Frugality

6 Frugal Living Tips From the Great Depression

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The following is a guest post from Jonathan of Master Your Card.

The Great Depression of 1929 is widely considered to be the worst period in US financial history, and the collapse of the Wall Street stock exchange left millions of ordinary people feeling that they couldn’t trust the banks. To a lesser extent, many of us are experiencing the same type of suspicion and mistrust as far as the banking system goes, not least because some financial experts have predicted that the current recession could be the worst since the Depression.  With this in mind, what can we learn from looking back at the Great Depression?

# 1 – Consider cash instead of credit

We live in a credit-rich society in which many of us think nothing of whipping out the credit card to pay for purchases. Back in the days of the Great Depression, cash was generally the most common means of paying for things. The lack of trust in the banks led many people to hide their cash under the mattress for fear of losing it altogether and credit became a luxury that the majority of people couldn’t afford to use.

While we don’t need to go to these extremes thanks to FDIC protection, turning your back on credit isn’t a bad idea. If you’re struggling to keep your head above water, stick to cash only and forgo the credit cards altogether. This will much reduce your spending as it forces you to think about whether you really need to buy the item(s) in question. If you don’t have the cash available, don’t go through with the purchase. This may mean postponing purchases until the price falls to one that you can actually afford and going out of your way to hunt for bargains (see tip # 2 for more on the latter).

# 2 – Live as frugally as possible

In the Great Depression, frugal living was the norm and people tended to live as cheaply as possible. This was often out of necessity, but it was arguably what enabled them to survive the financial hardship. This is a tip that is useful in any type of economy, but especially so during a recession or depression.

Living frugally doesn’t necessarily mean living like a cheapskate. Frugal shoppers look for the best bargains so that they’re getting the best value for money, just as previous generations did during the Great Depression. Their motto was: if you don’t need it, don’t buy it. The Internet makes it easier to search out bargains as comparison websites can show you the best prices in seconds.

Another aspect of living frugally involves using up what it is already in your house before you buy replacements. This includes fixing broken items whenever possible rather than shelling out to replace them straight away, re-using items if they no longer serve their original purpose but can have other uses, and growing your own fruit and vegetables. If you’re currently struggling to keep your outgoings below your income, living frugally is a necessity to keep your budget down.

# 3 – Work on your emergency funds

If you suddenly lose your job or are hit with unexpected outgoings, you need an emergency fund to fall back on to cover you. If you don’t have one, the chances are high that you’ll fall into debt. It’s recommended that you put at least 10 per cent of your income into savings to act as a cushion if you need to access money quickly. Even in the Great Depression, saving for the future was a regular occurrence as people looked to get themselves out of their often dire situations. The ones who did survive the Great Depression from a financial standpoint tended to be the ones who saved for the rainy days that they knew would come.

# 4 – Get yourself debt-free

In the Depression era, debt was seen as a big no-no and people did all that they could to avoid it. Admittedly, it was easier to do back then as credit wasn’t so popular or as widely available but it’s still a valuable tip. These days, staying out of debt is easier said than done when living costs continue to rise and unemployment is rife.

As many of us are already in debt of one kind or another, looking to consolidate debts together in a debt consolidation loan may be a good option to help you to manage your repayments by lumping them together in one repayment. This is useful if you have multiple debts and are struggling to keep on top of them all.

# 5 – Fix bad credit

While credit wasn’t as widely used during the Great Depression, it still existed as a means of paying for items at a later date and was frequently used to buy luxury goods such as cars. When the markets collapsed and the already fragile US economy began to follow suit, many people found that they simply couldn’t afford to meet the repayments for their credit purchases. If credit scores had existed back then, a lot of people would have been experiencing bad credit.

A poor credit score is bad news at the best of times, but this is even more so in a recession. During times of financial trouble, lenders will make it more difficult to obtain credit and this will hit you hard if you have a low credit score. With the advances in credit since the Great Depression, we have the opportunity to fix bad credit, but how do you go about trying to fix bad credit during a recession if you’re likely to be turned down for credit due to your credit score?

  • Use credit sensibly. Don’t charge more to your credit card(s) than you can afford to pay off each month. You may want to use your card(s) for everyday purchases unless you’ve chosen to follow the advice in tip # 1 and prefer to pay in cash to reduce credit use.
  • Pay bills on time. Late payments will impact on your credit score. On the other hand, making payments on time will show lenders that you’re a responsible credit user.
  • Secured credit cards. If you have bad credit, lenders are unlikely to approve you for unsecured credit but this doesn’t mean that you can’t get credit at all. Secured credit cards require you to open a bank account, and the deposits made into this determine your credit limit. The lower credit limit gives you less opportunity to rack up big debts, but you still need to keep to 30 per cent or less of your available credit limit to avoid lowering your credit score.

The Verdict

The financial habits of previous generations who lived through the hardships of the Great Depression can prove valuable during the current economic crisis. Although times have changed somewhat as far as our spending patterns go, we can still adopt several of the basic ideas that saw them avoid financial ruin.

Eating on $10 a Week

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The following is a guest post from Cindy Brick. Her blog is located at CindyBrick.blogspot.com.

Ever need your money to stretch twice as far on short notice? There are few things you can suddenly cut down to near-nothing – except food. With care, you can live on $10 for a week….or $40 a month, using different sources of protein. You’ll do even better planning for two weeks than one, because your money will go further when you can buy in larger quantities.

Here goes, for two sample weeks. Prices are based on the Denver, CO area.

GROCERIES:

2 pounds carrots 1.00

2 bunches green onions 1.00

2 gallons milk 3.20

2 dozen eggs 2.50

2 loaves bread 3.00

1 jar peanut butter 1.50

1 whole chicken (4 lb) 3.20

1 pound hamburger 1.60

1 pound tofu 1.50

1 pound rice .70

1 pound margarine .60

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19.80

I’m assuming you have salt and pepper and at least a few spices. (Garlic, oregano, marjoram, hot sauce, curry powder.) If not, salt and pepper will work just fine. A little sugar helps out, as do ketchup or barbecue sauce, as well as soy sauce and bouillon cubes.

Prep work: Cook the chicken for broth, after cutting off the legs and breast portions; use a BIG pot of water. (Add bouillon cubes, if you’ve got them.) Chop the carrots and green onions; add a triple handful while simmering the broth. (Pick the meat off the chicken bones, and put back into the soup. Split the hamburger into four portions, and the tofu into three.

Breakfasts – toast, eggs, French toast (toast dipped in egg and fried, then sprinkled with sugar), leftovers.

Lunches – any of the supper choices, plus fried egg and peanut butter sandwiches

Suppers – Chicken soup (at least 10 portions)
Chicken breast (2 portions)
Chicken legs (2 portions)
Hamburger (4 portions – cook one with rice for ‘porcupine rice,’ one formed in small meatballs and baked or simmered in chicken soup, one mixed with a torn slice of bread and baked for meatloaf, and one baked or grilled, then served as a sandwich with bread.

Tofu (3 portions) – fry two with veggies and serve with rice, grill or bake one (marinate first in soy sauce, if you’ve got it), add some to chicken broth.

Use the veggies either as a side dish or cooked along with your protein. Any leftover eggs are good simmered in the chicken broth (egg drop soup), or stirred into the rice (fried rice). Use the milk for drinking, or add to the soup for extra protein. (If you’re not big on milk, buy just one gallon, plus a box of tea bags.)

For the next two weeks, try substituting or adding 10 pounds of potatoes ($3.00), beans (.70 a pound – substitute for meat), a jar of spaghetti sauce ($1.60), lettuce or greens ($1), or macaroni (.80 a pound). My daughters swear by ramen noodles (.35), tuna (.80) and noodles (.80 a pound). The key is limiting your portions, adding some ingredients for flavor (like onions, celery and so on), and using every single scrap of food. (I even rinse out jars to get every drop, then add the liquid to broths and sauces.)

A few extra bucks can get you a pack of small candy bars ($1), fresh fruit (keep it to $1.50 a pound or less), and luxuries like coffee!

Most of us have more than ten bucks a week to spend on food. It’s helpful, though, to know you can do it if you have to. For more, try these interesting, if sometimes unimaginative blogs:

http://budgeteating.blogspot.com
http://www.hungryforamonth.blogspot.com

Save Money with Back to School Sales

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One common frugal tip is that you should stock up on an item when it is on sale. Stores are starting to have their back to school sales. This is an excellent time to stock up on school or home office supplies. The large department stores and office supply stores have a variety of merchandise for extremely low prices.

For example, Staples currently has many items free after rebate, Wal-Mart is selling 70 sheet notebooks for .15 cents, and K-Mart is selling Elmer’s glue for .20 cents. That is just a few of the deals available and there will be new ones every week for the next few weeks.

About a decade ago I took advantage of a cheap notebook offer and I haven’t paid for paper yet. During my four years in law school I never purchased any school supplies. I either already had the items needed or was able to get them for free. With a little planning you can stock up on supplies as well and not have to buy them again for years.

Frugality 101: Housing

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Housing is the area where most people can see their most significant savings. Most people live in too big of a house and spend more than necessary on housing. The average U.S. home size has gone from 1400 sq. ft. in 1970 to 2330 sq. ft. in 2004. Granted the average American has gotten larger during that time period too but it isn’t like they are taking up that much more space.

My housing cost has been around $400 the past few years. With a little effort I could reduce that and I probably will before the year is up. I think $400 a month is a reasonable target for your housing expense. It is much easier to do here in the Midwest than in other areas but it is possible in more areas than you would think. My best friend lived in the S.F. Bay area last year and paid $400 a month for a room in a house right by the ocean. Even in some high cost areas you can find reasonably priced housing if you are willing to be a little unconventional.

If you find the $400 amount too constricting you could consider keeping your housing expense at 20% of your income. That would still keep your housing cost below average and should allow you to save a significant percentage of your income.

If you still think it is impossible to do this in your area then you might consider moving to a different location. I’m going to do a separate post on location in regards to frugality.

If you need some ideas on how to lower your housing cost check out “Twelve ways to become rent or mortgage free” at Wise Bread or check out Jacob’s post on living in a RV at Early Retirement Extreme.

Frugality 101: Mindset

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I haven’t written too many “how-to” types of posts on frugality. This is mainly because frugality comes natural to me and I do not put much conscious though into being frugal. People do seem to be interested in how I can live on so little so I’m starting a series on frugality to give everyone an idea of how I do it. You might find some of my ideas a little extreme if so you can adapt these ideas to fit your own needs and still be pretty frugal.

I think the most important thing to change when becoming more frugal is your mindset. You need to get out of the mindset that money is the only way to solve problems and that money is the key to happiness. With a little creative thinking you will find that it is often possible to solve problems without spending money or at least without spending too much money. You will also find that there are plenty of things that make you happy that cost no or very little money. I’ll have specific examples of the most common categories as this series goes on but I think it is best to establish the mindset first.

You also need to be conscious of your spending. Many people buy a meal out, the latest bestseller, or some electronic gadget and don’t give the purchase a second thought. I consciously aware of every purchase I make. I don’t agonize over whether I should a McDonald’s extra value meal or not but I am aware that I am unnecessarily spending money and make a mental note of it. Making occasional small, unnecessary purchases of this sort won’t keep you from being frugal but allowing them to become a habit will.

There are several tools you can use to help develop a frugal mindset. Tomorrow I will post about the best tool for helping you develop a frugal mindset and seeing where you have the most room to become more frugal.