5 Ways to Live Better Without Spending More
The most simple-minded measure of your standard of living is how much money you spend: spending more equals living better. Reality is more complex. There are a lot of ways to live better without spending more.
I'm not just talking about the "touchy-feely" ways of being happier that come from strong connections with friends or relatives or having a spiritual aspect to your life, although that's also important. I'm talking about the sort of standard-of-living stuff that you usually have to pay cash for.
1. Don't buy stuff you don't really want
It sounds obvious, but it's not so easy in practice. It's hard enough just to grasp the difference between needs and wants. It's all the harder to grasp the difference between the things you truly want and the things that are just a passing fancy — especially in the face of advertising, the expectations of your family, the consumption practices of your neighbors, and all the other influences on the way you think about what you want.
Still, this is the core principle of of frugal living. The less you spend on stuff you don't want (or don't want as much), the more you have to spend on the stuff you really care about. Get this right and the other pieces fall into place pretty easily.
So, how do you get it right? Here's what I've been able to come up with:
- Needs, wants, and not even wants
- Lucky trade-offs
- Raise your standard of living by focusing your spending
- Making the most of your guilty pleasures
- When poor folks have better crap than you
Probably the key tool for doing this well is a budget. Always remember, a budget is not a constraint. Those constraints that seem like they come from the budget are actually from the real world. Your budget is a tool for maximizing your joy in the face of those constraints.
2. Share with others
There is probably no more powerful tool for raising your standard of living than sharing. After all, if you can use something without having to buy your own, you get the benefits at zero cost.
People actually share all the time within the household — I knew very few kitchens where each person has their own pots and pans, let alone their own stove and refrigerator. In fact, a lot of people don't even think of it as "sharing" to have a common set of stuff in a household. Sharing between households, though, has become increasingly rare.
I talk about some of the reasons for that in a post called Why don't people share more. (That one picked up a bunch of good comments as well.) If that doesn't convince you to make sharing a fundamental tool for living large on a small budget, there are some less effective alternatives (that are still better than just buying everything yourself): Renting, substituting, and doing without.
Since sharing within households seems more normal, that's a place to start. And sharing stuff is only the beginning — it's also possible to share the work, both household work and work in the money economy. See my post: Strategies for households with more than one adult.
3. Have some capital
Too many people think of saving only in terms of a specific goal: Saving for a new car, saving for a new house, saving to send the kids to college, and (most especially) saving for retirement. The fact is, though, that just having some money — some capital — raises your standard of living.
Investments can earn a return — raising your income — but that's only part of the story:
- Capital makes the household run more smoothly. Just like having adequate supplies in your pantry makes your kitchen run more smoothly, having adequate capital means you're not having to waste time "managing" your finances--shifting money from one account to another, keeping track of bills until payday.
- Capital also means that you don't have to borrow. If you don't borrow you don't have to pay interest--and since you don't have to borrow, you can also negotiate a much better rate when you choose to borrow.
- Capital sets you free to take bigger risks. This can can lead to all sorts of good things. It can save you money (for example, though higher deductibles on your insurance). It can let you pursue your true interests (for example, by letting you start a business or get a degree). It can earn you a better return.
Want more details? Here's some of what I've said about this before:
4. Don't borrow (so you don't have to pay interest)
There are good reasons to borrow. But however good your reason, it still costs money.
If you've been borrowing, then living within your means will initially lead to a drop in your standard of living. But it's a drop that doesn't last. As long as you don't rack up debts now that you have to pay off later, your standard of living tends to rise automatically.
5. Cook your own food
This is a fairly small item — the average household spends about 15% of its money on food. But the average household spends about 6% of its money on food away from home. If you spend more than that eating out (which half of you probably do), then just a little more home cooking can save you a lot of money. And even if you spend less than average on eating out, unless you're already a subsistence farmer you can almost certainly save money and eat better by cooking more.
Of course, someone in your household needs to be able to cook. Fortunately, it's pretty easy to teach yourself how to cook.
Once you're cooking (even a little), it's pretty straightforward to save money in the kitchen. There's lots of support for frugal, healthy eating, such as healthy recipes with cost data courtesy of the U.S. government.
Really, cooking your own food would be an increase in your standard of living even if it didn't save money, simply because stuff you make yourself can be better (i.e. more to your taste) than stuff that someone else cooks. The fact that it's cheaper is just a bonus. Plus, it's fun.
6. Spend money to save money
Finally, here's a bonus tip that doesn't quite match the headline, because it sometimes involves spending money, so I'm not counting it as one of the five.
There are lots of ways to spend money to save money. The most basic is simply to stock up on things when they're cheap. (This yields a return which can be huge in percentage terms and tax-free.) There's also just taking good care of your stuff.
More generally, though, there are lots of ways that small investments (of money, time, or both) can produce a permanent decline in your cost of living. There are obvious examples, like weatherstripping or insulating your house. Some, such as learning how to make or fix things yourself can be free (although sometimes you need to pay for classes or tools).
Non-financial investments — investments where either the investment itself or the return is in the form of something other than money — often yield a higher return than ordinary stocks or bonds.
I think this will turn out to be especially true of investments that either save or produce energy, because they're priced based on the current costs of energy, and I happen to think that energy is going to be more expensive in the future: