Frugality

Save Money by Living in a Small Town

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We visited my mother this weekend.  My sister, who is in the Navy and stationed in California, was also there visiting.  My sister plans to retire from the Navy in three years after twenty years of service.  When she retires she will move to the small town where my mother lives.  There are several advantages of retiring to a small town and I might do the same myself.

The biggest advantage is that real estate is cheap.  My mom bought a brand new 3 bedroom, 2 bath house a few years ago for only $70,000.  Houses are still cheap there and rent is very low as well.  You also save money on transportation because everything is within a ten minute drive.  If something you want to do isn’t within a ten minute drive you’ll be saving money by doing that activity less often.  Car insurance is generally cheaper than in the city too.  That is just a few of the ways you can save money by living in a small town.

The biggest drawback to living in a small town is that most local jobs don’t pay very well.  If you’re retired then that isn’t a big deal.  Another drawback is the lack of diversity and exposure to other cultures.  I plan to travel often when I retire so I’ll get my culture and diversity during my travels.

Even with the financial advantages of living in a small town I probably wouldn’t live in one if I didn’t have family there.  If I do end up retiring to a small town it will probably be more of a pit stop between hiking and travels than  a permanent residence.

Getting Cash Back On My Tuition

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For reasons that are still unbeknownst to me not all of my tuition was automatically paid out of my financial aid. This created an inconvenience for me since I now had to pay the remaining balance by cash or check. Since I have several checking accounts but no checks this left me with the option of paying by cash.

I decided to get a little cash back for my inconvenience. I ordered $500 in dollar coins from the U.S. Mint. These coins sell at face value with free shipping. I used my credit card to pay for them earning myself $15 cash back.

The university cashier didn’t seem real pleased to be paid with dollar coins but he accepted them without complaint. The few minutes I spent ordering the coins were well worth the $15 return to me. I’m not sure how long the U.S. Mint is going to be offering this free shipping deal but I’ll probably take advantage of it again.

Living on $700 a Month

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Back in January I posted my sample $1000 a month budget.  I don’t stay strictly on this budget but it is a fairly accurate representation of my monthly expenses.  Frugal Freedom lives on even less and posted her $700 a month budget.  Below is her monthly budget.  I combined some expenses into categories to make it easier to compare to my monthly budget.

  • Food $150
  • Transportation $256
  • Utilities $149  (electric,internet, and phone)
  • Life Insurance $47
  • Everything Else $98 (trash,Christmas, property tax)

The main difference in our budgets is that she doesn’t have a rent or mortgage payment in her budget because she lives in an RV.  She does have a house with a mortgage but I’m guessing she doesn’t include it here because her renters cover the mortgage payments(?).  Other than that our budgets are pretty similar.  One difference is that she doesn’t have any money budgeted for entertainment or health insurance.  She also spends money on life insurance which I don’t have because I have no need for it.

This does show that you can live on very little money if you plan for it.  If anyone else has a low monthly budget they’d like to share I’d like to see it.

Save Money by Buying Gift Cards Online

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You can get some serious discount by buying gift cards online.  There are several sites where you can buy gift cards at discounts around 15-20% off.  They will also buy gift cards from you for about 70% of the face value. It is a much better deal for you as a buyer than a seller.  Some of the most popular sites include PlasticJungle.com, GiftCardsAgain.com, SwapaGift.com and CardAvenue.com.  You can also find gift cards on eBay  and Craigslist.

One example of the deals available is a $100 AMC gift card for $85. This is nice 15% discount which would lower my usual ticket price from $5 to $4.25. I recently saw them being offered for 25% off at $75 but didn’t buy one quick enough and I can’t find them at that price anymore. Even a 15% discount is a good deal since this is for purchases I’ll make anyway.

When using gift cards you do have to be aware that many gift cards have expiration dates or dormancy fees. Some states restrict the fees gift card issuers charge but it is best to use a gift card promptly. I only buy gift cards that I know I’ll use upon receipt. Despite these drawbacks using discounted gift cards is well worth the effort. With a little shopping around you should be able to save 15-20% on your purchases by using discounted gift cards.

How Much Should You Save for Retirement?

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The standard used to be 10-15% of your income should be saved for retirement. That still might be a reasonable standard if you start early enough, your investments perform well, and you’re confident that Social Security will provide a healthy boost to your retirement income.  There isn’t really a one size fits all standard on how much you should save for retirement. Many different factors come in to play such as how early you start saving, how much you plan on spending in retirement, what returns you’ll get on your investment, how long you’ll be retired, and so on.  Since I didn’t start saving until age 39 and don’t have much confidence that I’ll receive a full benefit from Social Security I need to save more than 10-15% of my income.

I made approximately $12,000 last year and invested $4,000 in my Roth IRA.  That is a savings percentage of 33% of my income.  That isn’t bad but I still need to increase my income or savings percentage or both if I want to retire.  I’d like to retire before I’m 50.  I’ll be 41 this month which only gives me nine years to save enough money.  That makes my goal a longshot but I have some ideas how to make it more probable that I’ll share in another post.  My total invested in my IRA will most likely be smaller this year but my savings percentage will likely be about the same.

I see some people that save much larger percentages of their income.  These are usually people with much larger incomes than me.  I’ve developed another way of measuring percentage of income saved that levels the playing field somewhat between large and modest incomes.  I look at what percentage of income above the federal poverty level was saved for retirement.  The federal poverty level for 2008 for one person is $10,400.  My income was $12,000 and I saved $4,000 so my savings percentage was over 100% of my income above the federal poverty level.  I don’t think there are a lot of people matching that although I’m sure there are some.

In summary how much you should save depends on your circumstances.  In my opinion you should save at least 20% of your income and if you want to retire early you should save much more than that.