Five Ways to Be Frugal While Building Wealth

Being frugal is an important part of my wealth building plan. For me, being frugal means cutting back on the unnecessary items and saving money on those that I need. Here are my five principles for frugal living while building wealth:

Buy only what you need. The challenge to saving is that most of us spend all of our monthly, biweekly or weekly paycheck before we have received it. To get money for savings, I had to break the cycle. I am not a big fan of budgeting. It is kind of like dieting. Most of us can do it for a short time, but then we fall back into the old habits. (Read more...)

Ask for a cash discount. On large purchases, such as furniture, appliances, or services, I always ask if there is a discount for paying cash. About 90% of the time, there is a 2-3% discount, which amounts to $20-30 per $1000 spent. My spouse is reluctant to ask for a cash discount, but I am always happy to ask. As a colleague once told me, the worst they can say is "no." And very few people are saying “no” nowadays. If there is a discount, I pay cash. If there is not a discount, I use the credit card and take the rebate or points.

Use good high value providers for your regular purchases. Groceries, gasoline, dry cleaning, and home repair/decorating are just a few examples of regular purchases. Whenever I move into a new neighborhood, I look for retailers that provide good overall value to me – low (not lowest) prices, good service and minimum time impact.

Overall, I save money versus going to random stores or the nearest stores. However, I do pay a little bit more than if I searched for the lowest price for each item.

Costco and a local grocery store are high on my list for providing this benefit. Although Wal-Mart has low prices, it is doesn’t make my list because it take too much time to purchase 2-3 items (male shopping syndrome:-) and their service does not meet my minimum standards.

Use sales/discounts for your normal purchases. For items that you regularly buy, look for sales or coupons you can use. If you already buy it, why not get the benefit of a reduced price from a sale or coupon? Sales and coupons usually happen often enough that I can benefit from either approach during one of my regular purchase cycles.

Give your kids your time. Since we chose to have children later in life, we decided to change our lifestyle to give them more time. My spouse stopped working and I cut my work back to about 60 hours/week and reserved weekends for family time. We often go to parks, the zoo and other fun activities. In addition, we spend lots of time reading, playing, and learning together.

While I believe a variety of experiences is important for a child’s development, we are avoiding high levels of spending in toys (especially, the electronic/video ones), children’s activities (e.g. specialized training for $4000/year) or highly involved sports (e.g. year round select soccer). Part of the reason is cost, and the other part is the value returned for that cost. I believe that equivalent lower cost activities and additional parental time provides developmental benefits equal to or more than the higher cost options.

And selfishly, I want the time with my children while they still think I’m cool:-)

This is not financial advice. Please consult a professional advisor.

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