Frugality

J.D. at Get Rich Slowly recently had a post “Extreme Personal Finance:America on $10 a Day.”  It was about a man who lives on about $3,700 a year.  I found it interesting that some commenters couldn’t imagine living on anywhere close to that.  Some didn’t think they could live on that much for a month.  Although somewhat odd the man does seem to be quite content living on that amount.

It makes me wonder how little I could live on.  There have been many years that I’ve lived on less than $10,000.  It was pretty simple to do because I made less than $10,000.  Since I  avoided debt I couldn’t spend money I didn’t have leaving me with no choice but to live on what I made.

If I were free from the expenses associated with earning an income I think I could live quite comfortably on less than $10,000.  If I were to spend six months hiking the Appalachian Trail and the rest of the time in Guatemala I think it would be fairly easy to live on $6000.  That does include paying for health insurance.  That year would probably be much more enjoyable than the present one too.

How little could you live on?

After doing some calculations I have determined that my new underwear will pay for itself. I normally do a very small load of whites every week. This isn’t my preference but I only have enough clean underwear to last a week. I often wear pants or sometimes shirts more than once but not underwear. Even a miser has his limits.

The math works like this. A load of laundry costs me approximately $1.50. I was able to buy seven pairs of underwear for $5 at Target. I used a Target gift card I’d received for Christmas making the purchase free to me but I’ll stick with the $5 figure. Now that I have the additional underwear I only need to do a load of whites every two weeks. That makes a savings of $1.50 every two weeks. In eight weeks I’ll have saved $6 which is a dollar more than the underwear cost me. That makes it underwear that pays for itself.

My latest gas bill was for $103.  This is much more than I paid last year.  My highest heating bill last year was $61.  The gas customer charge is $15 higher than last year but most of the increase in my bill is from using more gas. I know the apartment I’m in now is poorly insulated but so was the apartment I was living in last year.  The furnace in my current apartment must be extremely inefficient.

Being a tight-fisted miser I don’t like paying this much for heat so I’ve decided to try an experiment to reduce my heating bill.  I’m turning down my thermostat to 55 degrees and am going to use an electric space heater to take off the chill in the evenings.  I won’t need it when I’m sleeping because I use my down sleeping bag as a blanket and it can keep me comfortable at temperatures much lower than 55 degrees.  Also I’m going to try to take my showers at the fitness center.  I still haven’t gotten into the habit of working out this year but this will give me one more incentive to get to the fitness center.

I have no doubt this will work to cut my gas bill.  I’m just not sure I’ll save enough on my gas to make up for the extra electric cost.  I receive my electric bill a couple weeks ahead of my gas bill which will give me an idea if this will pay off.

Next to a house, a car is probably most people’s largest purchase and spending category.  That makes it one of the best opportunities to save money.  I think the best way to save money on a car, besides not having one at all, is to drive a hoopty.

There are several advantages to having a hoopty.  The first is you won’t lose much to depreciation.  New cars often depreciate 20-40% in the first couple years.  A hoopty won’t depreciate much because it is already so cheap.  I plan to drive my hoopty until it only has salvage value so I’m not worried about depreciation at all.

Another advantage is that I was able to buy my car with cash.  This allowed me to avoid paying interest on a loan.  Also, since I didn’t have a loan I was able to get liability insurance only.  This is a significant savings over comprehensive insurance.  My liability insurance runs just $20 a month and that is for more than the state required minimum coverage.

Still another advantage is I don’t have to worry about the appearance of my car.  This car has picked up various door dings and other minor dents and scrapes.  Since this car is a hoopty they don’t bother me at all.  If I had a new car these would have upset me and possibly required expensive repair.  Also besides washing the car to remove road salt there isn’t really any point in washing and detailing the car which reduces that expense.

Some hooptys also have the advantage of being green.  My car gets 29-30 mpg doing pizza delivery.  That is better than most new cars.  It is estimated that production of a car contributes 10-20% of its total lifetime CO2 emissions.  By keeping the car on the road longer that percentage is reduced.

Many people think that all of these advantages are wiped out by the need for repairs.  The need and cost of repairs can be reduced by by buying a car known for reliability.  Knowing an honest, good, and inexpensive mechanic is also extremely helpful.  My car has needed several repairs but has always started for me.  Even if you buy a new car there is a chance of being stuck with a lemon.  With a new car you have a warranty but that lasts for a limited time.  If you trade your car in every time the warranty is about to expire you drive up your cost of ownership even more.

Even with the added cost of repair the cost of my hoopty compares very favorably to a new car.  I paid $1750 for my car and have driven it over 80,000 miles.  I estimate that I have paid about $1000 in repairs on the car not including standard maintenance.  If my math is correct this comes to 3.4 cents per mile.  If you buy a new car for $20,000 you’ll have to drive it hundreds of thousand of miles without any added repair expense to come close to that figure.

I know that hooptys aren’t for everybody but if you can put aside your vanity this is one of the best ways to reduce your expenses.

I’ve discussed this before in my post Saving on Minimum Wage which was included in The Great Money Challenge‘s post More on How to Live on Minimum Wage.  This post features several posts about minimum wage.  I highly recommend reading How to Get Wealthy on Minimum Wage  by Early Retirement Extreme.  I just started reading Early Retirement Extreme last week and it is one of my favorite blogs.  Through what some would consider extreme frugality he has managed to become financially independent in just five years.

You should also check out Multi-Millionaire Made on $11/hr Job at Consumerism Commentary.  This is more than minimum wage but still a very modest salary for becoming a millionaire.  All these posts show how frugality can help you get ahead while making a small income.  Of course if you’re making a modest wage you should also look into ways to increase your income.