Frugality – Your Best Strategy for Becoming Debt Free?

By on October 17, 2012 No Comments

The idea of frugality as being your best bet for paying off debts is not a new one. Made popular by David Bach, he calls it the “latte factor”, explaining how your quick trip to Starbucks for a $3 coffee every day is actually crippling your chances at a strong financial future.

The logic is simple – on a daily basis there are a lot of small expenses that we don’t pay attention to. Over time, these little expenses actually add up to a ton of money we’re spending without thinking about.

How Much is That Coffee Really Costing You?

Let’s say an average coffee at Starbucks is $3.50. If you get one every weekday, that’s $17.50/week, and $910/year (we’ll assume you drink one on vacation too for the full 52 weeks).
In 10 years that’s $9,100 and in 20 years that’s $18,200!

Should I Stop Drinking Coffee?

While a lot of people take Bach’s point a bit too literally, his real point was that in order to win with money you have to be conscious of where it’s going. Every dollar you spend, whether you’re paying attention or not, is one that’s not working FOR you.

It’s all about priorities. Do you REALLY need a $3 coffee every day, or can you live with office coffee for free? What about brewing your own at home before you head out?

But what if you just really love getting your nice cup of coffee? Maybe those few minutes, where you’re on your own, where you don’t have to gossip with work people and you don’t have to think about any cleanup at home are just a great part of your day that leaves you feeling energized and happier. Maybe it IS worth a couple bucks for that mini-vacation every day.

Find YOUR “Latte Factor”

So you’ve decided that the coffee has to stay. No problem. Now it’s time to start looking at other areas in your life where you might be spending blindly.

Can you go down a tier on your cable bill? Saving $15 a month is $180 a year and $3,600 over 20 years.

Do you actually USE your gym membership or read the magazines you subscribe to? If not, cancel them.

You get the point. Make sure you’re spending your money on what’s important, and don’t waste it just because you’re not paying attention.

Will Being Frugal Make Me Rich?

It’s easy to get caught up in the excitement of paying off your debt and fall into a pattern of cutting more and more expenses. Each dollar saved is an extra dollar you can use towards debt, and that can be very motivating.

The problem however is that some people end up spending too much time focusing on the cutting back.

Have you started making your own laundry detergent because it’s so much cheaper than the store brand? Are you walking for 30 minutes instead of hopping on a bus to save $2?

Yes, you saved a couple bucks, but think about the TIME it cost you to save that money.

Time is a Cost

Let’s take the walking vs. bus example. If a bus ride takes 5 minutes, that’s 25 minutes in lost time you have (ignoring the bit of exercise you got). What else could you have done with those 25 minutes to produce some income for yourself?

Does your company let you work overtime? 25 minutes of work would have earned you much more than the $2 the bus cost.

Could you spend that time in an online learning course that will help with a promotion or raise at work?

Maybe you have a small home business you’re trying to grow to make money on the side – can you REALLY not have more than $2 worth of positive impact on that project in 25 minutes?

Putting Frugality Into Perspective

Frugality is one step in taking control of your finances and getting out of debt. Being frugal forces to you pay attention and analyze your behavior, and it’s a necessary strategy to use.

But don’t stop there. Don’t think that the home-made soap is the answer to your problems. Start thinking about the big wins you can get by asking for a raise, getting a promotion, or learning to earn money on the side somehow. In the long run these will help you become debt-free much faster than avoiding that morning coffee.


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