How to be Cheap: General Principles

General Principles

1. Plan for giving first, not what’s leftover. If you wait to give what’s left, there won’t be anything. Diversify your eternal portfolio: give to the fellowship, missions work, and poverty relief through Christian organizations.

2. Minimize spending on indulgence and convenience items. Don’t stop at the gas station frequently for snacks and drinks. Pack lunch instead of buying. If you spend $5 a day on lunch, you’re blowing $80 a month! If you bought lunch once a week or less, you could use the money you saved to sponsor two impoverished children! See more on eating at restaurants below.

Besides food there are many items which make our lives easier or more comfortable. I’m not suggesting we eliminate these entirely, but think about whether you really need that new kitchen gadget or cleaning tool before you buy it. Also, reduce your consumption of paper and plastic products. Refill water bottles (of any type). Use resealable plastic bags sparingly, and wash and reuse whenever possible. Buy the choose-a-size paper towels and use half a sheet whenever possible. Use sponges more for cleaning to conserve paper towels. Consider paper and plastic products luxury items and use in moderation.

3. Minimize restaurant eating, including fast food. Going out to eat should be a treat, not a daily or even weekly occurrence. You could easily drop enough money to feed your family for a week on one meal. This is fine for special occasions and infrequent splurges, but it is not financially wise for common practice. The same goes for fast food. As a habit it is a money pit and very unhealthy, but in a pinch go for the dollar menus. The best value is the Taco Bell bean burrito. For $1 it’s packed with filling protein and healthy fiber, while it’s relatively low in fat.

Don't eat fast food regularly!

When you do go out to eat, skip buying beverages. They are the biggest rip-off ever! Water is healthy and free (not so in other countries). Also, keep your eyes open for coupons to use at restaurants. And consider getting take-out. That way you don’t have to pay as much tip or tax.

One problem with not going out to eat is that most Americans go out a lot. So if you want to have a social life, you’ll probably need to go to restaurants. In this case, order cheap items or split a dish with someone. Also, the beverage principle flips if all you buy is a beverage. If you go out with a group of people and don’t want to spend money, eat beforehand and then just buy something to drink or an inexpensive side. These are the cheapest items on restaurant menus.

4. Don’t buy brand names. You don’t need them! Even if you life the brand name better, you can get used to the off-brand. There are some exceptions to this rule, but they are few. When you do choose name-brand, buy it on sale.

I love Aldi!

Shop at Aldi! Save-a-lot is good for some things, Marc’s for others, but overall the best bargains are at Aldi. Just bring a quarter and some shopping bags. They are always getting new and fancier items, too. I have never become sick from eating Aldi’s products. It’s perfectly safe to shop there. If you object to shopping there, consider two truths: If Aldi doesn’t have it, you probably don’t need it. (Though you may want it and of course can buy it elsewhere.) And you are not too good to shop there! I know people who are well-off who shop there because they have good values.

5. Don’t buy clothes until you really need them. Fashion sells the myth that you need new clothes every season, or even every year. Just wait until your clothes are really worn out or don’t fit, and then shop at the thrift store, clearance, and sales. You don’t need to be in style or have your clothes fit like they’re made for you. At the same time, don’t buy clothes that are obviously cheaply made. For example, many of the mall stores with teeny-bopper-type clothes have cheap prices but the clothes fall apart in less than a year. Gabriel Brothers and other stores that sell quality items for less are great. All the same principles applies for shoes, pursues, and other accessories. Why do you need five purses? Just get something basic that will match many outfits and seasons.

6. Choose your splurges carefully. You will spend more if you indulge impulsively. Don’t buy a Starbucks drink on a whim every other day. Instead, decide to buy one once a week, or once a month, or when you go there with a friend (part of the social-life thing). The same is true for groceries. You don’t need to buy gourmet ingredients or your favorite snacks every week. Choose the splurges that fit into your budget and forego those that don’t.

When buying technology, appliances, furniture, or any other big purchase, shop around. Do the research to find out what will last, and how to get a good deal on it. Try e-bay and Craig’s list. Know what the product is worth is don’t pay more. Shopping around and doing research requires more effort but it’s worth getting a better value on a big item, especially something indulgent like a camera.

7. For young couples: understand home equity. When we started looking for a house I thought buying a house (at a good price) was automatically a good investment because real estate increases in value. What I didn’t analyze was how much you pay in interest, taxes, insurance, maintenance, utilities, and other incidentals. Over 30 years you’ll pay something like 150% of the loan value in interest alone. Will your home value increase by 150%? In thirty years it well may. But most people live in a home for 5-7 years. If you pay the closing costs, it will take five years to regain that money in equity.

Is a home a good investment for you?

Of course, if you need a house then it makes sense to buy one. Even if you’re not getting much of a return on the investment, there’s a utility value. Just don’t think you’re going to be making a ton of money automatically when you buy a house. Even in this buyer’s market with low interest rates. Think about why you want or need the house, and how it fits into your long-term plans.

This is a brainstorm of principles I follow; please comment with others. Next up: cheap meal-planning ideas.