Monday, July 26, 2010

What do you actually like?

I've found that like dieting, the hardest thing about making the shift to a more frugal lifestyle is the tendency to take it to an extreme that's impossible to maintain. If you vow one day, "I will stop eating out, I will stop buying things, I will live on rice and beans." You're doomed to fail. Sorry, but it's true.

If you approach frugality with a more reasonable attitude, you're much more likely to gain long-term success, and as you go along the frugal journey and become more adept at stockpiling, couponing, doing without, etc., you will save more money than when you started out.

The hardest thing, I find, is going through the day-to-day of mindful spending without really having a goal in mind. If your goal is to eradicate credit card debt and that's enough to keep you going, I commend you. Me, I need a little bit of a treat as well, and that's why I advocate a fun money fund as well as a regular savings account.

There are rules to the fun money fund:
  1. That money cannot be used for anything practical--ever. It is solely reserved for fun, and if I come up a little short on something else over the course of the month, I dip into my regular savings account rather than my fun money fund. Paying for car repair is not fun.
  2. My fun money fund is where I stash the money from my odd little jobs. Secret shopping, cat sitting, the 1% I get back when I shop at my regular grocery store--it all gets socked away in this fund, and sits there earning (very little, admittedly) interest. Every now and then, I pay myself a little extra toward the fund, but only after I've put money in regular savings, and made a student loan payment.
  3. This fund is kept at a different bank from my primary just so I'm less tempted to dip into it, and I cut up my ATM card. If I want money out of this account, I have to write a check, stand in line and cash it.
My fun money fund exists to subsidize my travel habit. You could put it toward a number of little things, if you like, but I think it's much more rewarding to save it up for a bigger purchase. If I pair my fun money fund with the travel rewards I get on my American Express--that's a pre-paid vacation.

So what do you like? What's your big guilty pleasure? It doesn't even have to be that guilty. I read plenty of frugality blogs where people are saving 100% down on a house, or planning to pay cash for a new car--and maybe that will be me someday when I grow up a bit, but not right now. If frugality is going to be a lifestyle and not just a phase, you need to understand yourself and your priorities.

Make a list of what is most important to you, and tailor your fun money fund based on that. If fine dining is something you look forward to most, save for it. If you're an avid rock climber, save for it. If you love photography and want a fancy camera, you'll probably be really thrilled when you can walk in, and buy it guilt-free. There's nothing fun about feeling guilty blowing your budget on something you really love.

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