LEVEL THREE

Make Frugality Work for You

Society loves to tell you you’re not depriving yourself enough. Stop buying lattes! Stop buying phones! Avocado toast? Who do you think you are, a Rockefeller? Money snobs constantly judge how others spend their cash, and if you don’t spend according to their priorities, you’re not good at life. In reality, most of us already feel like we’re cutting back. And thanks to that judgment, we feel guilty any time we spend $3 on coffee. It’s easy to see why so many people grow to loathe frugality. Who wants to live on even less? Frugality doesn’t have to be about depriving yourself, though. You can make it work for you, even without giving up your avocado toast, if that’s what you value. There are two different ways to think about frugality: the virtuous approach and the practical approach.

FRUGALITY AS A VIRTUE

“Why are you throwing out perfectly good Tupperware?” my mom asked, pulling a plastic takeout box out of my garbage and rinsing it in the sink. “So wasteful.”

My mother is one of the most frugal people I know. She thinks frugality is fun. “I like thinking about how to get the most use out of everything,” she recently told me. “That includes money, leftovers, just about anything.” You can probably guess which side of the fence she leans on. To my mother, frugality is a virtue and waste is a sin. People who approach frugality this way wear it like a badge of honor. They hate the idea of waste, even if it’s a dirty old takeout box, and often enough, you’ll discover that it has everything to do with how they grew up. My mom grew up in poverty with six brothers and sisters. Once, after I tossed out my bread crusts because “they were just scraps,” my mom waved the crust in my face and said she had dreamed of eating a “scrap” like that when she was my age. It’s not hard to understand how she might value frugality this way. Virtuous, frugal people squeeze what they can out of everything and aim to be happy with less.

FRUGALITY AS A TOOL

But there are also practical frugal people. We’re not necessarily frugal because we’re trying to live a life of less. Our scrimping and saving serves a tangible purpose, whether it’s freeing up money for travel or saving more in a 401(k) retirement account. Practical frugal people are only frugal because they want more money to spend on other things or save.

Both approaches have merit (and you can be both—I am!) but the goal of this book is to make money work for you, and that means making frugality work for you, too. In this level, we’ll focus on the second approach to frugality: using it as a means to an end.

If you hate being frugal, if you’re not good at it, if the very idea of frugality makes you groan, don’t worry. You’re about to learn some easy, even automatic ways to be frugal without wasting your time, energy, or effort. First you’ll figure out how to be frugal with your discretionary income: the money you have left over after paying for your basic living expenses. Then you’ll figure out how to cut the cost of all those expenses so you have even more money to save, spend, or throw at your debt.

DECIDING WHEN TO BE FRUGAL AND WHEN TO SPEND

Many of my friends call me frugal, maybe even cheap. I wear the same five outfits every week. I always buy the generic brand. My husband and I served tacos at our wedding (cheap, but so tasty). On the other hand, some friends would say I’m anything but frugal. I travel once a month. I had a $30 steak once (expensive, but so tasty). In reality, I guess I’m both. I’m super frugal with certain things, like clothing, beauty, and entertainment, but that’s only so I can spend like a maniac on other areas, like travel or restaurants.

After you pay for basic needs and save for your own financial goals, you get to decide how you want to spend the rest of your money. Personal finance nerds call this leftover money discretionary income. Discretionary income is pretty much what it sounds like: the money left over after basic needs like rent and food are paid. It’s income you can use at your own discretion. So how do you figure out what you want to spend it on? Research says we’re happiest when we spend our money on experiences,¹⁰ like trips with friends or concerts, but that’s not necessarily what makes you, as an individual, happy. To choose what kind of stuff you can (and should) spend your money on, let’s make a couple of lists. On his blog, writer James Clear relays a story told to him about legendary investor Warren Buffett.¹¹ As the story goes, Buffett gave his personal pilot a bit of advice to help prioritize his career goals. He asked the pilot to complete an exercise. First, he was to write down his top twenty-five professional goals. Second, he had to review the list and circle the top five goals that mattered to him most. At this point, the pilot had two lists: List A, which included the five circled items, and List B, which included the twenty items that were not circled.

Buffett then asked his pilot to confirm that he would start working on List A immediately. And List B? Forget about it. As Buffett suggested, he should consider this an “avoid at all costs” list. These twenty items were distractions from accomplishing the items on List A.

So what does this have to do with your budget? Well, let’s tweak the exercise a bit.

List ten things you enjoy spending money on. This is List B.

Now write down three things from that list you love spending on most. This is List A.

You now have two lists to help prioritize your spending. List B is your “avoid at all costs” list. It might include things like new shoes or a new phone. If you want to get the most bang for your buck, you’ll do well to cut back on the items on List B so you have more money to spend on List A, the things you love most. It isn’t realistic to expect you’ll never buy new shoes or a new phone again. However, List B serves as a reminder of the kind of stuff you should avoid so you can prioritize your spending according to what you love, not just what you like. And just like that, you have an actual list that tells you when to be frugal and when to spend.

SAVE MONEY ON EVERY BILL

Now that you know how to prioritize your spending, it’s time to save money on some common expenses people pay too much for.

Your Cell Phone Plan

The average American consumer spends $83 a month on their cell phone bill.¹² You guys, this is way too much. Granted, that includes family plans, but even if you’re paying more than $50 a month for your cell phone plan, I hate to break it to you—you’re overpaying. If you’re like most people, you could pay much less for the same service. If you can reduce your rate by even $25 a month, that’s $300 a year. In gastronomic terms, that’s ten to twelve sushi dinners you can enjoy each year.

But I have an unlimited plan, you might think. It’s like an all-you-can-eat buffet for phone service! These days, there are plenty of off-contract, discount cell phone carriers or plans that give you the same deal for less. (Ting, Republic Wireless, and Virgin Mobile to name a few.) Even some of the larger carriers, like Sprint and Verizon, are starting to catch on and offer their own discount plans. To find a cheaper phone plan, you want to know what options you have available. To do this, first calculate your actual cell phone usage. Look at your bill and add up the number of minutes and texts and the amount of data you use or send each month. Then, consider using a site like WhistleOut.com or Wirefly.com to compare carrier rates based on your usage. Enter your info and select the phone model you want, and the site will give you a list of rate options with different carriers. Before you think about switching, call your current carrier and see if they have any discounts available, too.

Once you find a cheaper plan, switching carriers is pretty simple. Your new carrier will help you with the process, and most of them have step-by-step instructions that walk you through it on their website. Once you find the carrier of your choosing, sign up online or head to a store and the new service provider will help you transfer your current phone number.

Your Car Insurance Rate

Insurance is my least favorite thing to buy because you pay so much money for it and the best-case scenario is that you’ll never actually use it. It’s expensive, but even a small rate drop can make a difference over time. You might already have the best rate possible, but in case you don’t, here are a few simple ways to save money on insurance.

Don’t Get PO’ed: There’s a sneaky trick insurance companies use to gouge their customers. It’s called price optimization.¹³ Car insurance providers pay data-mining companies to dig up dirt on your shopping habits and behaviors. If your carrier thinks you’re likely to compare insurance rates at other companies, they’ll keep your price nice and low to retain your customer loyalty. However, if they think you’re too lazy to shop around, they’ll take advantage by upping your price. Basically, the more likely you are to keep your options open, the better they’ll treat you. Sounds like a bad relationship, doesn’t it?

Advocacy groups are hard at work to regulate this tactic, but in the meantime, you can combat it by simply shopping around. Find a few companies with low rates, then call them or get get a quote online. A couple of months before my policy was set to renew, I called my insurance company and told them I was thinking about switching. They wouldn’t lower my price, but when I got my renewal notice, at least my rate wasn’t higher. Maybe it was a coincidence, but it’s likely that by calling, I let them know I was a comparison shopper who couldn’t be price optimized. The lesson here is, shop around before your policy renews. At the very least, call your insurance carrier, tell them you’re thinking about switching, and ask if they can offer you a better rate.

Pay Your Premium Up Front: You can usually get a small discount if you pay your insurance premium in full. Instead of making monthly payments, pay the entire cost up front, which is usually six months’ worth of coverage. The amount you save will depend on the company’s discount, but it’s a quick way to save some cash, if you can swing it. You can probably even do it online. When your policy renews, pay your bill online, and opt to pay the entire premium instead of monthly installments. If there’s no mention of a discount online, call your carrier and ask for one. Bonus: it’s one less bill you have to deal with each month.

Combine Your Policies: This is one of those “your mileage may vary” situations (pun not intended), but you can often get an insurance discount when you combine policies. A company might give you a discount for adding a homeowner’s or renter’s insurance policy with them, for example. Or they might offer you a discount if you and your partner get on the same plan. Either way, call your carrier and ask what discounts are available for combining.

Your Credit Card Rate

Who knew your credit card interest rate was negotiable? I certainly didn’t, until an editor assigned me a story on haggling for better credit card rates. I had to call my credit card company, follow a script, and ask them to reduce my interest rate. To be honest, I thought it was a non-story, but to my surprise, it worked. My rate went from 15 percent to 12 percent. Here’s what that script covered in three simple sentences:

“I’m a good customer with a solid history of paying my bill on time.”

“The interest rate on my card is a bit high.”

“Is there anything you can do to lower that rate?”

When I asked, the credit card company immediately came back with a rate that was 3 percent lower. That might not seem like much of a reduction every month, but this adds up, depending on how big your balance is. When you’re paying off credit card debt, every little bit helps, and it doesn’t take much time. It’s a one-time call and you automatically save every month.

Haggle Any Bill Using This Five-Step Method

For some people, haggling is a sixth sense, an effortless habit that comes naturally to them. They could haggle in their sleep.

Then there’s the rest of us. I’ve never been much of a negotiator, because I hate asking for things. When I noticed my Internet or cable bill was doubling in price every six months, however, I quickly learned to embrace the art of haggling. Over the years, I’ve successfully negotiated my cell phone bill, credit card interest rate, bank fees, and cable and Internet rate. You can get what you want in five simple steps:

Before you even pick up the phone, do some research. Check competitors’ rates. Look for online reviews. Customers often use online forums to reveal their own tactics for getting better rates. Second, make sure you’re polite, because, well, no one likes a jerk. Be direct, but don’t resort to shouting, condescending, or name-calling. Not only are you less likely to get help, it’s just rude.

And, yes, threaten to cancel. I know this seems contradictory to being polite, but there are nice ways to say you’ll take your business elsewhere. For example, instead of:

“Listen, asshat! Give me what I want. Or else!”

… you might try:

“This rate isn’t in my budget anymore. Unfortunately, I may need to cancel.”

If they give you an answer you don’t like, don’t be afraid of silence. A simple “hmmm” followed by silence can be awkward, but it can also be surprisingly effective. If they ask if you’re still on the line, tell them you’re reviewing your statements and you need a moment. If they’re able to offer a better rate, they’ll usually break the silence and tell you so.

Finally, if you’ve tried all you can and the representative still refuses to budge, ask if you can chat with a supervisor. Sometimes, this is all it takes. Go through the same process with the supervisor: be polite, ask for a better rate, tell them you’ll leave. In the end, if you keep threatening to cancel, they may just call your bluff. Fear not. You can always tell them you need time to think about it, then hang up. In my experience, I get a better rate about 80 percent of the time when I call and haggle.

Hack Your Electric Bill

Want to binge-watch Orange Is the New Black? Feel like reheating some leftovers in the microwave? Want an ice-cold beer to go with it? All these things have something in common, aside from being my typical Friday night: they take electricity. And that means that unless you’re lucky enough to live in an all-utilities-paid paradise, these activities cost money. You probably think there isn’t much you can do about your electric bill, but there are a few tweaks you can make to save money every month.

Lock in a Fixed Energy Rate

In some cities in the United States, residents get to choose their electric company. Typically, these companies offer two kinds of rates to attract customers:

Beware Energy Tiers

I had no idea energy tiers existed until another editor made me write an article dissecting my electric bill. (Come to think of it, my editors have saved me so much money!) Looking at it, I realized that the more energy I used, the higher the price I paid. For the first 1,000 kilowatts, I was only paying $0.14. But for every kilowatt after that, I paid $0.17. So if you want to save money on your bill, it helps to simply be aware of how your rate changes, depending on how much you use.

Save Electricity the Smart Way

There are a number of “smart” devices on the market that control your appliances so they can conserve energy. After you set up these devices, they’ll automatically turn on and shut off when you need them, too. Here are some examples of smart devices, along with their typical pricing:

APPS AND WEBSITES THAT HELP YOU GET THE BEST DEAL WHEN YOU SHOP

Deal hunting used to be a lot like standard hunting. First you find your prey: the latest iWhatever. Then you stalk it. You check prices over and over, analyze your options, wait to pounce on the best discount. If you attacked at just the right moment, you could score awesome savings. If you didn’t attack at just the right moment, too bad. The whole process was very primitive. Thanks to technology, you no longer have to be a predator of thrift to find a great deal. These days, all you need are the right tools and apps. All the apps and tools mentioned here are free.

Find Coupons Effortlessly

Couponing: you’re afraid of it, aren’t you? I don’t blame you. I don’t want to dig in a dumpster to save 35 cents on ketchup, either. That’s not how it has to be. If you do it right, couponing doesn’t have to be extreme. There are plenty of apps that do the work for you so you can automatically get coupon savings without wasting your time or energy. Coupon Sherpa is one of my favorites. It’s a free, all-in-one couponing app that finds online and in-store deals and coupon codes. Download it to your phone (it’s available on iOS and Android), open it while you’re in line at Best Buy, and it will let you know if there are any savings.

“I even have my husband and my mom using it frequently, despite not being big couponers,” says Kendal Perez, a savings expert and spokesperson for Coupon Sherpa. “What I like about the app is that you can also see local deals. Use the ‘Nearby’ tab to find deals located near you, whether it’s the city you live in or one you’re visiting.”

The app is intuitive, and it essentially reveals all the active coupon codes for different stores, like 20 percent off or $10 off your purchase. You’ll find savings at restaurants, retailers, auto shops, hair salons, and more. I actively use this app and just open it while I’m waiting in line to check out. It’s easy, convenient, and only takes a few seconds to look. If you do find a deal, just show the cashier your coupon code.

For online shopping, a free tool called Honey (JoinHoney.com) works well. It’s a browser extension available via Chrome, Safari, Firefox, and Opera. You download it, and when you shop online, Honey will search for coupon codes and automatically apply them to your order at checkout. You don’t have to sign up for anything, search for anything, or jump through any hoops. It will even track prices for you.

Get Low-Price E-mail Alerts

An item’s price can fluctuate quite a bit. Let’s say you have your eye on a KitchenAid mixer. Depending on sale prices, coupon codes, and seasonal retailer discounts, that mixer might cost anywhere from $200 to $350. That’s a big range, so obviously, you want to buy when the price is lowest. Honey will track the price of items on Amazon for you, and so will websites like CamelCamelCamel.com. You head to the site and enter the name or URL of the item you want to track, and the site will show you how the item’s price has changed over time. Even better, if you register, you can sign up for price-drop e-mail alerts. When the item you’re watching drops in price, they’ll send you an e-mail so you can pounce on the deal. Slickdeals.net has their own price tracker that does the same thing and works just as well. Pick one of these sites and bookmark it. Next time you’re thinking of making a big purchase, you can just hit your bookmark link and start tracking.

Get Automatic Price-Drop Refunds

Let’s say the fancy headphones you’ve had your eye on are finally on sale for $50. You buy them, patting yourself on the back for waiting until you found a decent deal. A week later, they drop in price and are now $25. Price drop regret is real, and it’s painful. Some retailers have price-drop policies, meaning if an item decreases in price after you’ve bought it, the retailer will refund you the difference. However, this takes effort on your part. You have to research their policy, contact them, send them your proof of purchase, then wait to see if maybe you get a refund. There are tools that will do the work for you.

Paribus.co and Earny.co are web apps that track every purchase you make and keep tabs on price fluctuations. If something you’ve bought has dropped in price, the site will e-mail the retailer asking for a refund on your behalf. Aside from the initial setup, which simply involves linking your account info and e-mail, there’s no effort involved. The tool just tracks your spending and saves when it can. While you do have to link your e-mail for them to work (they look for receipts), both tools encrypt your data to keep it secure and don’t store your passwords, either. Still, you’ll want to read their security and privacy policies online to make sure you’re comfortable with granting access to your accounts.

The tools are free to use, but if they find you savings, they’ll charge a small commission (25 percent) of whatever amount is refunded. Fair enough, considering they do the work. However, you can also refer people to use the service, and they’ll knock 5 percent off your fee for each person who signs up. Tingo.com does the same thing, but with hotel price drops. You register for the site and let them know where and when you booked, and they’ll monitor prices for that specific visit. If the hotel drops their rate, Tingo will ask them for a refund. Again, if they’re successful, they’ll take a percentage of your savings, but it’s not a bad deal for an effortless refund.

Compare Prices and Find Better Deals

Prices can also vary depending on the retailer. Amazon often has the lowest price, but not always. Sometimes you’ll find the same item cheaper at Newegg or even from a retailer on eBay. That’s where a solid price comparison tool comes in handy. Browser extension GetInvisibleHand.com (available on Chrome, Firefox, and Safari) works really well for this. Download it to your browser, and when you’re shopping for an item online, the extension will pop up and tell you where you can find that item cheaper. You can save money in-store, too. The following stores have online price-match policies, which means if you find an item cheaper online, they’ll match that price in-store:

If you’re shopping in-store, a smartphone comparison app can help you search for lower prices, and ShopSavvy (available for iPhone and Android) is a decent option. When you find an item you want to buy, open the app on your phone, then use it to scan the item. ShopSavvy will search for the item and tell you what prices look like at online retailers as well as at nearby stores. If you do find a cheaper price, you can show your results to the cashier. If the store has a policy, they should match it, as long as it’s sold directly from the retailer and not a third party.

Hunting for the best price doesn’t have to take work. All it takes is having a few digital tools in your back pocket and making them part of your shopping routine.

Buying Quality vs. Crap

Believe it or not, sometimes spending more money on something is actually frugal. If you buy something cheap and have to replace it every six months, you may end up spending more over time than if you had purchased something a bit more expensive that would’ve lasted for years. I like to use an excerpt from a Terry Pratchett novel, Men at Arms, to illustrate this. He called it the “Captain Samuel Vimes ‘Boots’ theory of socioeconomic unfairness.” Pratchett writes:

Vimes’s point was, sometimes spending more can save you in the long run. Frugality is about getting the most value out of something, which is why it sometimes makes sense to pay more money for quality. Quality can save you money over time. There are a few rules I follow when it comes to ensuring my quality purchase is also a smart spending decision:

Quality doesn’t always mean pricey: Warren Buffett once said, “Whether socks or stocks, I like buying quality merchandise when it is marked down.”¹⁴ This is good advice: buy quality stuff when it’s on sale. That might mean you have to wait, but the savings are often worth it.

Don’t wreck your budget to buy quality: Buying quality is great, but is the purchase going to throw off your budget and make it hard to pay bills? Is it going to eat into your financial goals or your retirement savings, or dig you further into debt? If so, it’s best to steer clear.

Don’t just pay for status: Are you buying quality or buying the brand? Some cheaper items still work just as well as brand items, so get honest and ask yourself why, exactly, you need that $50 Le Creuset utensil holder when you can probably get the same one for $10 at Target and it will hold your utensils just as well. Like any big purchase, it also pays to do your research. Read reviews, ask around, and make sure you’re getting your money’s worth. Just because something is expensive and brand-name doesn’t necessarily mean it’s quality. Don’t forget: frugality is ultimately about getting the most use out of your money.

Learning to be frugal is a crucial starter step in getting your money in order because it’s all about using your money efficiently, whether it’s saving it or figuring out how you want to spend it. If you saved money in this chapter, let us know how much on social media with the tag #GetMoneyWin.