Living Cheaply for the Long Term

By Philip Brewer on 9 December 2009 (Updated 22 December 2010) 23 comments
Photo: Philip Brewer

Frugality sites are full of advice for cutting your expenses right away. Everybody's got a list of unnecessary expenses, an exhortation not to buy stuff you don't need, and some ideas for how you can get the things you do need more cheaply. Living cheaply for the long term is different. Call it "strategic frugality."

Most people don't really have a goal to live cheaply. Rather, within the constraints of their income and their important long-term goals (like college for the kids and retirement), they want to live as well as they can. The problem is, boosting your living standard at each opportunity makes it impossible to take the strategic actions that let you live better for less. (And once you've got that down, funding your long-term goals gets a lot easier.)

Many of these strategies cost money, which means that they're not an option for someone who's in the midst of a financial emergency like a loss of income or a major unexpected expense. For that, see my emergency belt-tightening post with a bunch of ideas on how you can cut your expenses right now. Living cheaply on a non-emergency basis is different. Living cheaply for the long term sometimes involves spending more money now with an eye toward long-term savings. Many of the basic ideas are pretty obvious, but it's worth putting them all together and looking at the pattern they form.

Strategies

Buy stuff that lasts. This saves money, because you don't need to replace the item as often. It also raises your standard of living, because stuff that lasts is often higher quality.

Buy stuff that reduces future expenses. Things like weatherstripping, insulation, energy-star appliances, a fuel-efficient car, a small motorcycle, or a bicycle can all save on future fuel costs. Doing proper maintenance can save on future repair costs, and proper preventative care can save on future health costs. Tools, books, and classes that enable you to make (or repair) your own stuff can save on future expenses.

Stock up when things are cheap. This saves money, because you're getting the stuff at a better price. It also raises your standard of living, because you don't have to rush off to the store to get something (or else decide to make do without it). As a bonus, it produces huge tax-free investment returns.

Buy things that earn money. That is, invest in things like bonds and dividend-paying stocks. If you can handle the extra work of being a landlord, you can also invest in rental property.

Take care of your stuff. This goes along with buying things that last, but it's a concept that isn't well supported by society these days. It's tough to get things that are made to last — most things are made to break. Still, despite planned obsolescence, most things will last longer with gentle use and many things can be repaired (or kept in service, at least temporarily, despite not working as well as they did when new).

Best practices

When you want something, it's easy to fool yourself into imagining that whatever it is will somehow save money in the long run. (Such as thinking that a home theater will pay for itself in fewer movie tickets or that a fitness center membership will pay for itself in fewer heart bypass operations.) Avoiding that pitfall simply requires being honest with yourself. To that end, here are a few best practices.

Evaluate your budget against your needs. Even among people who have a budget, most simply assume that last year's spending is the benchmark against which they need to compare. Instead, start each budget category at zero. Then, evaluate what you actually need and investigate the cheapest way to fill that need.

Analyze fixed costs. The average household has a bunch of costs that are fixed for the medium term — a lease that runs for a year, a cell-phone contract that runs for two, a car loan that runs for several years, a mortgage that runs for a decade or three. You can often get a better deal if you commit to an expense for a longer term, and a collection of such deals is what adds up to living cheaply. Still, always think twice before buying things that come with monthly fees or that need to be insured, fed, or maintained (unless you can maintain them yourself). The more fixed costs you have, the less flexible your household cost structure becomes — and an inflexible cost structure makes it tough to handle a financial emergency.

Learn how to do things yourself. If your goal is the highest possible standard of living, you probably come out ahead by putting all your time into whatever is your main way to earn money. In the time it would take to change your oil you can earn more than enough to pay someone to change it for you. In the time it would take just to plant a garden you can earn enough to buy a whole summer's worth of vegetables. But if your goal is to live cheaply for the long term, learning how to do things yourself adds a whole category of cost saving options, while at the same time recovering some of the flexibility you'd otherwise lose to fixed costs.

Having said all that, a lot of keeping costs down is just spending less. If you don't do that, none of this other stuff is going to add up to much. Still, there are certain opportunities where spending a little more up-front, or committing to spending for a little longer, can save money. The key to living cheaply for the long term is cranking the numbers to figure out which option is cheapest — and then, of course, taking action in accordance with what you figure out.

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Guest's picture

Buy stuff that lasts.Great tip. SO many people buy in buld but stuff that goes bad quickly- a bug waste of money!

Guest's picture

Great post! I plan on living cheaply for the long term.

I agree that you need to take care of your stuff! (wishes I could get kids to understand that same concept - lol). The husband and I take time to make sure things are maintained as we use them. We even learn how to fix them when something goes awry - like we are pros at fixing a washer now.

Guest's picture
Guest

get sucked in to the latest fads!
These were great tips. Thanks!

Guest's picture
Guest

Buying stuff that lasts is hard , higher cost , and the outside apperance of quality dosent work if the wires and hard wear inside is designed to breack down after warenty, in fact thats the only way i can buy some thing good is to look for an item that garentee their products for 5 - 10 years. My mom has a microwwave older than me , im 26 and if i am to but a microwawave i would be lucky to get 10 years out of it. It seems like most stuff is made to last only 3 years.
great post by the way

Guest's picture

Great post Philip,
My favourite part is buying stuff that lasts. This of course always brings a conflict between the short term and long term. Much easier to buy a number of cheap things than one more expensive thing that wil last. Right at that moment of purchase I can find it difficult to limit myself to one item which takes up all the current budget BUT in the end it always seems to be a great choice when after a few years I'm still enjoying it!!

Nora Dunn's picture

Great tips and strategies, Philip! You're bang on...

Guest's picture

Thank you for this wonderful article! I am going to send this to a lot of people I know. It really gets to the heart of frugality.

Guest's picture
Guest

Thank you, thank you, thank you for not including a blurb about growing your own fruits or vegetables! I thought this was going to be one of those kinds of articles. Unfortunately, I see too many of those suggestions here.

I would consider the advice you give is less frugal and more maximizing your cash.

Thank you again for the excellent and practical article.

Guest's picture
Guest

We not only grow our own veggies and fruits, we go enough to share with the local food banks. we can tons of veggies each yr and they taste alot better than the ones in the stores.

Guest's picture
Eystein

I have a separate account for this type of saving. For instance if I start to make my own bread instead of buying it. I may save 5 - 10 $ a month, I put up and automatic transfer of 10 $ to the account. I use this money to buy more stuff that saves me money, for instance a safety razor. Rinse and repeat.

Guest's picture
scheinmoen

Nothing can make you more mad than spending your hard eaned dollar on a product just to have it crap the bed on you in no time flat. I started going to the library an checking out the back issues of Consumer Reports magazines before making any major purchases.

Reduces the chances of buying a lemon.

Great article, Thanks

Guest's picture

I completely agree with the take on cutting at the fringes. For a lot of people, the real budget busters are in the fixed costs--the house, the cars, the student loans, etc. A lot of households could cut out all the fringe stuff they can and still be underwater.

For the long term the big fixed expenses have to be on the table. With a big house come big utility and insurance costs, with an expensive car there are large repair and insurance costs. It might be best to start with these expenses and work back from there for the greatest savings.

I think it would help a lot to focus on what we want in life--who we want to be--apart from money. If we can settle that, the money issues would fall into place. Money has become a substitute for many things in life, but in the end, life is more about what we do and who we are than about what we have.

Guest's picture

When it comes to health care, we shouldn't hesitate to ask "Why?," "How much?" and "Is it necessary?" I got a kick out of this fun, short video. Check it out.

Guest's picture
joe

I agree with Kevin
If you are underwater in debt, anything more will just sink your boat even deeper. I like Dave Ramsey slogan.. "live like no one else, so you can live like no one else".

Joe

Guest's picture
Katie

Awesome post Philip!

"Take care of your stuff." This was a great idea that I feel as if I should send to my friend Lydia. She always spends a fortune on her things that she buys and they are runied in less than 6 months. She always buys the most expensive things and then ruins them because she never takes care of them. It is not like she has all this money to spend, she is spending most of her loan money!!! For example, she buys a 400 dollar Coach purse last year and within the first 4 months it was black and nasty and she didnt care! She just bought a new one after 4 months that was almost the same so I (being the cheap one) asked her for it! I cleaned it and when she saw it she couldnt believe it! I always try and tell her to keep care of her stuff!!

I am forwarding her this email! She needs some of this advice about how to live cheaply! These are great ideas and made me think so much of her and about changing my life! Thanks Philip!

Guest's picture

I think it's more of a quality living. Diligent ways of spending money deals with valuable costs that is bounded by your needs and not by your wants. Being responsive toward your expenses is a deliverance of personal management. Having t create self standards and being a consistent follower of your dedication is the best way to strive success in having to leave with this option.

Guest's picture
Mark Cover

I agree - most people often have only their short term interests in mind when making personal or business insurance most of the times which is usually very short sighted & ends up costing the person / business more in the long term, more stress & usually leaves a bitter taste in thier mouth knowing they did the wrong thing at the time and now it is costing them...

Guest's picture
A

Excellent info. Great post. And Philip, did you take that awesome photo? Wondering what/where it is.

Philip Brewer's picture

Thanks for the kind words!

I did take that picture. It was taken in Denmark, near Kronborg Castle in Helsingør (also known as Elsinore, the setting for Shakespeare's play Hamlet). It was taken in 2003, on a free day during a business trip that had brought me to Copenhagen.

Guest's picture
Guest

Quality is remembered long after price is forgotten. IOW, quality doesn't cost; it pays.

Guest's picture

I originally started living cheaply because it was easier to work on projects that I enjoyed rather than a set career, and have found it to be a great lifestyle that I'll continue for the long term as well. Think I kinda stumbled onto it similar to yourself.

Guest's picture
Anna

When I got a new job in 2006, my husband and I were amazed that suddenly we were a six figure household without kids. Luckily, we looked at it as an opportunity to spend down our debt which accumulated while I was in school. Because in 2008, like many others, I was laid off form my wonderful job.

Now in 2011, I have been rehired in my former industry. Our previous mindset, spending down debt, was honed during my 3 year sabbatical (I went to grad school - which DID help in getting both my new job and my new salary).

Our mindset is the strategic frugality mentioned here. We do want a certain lifestyle. However, we found that we could downsize in many areas that we didn't really care about and pay attention to in order to upsize in the areas important to us.

We had cable because we grew up with TV. And realized we didn't watch it. Canceled our DirectTV, kept netflix. Utilize online programming. We are interested in reducing chemicals used in our household. We bought Norwex products (clean with water - silver infused cloth kills germs/bacteria) and got rid of Windex and other cleaning products. We get simple laundry powder and Ivory soap to make our own laundry detergent. We are freezing more farmers market produce to last for winter but spent on the freezer to keep the food. With our savings, we can now buy large quantity of meat directly from the farm - and save on meat costs at the grocery store.

Finances are like diets in my opinion. I can't stick to a lifestyle change just to lose weight just like I can't make a change just to save money. But if I make changes to do things I enjoy, I'm more likely to stick with it.

Guest's picture
Jon

This is also consistent with Ramit Sethi's advice of cutting costs mercilessly on things you don't need or care for, but spending money on the things you love :). It's not solely about cutting costs.

Like changing oil of car. If you enjoy getting your hands dirty, then fine. Wait for the engine to cool down, lift up the car, change oil, dispose of the oil properly. You may have saved a whopping 5-$8 Or you can pull into one of the many quick-oil changing places and have it done for the same price. In fact, you would most likely spend more time and money changing it yourself vs going to a shop that already has a rapid system in place for changing it.

My point is that you have to know when it is more economical to outsource vs do-it-yourself. The old saying of "being penny smart and pound/dollar foolish" is very applicable here :)

Another point worth considering is the attachment factor. We know that we will leave this world one day, but yet it seems so far away and some people buy, buy, buy stuff that are garage stuffers. Our agreements with money is just an extension of the core agreements that we have with ourselves. I recommend "The Four Agreements" for anyone looking to make a transition to financial freedom, which goes hand in hand with personal freedom.