (Spoiler: People who make more money spend more money on food. You would think that this would taper off at a certain income level, because how many bee pollen smoothies can one person really drink, but according to this website it doesn’t.) I won’t bore you with a lot of details because the internet is full of great resources about preparing and eating healthy, cheap food, but I will say that I buy a lot of produce and bulk staple foods (think nuts, pasta, olive oil) at Trader Joe’s, because the stuff they make in-house is cheap and they offer both organic and conventional options.
(Handiest lesson that you’ll never learn in school: look closely at grocery store price tags, usually in the top left hand corner, and you’ll find the price per ounce, which enables you to comparison shop quickly without doing conversions in your head.)
Reducing discretionary spending is a hard principle for many people to get on board with, maybe because they’re worried that they’ll be bored if they can’t spend money to do stuff, but it’s also more low-hanging fruit ready for the picking. If you struggle with this, set a limit in the “Discretionary” column of your monthly budget. Alcohol, dinners out, salon haircuts, mani/pedis, and new clothes are some of the big, regularly occurring culprits. Sensible Millenimalists should also skip the unnecessary, large, one-time-only expenses, like the private university degree in women’s studies or the wedding that costs more than a down payment on a house.
Finally, shop the used market for large purchases, especially cars and clothes. (Or, for equipment that you won’t need to use often, consider borrowing or buying collectively with friends or neighbors. A few friends of mine recently started a “Tool Library” project that’s perfect for this kind of community sharing. Need a leaf-blower? They’ve got one. What about a table saw? They’ve got one of those, too. Sewing machine? Yep.) Craigslist is a great place to score furniture, snowboards, lawn mowers, and more. Cars are the biggest item on this list, because they lose value so rapidly after purchase: 10% after you drive it off the lot, plus an additional 10% the first year and every year after.
Buying clothes secondhand makes some people uncomfortable, but I thrive on scoring that pair of perfectly fitted jeans while on a thrift store expedition with friends. To each her own, but frequent department store clothes purchases add up quickly, and our throwaway culture means that high quality, second-hand clothes are ubiquitous and available at a fraction of the cost of their new counterparts.
*I know what many of you are thinking: if you have a full time job, spending less money just means that you have more money lying around. You still have to be at the office at 9am on Monday. And you’re right: the structure of most full-time paid work is such that, even if we do manage to significantly scale back our spending, we don’t necessarily gain free time, because we’re locked into the 40 hour workweek. But spending less money is half the battle, and it’s the first half. If you can learn to spend less money, only then can you adjust your work life to take back your free time. That half of the battle is the subject of my next blog post.