Does it make sense to sacrifice our quality of life for the sake of frugality? This is a personal question that each of us has to grapple with to some extent especially if we are trying to cut back our expenses or save for something. How much do we give up in order to save money or pay down our debt? Do we give up everything and exist on a bare minimum or do we afford ourselves a few niceties in life.
One of the things that my wife and I enjoy is a glass of wine or a beer in the evenings. The question is do we give up our evening glass of wine for the sake of saving a few extra dollars a week? If we were in a situation where we are not making ends meet and we’re barely able to pay our bills the answer to this question is quick and obvious, of course.
The question becomes a bit gray in my opinion when it isn’t a matter of necessity. My wife and I are in debt and we have decided to focus our energies and finances on paying this down. We are able to pay all of our bills without too much difficulty but at this rate it will take us a long time to pay down this debt. The question becomes how much do we decide to give up in order to speed this up?
Some authors and financial gurus will say that you need to do everything and give up everything in order to get financially ahead. Although in principle this is a great idea do you want to give up everything that you enjoy because it will save you a few extra dollars?
The reality is it’s a bit of a toss up; if your sin is enjoying a latte from Starbucks that costs you $5 a day over the course of a year this adds up to $1,825 which could be used for a great many other things that would be more enjoyable or beneficial. But if you really enjoy that latte it might make your day to day life less enjoyable. Can you go without the latte? Of course you can. The question is do you need to go without the latte if it’s really important to you?
I think a balance needs to be set, if you are about to give up everything or almost everything for the sake of a financial goal the frugality you’re undertaking should have a purpose. You are choosing to forgo your quality of life for the sake of a financial goal. With a specific goal in mind I am happy to make sacrifices but it’s a choice that everyone has to make. For the sake of our current financial goal we’ll give up some of our niceties but not necessarily all of them. The question that I am still grappling with is how many of them and to what extent because the goal is important to me but so is being able to enjoy my life.
One of the main reasons that I got into as much debt as I did was that I collected stuff, I purchased it with credit and in the end I didn’t really need it. The problem with some of the stuff is that it was expensive so I held onto a lot of it. David’s post at My Two Dollars about getting rid of stuff made me think about this, how much stuff do we really keep that we shouldn’t? Another question that came to mind was: Why do we buy so much needless stuff?
Unfortunately I can’t speak for everyone but I know that I have become a lot better at purging unneeded things yet a few items have managed to move with me a couple times. Going back to David’s post there is a laptop that I bought and used a bit but not excessively that I have carted with me on three separate moves. The computer is now almost 9 years old yet I still keep it. Why you ask? Well it cost $1,800 at the time and I purchased it on a store credit card so in the end I paid over $3,000 for it. It’s not quite junk, yet, I can still use it but it holds little value to me now. Yet I keep it, how much other stuff that should be junk do I keep around?
I also got to thinking about all the stuff that I have purchased over the years and never used, some of it still has some value and use but why did I buy all this stuff? Well I think it has something to do with the consumer mentality that most North Americans get into as they grow up. The latest and greatest gadget comes out and we purchase it, without really determining if we need it.
There is nothing wrong with being a consumer if you can afford it (environmental issues aside), but I doubt that I am the only one that purchased a lot of my stuff with credit. Since starting this blog a while back I have become much more aware of my spending and as a result a lot less useless stuff has been purchased but I am not completely innocent. Now whenever I am about to purchase something that might end up being stuff I stop myself and think do I need this item or do I just want it? With our focus to repay our debt this questioning of purchases is going to increase.
As for that laptop, it’s still tucked away in the basement but it will be tossed when we clean the house in preparation for the kitchen renovation that’s coming up.
When it comes to these weekly budgets I have kept my finances completely separate from my wife’s. The budgets that I have been posting have been my weekly spending and that is mostly because she’s a private person that doesn’t share her financial information. We share our spending and one week I might give a bit more to the grocery spending than she does and vice versa. I think going forward I am going to start including mostly my spending but at times hers as well. There is no reason to keep things like grocery spending completely separated.
Here is my budget for this week:
May 11 – 17
This is definitely an increase from my typical budget. I have mixed a couple categories that were somewhat divided before. The biggest one is food, this upcoming week I expect that I will pay for the groceries and even if I don’t this is approximately what we’ve been spending for the three of us every week. This does include food and stuff for the baby.
Other than that I’ve allocated approximately $50 for alcohol which is an unnecessary expense but we have a long weekend coming up and it’s nice to have a beer or two when we get home from work and after the baby is asleep. I know that there is room for improvement in this budget but at the moment we are able to work this budget.
Question for my Readers
How do you handle items in your budget that are unnecessary but fall into the quality of life category? For example having a beer or some wine with dinner, unnecessary but if you enjoy something like this being forced to remove it becomes an issue of quality of life.
I was included in this week’s Carnival of Personal Finance which was hosted by Weakonimics. I can’t believe that this is the 203rd carnival of personal finance. If you haven’t checked it out yet definitely do so there are always some great articles included. Here are a few articles that caught my interest this week:
Is Budgeting Keeping You Poor?
Credit Cards Don’t Suck, You Suck!
By reducing the interest rate on our credit cards my wife and I have saved ourselves litterally thousands of dollars in interest payments and we’ll have our debt paid off faster. Since my wife and I have decided to focus on removing our debt we knew we needed to take some steps to getting speed the process along and make it as efficient as possible. Because we are carrying a balance on our credit cards a high interest rate means slow repayment and lots of interest paid out. Over the past few days we changed all of that and reduced our interest rates.
How did we do it?
Its easy – All it takes is a little research and a phone call
Step 1 – Either:
Call your credit card provider and ask them or
Check your providers website – they probably list their credit card options – find the lowest rate one
Step 2 – Call and Change your card type
Its that easy and the impact is huge.
The impact for Me
The impact can be significant depending on your credit card provider and what interest rates they offer you. My wife and I both recently changed our credit cards to low interest ones and here’s the impact that my credit card will see:
At 19.75% with a $5000 balance my monthly interest is $80.65 (about $1022 per year)
At my new rate of 9.15% with a $5000 balance my monthly interest is $37.36 (about $448 per year)
With a simple phone call I was able to reduce my yearly interest payments by almost $575 per year which over the long haul makes a huge difference. If I keep my payments exactly the same then all the difference goes directly to my principle. Using my credit card as an example if I hadn’t made the switch and I paid $100 per month, which is about my minimum payment after a year I would have a balance of roughly $4722 which isn’t all that great considering I paid out $1200 in payments. With my new rate of 9.15% with the same $100 monthly payments my balance after a year will be $4147.
By lowering the interest rate on your consumer card you can very easily cut years off your repayment time which is exactly what my wife and I are looking to do.