Forced Frugality

Posted by T | 10:20 PM | | 0 comments »

We have entered an era that I honestly didn't think I would see during my lifetime. Millions of people across the U.S. are adopting a frugal lifestyle. All of a sudden, I don't feel like the "odd man out" anymore. My friends and family used to mock my frugal ways. Now, they ask me for tips on saving money.

The current state of the economy has something to do with this, I'm sure. Every day, we are subjected to news stories about how the economy is continuing its downward slide. Local and national newscasts have a money-saving feature almost every day. When times were good, few people cared about watching their spending and living frugally. Now, it's a necessity.

One of the questions I get a lot is "where should I put my money?" People don't know if they should invest it, put it in a savings account or stick it in a mayonaisse jar and bury it in their back yard. The answer is: it depends.

Here is my rule of thumb: Put money in your savings first, until you have 6-9 months worth of living expenses socked away. Start small if you have to, but save something. After that, whittle away at your high-interest debt. Then, tackle the rest of your debt. Once you are out of debt, then you can start sticking money in retirement accounts, college accounts, etc. I actually siphoned off quite a bit of my emergency savings earlier this year due to unexpected medical expenses, but I'm working to rebuild it again. That's why it's called "emergency savings", right?

I do see more people at my job packing lunch at home, rather than eating out. They buy new clothes less often. They go out on the weekends less often. They are hanging on to their money.

I have come to call this phenomenon "force frugality." People are being frugal because they feel they have to. The real question is when the economy improves, will this newfound feeling of frugality last?


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