Tuesday, May 3, 2011

Simple Frugal Advice

There was a time when the word frugal made many people cringe with embarrassment and run the other way. Yet, during economic hardship, we turn to the same word and wear it as a badge of honor--some sort of avant garde, trendy thing we should do to look good in the eyes of others. It is a lot like when kids must wear a certain this or that in order to fit in with the other kids in class.

Frugal is a simple word. It basically means mindful spending. It doesn't matter what your station in life is, if you are keeping an eye on your money and utilizing it in a planned way, you are frugal. The word doesn't mean cheap or stingy. It refers to well thought-out use of your finances. Warren Buffet is frugal. So is Joe Public.  We should have been taking care of our money all along but many of us somehow thought that the financial jet just pilots itself.  Suddenly the news turns grim, pundits begin preaching doom and gloom, then suddenly we reazlize we need to get to work---and fast!  I've got a stack of books and articles that I've turned to time and again for financial guidance. They offer such useful advice I would encourage you to read anything any of them ever wrote.  I have picked my favorite tips to give you a jumping off point.

Warren Buffett is well respected as the Oracle from Omaha and probably the greatest financial mind of the modern era. His opinion matters because he can back it up with a solid track record. The most important advice I have ever heard attributed to Mr.Buffet was quite simply, 'Stick with what you know and understand.' The old story goes that the guy next door has more money than anyone could ever guess. Why? He had no clue what a tech stock was, so when everyone was buying and selling, he left it alone. Instead, he invested in the stock of a motorcycle company. He had been a customer for almost 30 years because the product the company produced was well made, solidly built and was of the highest quality. He held onto his stock (another of Mr. Buffett's tips) and made a fortune steadily over a fair amount of time. This fellow stuck with what he understood and, despite the inherent risks of the stock market, did well because he understood the product and the company he was investing in.

During the '90s I came across a book written by Mary Hunt. I loved her style of writing because she felt like the gal next door and that made it easy to relate to her.  She made me think long and hard about how I viewed my own finances. My favorite tip from Ms. Hunt was to prepare for irregular expenses. You know you have to pay auto insurance so don't let it sneak up on you because when the time comes you won't have the money to pay the bill in full. You know you won't. Go ahead and figure out those type expenses and set aside that money in an account that, like your emergency fund, is untouchable. When the bill comes due, you will be prepared. Ad valorem taxes, Christmas, vacation, etc. all fall into this category. As Ms. Hunt stated, you may think you can't afford to do this, but you can't afford not to.

Like Hunt, Dave Ramsey offers real world advice that is easy to understand. I've read his books until they were tattered and needed to be replaced. The ultimate tip is so effective, deceptively simple, and incredibly hard: you must intently focus on your financial goal and never let up. I agree with Ramsey that all debt is bad. You have worked hard to earn that money--why would you want to give it away to somebody else? Ramsey suggests you use 'gazelle intensity' to get the debt paid off and do not get sidetracked. Brilliant, but, for lots of us, difficult.

Finally, another favorite of mine is Amy Dacyzyn of the Tightwad Gazette-era. I have her books and they are well worn and dog-earred. Although there are pearls of wisdom on every page, it was the overall sense I got that affected me the most: Any one can do this.  Practicality and common sense are key. All you have to do is pay attention and make the effort. Why spend more money if you don't have to?

 I continually lean on the experts to boost my own financial journey. Sometimes I get it just right and other times I really fall off the money bandwagon. But I keep persevering and try to never let my 'hiccups' keep me weighed down. We're only human and real life happens. Just get up and keep going.

There are countless other financial advisers out there. Websites provide more information than anyone could ever read in a lifetime.  Bookstores are filled with shelf after shelf of  'How To" books. You only have to find the ones that 'click' with you. Obtaining financial stability requires you to have the right mindset. You have to wake up and realize you are smart enough to fix the problem and you can create the resources needed to achieve your goal. Good luck! You can do it! Let me know how it's going because I would love to add your tips to my own 'how to' list.

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