What is frugality?
In this blog, we keep talking about being frugal without actually defining what it means. It’s about time we did.
What is frugality? Is it about buying the cheapest products? Is it about cutting corners everywhere? Do you have to save a lot of money to become frugal?
Frugality isn’t about price or numbers alone. It’s about getting the best value for your money - whatever it is you’re spending it on.
Some examples of NOT being frugal:
- If the cheapest toilet paper is P6.00 a roll, but it keeps breaking and doesn’t absorb as much, that’s not frugal.
- If the cheapest make up makes your skin itch or isn’t the color you like, buying it is not a frugal choice.
- If your health is important to you and you keep buying and eating instant noodles every day because they are cheap, then you’re not getting the best value for your money. Eating instant noodles too frequently is unhealthy (mostly because of the MSG and the wax in the noodles).
Some examples of being frugal:
- If you realize that buying your favorite brand of soap is cheaper in the long run if you buy it in bulk, then that’s what you do.
- If you want a new camera, instead of buying the latest model, you shop around for models that are a year or two older because they’re much cheaper now.
- You buy used books instead of brand new books because you know they’re going to have the same words and pictures anyway and the only difference is that the used book doesn’t look as shiny and new (but it’s still ok).
(If you want to read more about ‘frugality vs. being cheap’, Fitz Villafuerte has written an interesting article on the subject, with matching scenarios you can think about.)There’s also another thing you have to consider when taking frugality into account: time and convenience. Both these things play an important factor when you’re faced with spending decisions. Here are some examples:
- Although I can walk to my house from the jeepney terminal, I choose to spend P 17.00 on a tricycle ride because it is very hot outside and I need to save my energy because I still have to work when I get home.
- When we bought our scooter, we could’ve bought it at a lower price (by P 2,000), except the cheaper alternative did not have complete registration papers and was a little farther from our house. We opted for the more expensive unit that the seller actually brought to our home (which was important, because we don’t have licenses yet).
- Groceries at Pure Gold Cubao are the cheapest I’ve seen, but it’s an hour away from my house and I don’t have a car to load the groceries in (I have to carry them myself going home). Instead of making things harder for myself, I shop at a nearer grocery which is also cheap (not as cheap as Pure Gold, though) but without the hassle.
When factoring in time and convenience with your purchases, consider these questions:
How much are you willing to ‘pay’ to make a more convenient purchase? How much are you willing to ‘pay’ to make the purchase ASAP?
In the cases I illustrated above, I was willing to ‘pay’ P 17.00 to avoid the heat of walking under the sun and to conserve my energy. For the scooter, I was willing to ‘pay’ P 2,000.00 more for a delivered product with complete papers. I’m also willing to pay an extra 25 centavos to 5 pesos per item of grocery for the convenience of having the grocery near my house.
Frugality is getting the best value for your peso. That’s it. You’re the one who defines what ‘value’ is. Is it convenience? A speedy purchase? Is it quality? For me, it’s a little bit of all of that. If I can get an item cheaper without sacrificing too much time, convenience, and quality, then I go for the cheaper bargain.
Edited to add: After I posted this article, I saw this great post from QueerCents about what frugal living is all about. It’s very similar to my personal values, so I think it’s a good resource to supplement what I’ve written here. Click here to read 5 Steps to Prosper at Frugal Living.
How do you define frugality? Do you think you’re frugal?
Read MoreLadderized Savings
What do you mean when you say you’re saving money? You’re saving money for what? What do ‘savings’ mean to you?
For me, there are several categories of savings, with one category higher up my priority list and more ‘untouchable’ than the next. These categories include my retirement savings, money that I’m saving to spend on big ticket items, money for smaller purchases, and my emergency fund.
These savings categories all have their ranking – like a ladder – and in times of financial need, there’s a certain hierarchy I follow when choosing which of my savings I can withdraw from.
So what are these categories of saving and why do I have them?
Step 1: Retirement Savings
Obviously, retirement savings are meant to be spent during retirement. But the definition of the word ‘retirement’ varies from person to person. For me, it means the time when I am no longer physically or mentally able to work or earn money. For others, it could mean leaving their line of work when they reach the age of 65 or 70.
After you’ve defined retirement, you need to figure out how much you’ll be needing for the lifestyle you want. I’m currently 24, and the time between now and retirement seems a bit too far for me, so I haven’t calculated this exactly. I just put away as much as I can each month.
For me, this is money that I absolutely cannot touch until I reach retirement. After all, that’s what this is meant for. This is at the top of my savings ladder because it is the one that is farthest from my sight (since it’s a long time ’til then) and it’s also the last of my savings that I will touch. If I needed large amounts of money in a time of financial crisis, I’d go through the bottom levels first before spending my retirement savings.
Read MoreMaking a 'gimik' more affordable
It’s Friday night and your officemates or friends want to go out. Although you love their company, either you don’t have enough gimik money or your friends tend to spend more money on gimiks than you’re comfortable with. So what do you do? Is it possible to hang out with them without breaking your budget?
Yup, and here are some ways to do it:
Make the suggestions. Before someone jumps in to say they want to go to the most expensive restaurant in Serendra, step in and make your own suggestion. It helps to know beforehand the more affordable places in your meeting area. Doing your research will make things less of a hassle.
Sometimes, friends appreciate going to a place that’s out of the ordinary. So if you know an affordable hole-in-the-wall restaurant that only few people know about, your friends are likely to be willing to go with your suggestion.
Order as a group. Getting a family sized serving and sharing it tends to be cheaper than individual orders. Plus, you can only get as much as you want rather than attempting to finish a big serving.
Meet after the meal. If you’re really short on funds, you can opt to meet your friends when they’re almost finished (or completely finished) with the meal. That way, you don’t have to order much (or anything). Besides, the after-meal conversation tends to be more interesting, and groups often move to a different place for dessert/drinks, which will be cheaper than a complete meal.
Opt for water. But only if it isn’t unfiltered tap water. Obviously, free water is cheaper (and healthier) than softdrinks or a P60.00 glass of iced tea.
Remember that you don’t always have to buy what your friends buy. Especially if you have different tastes. I’m not a big fan of coffee, but I always have friends who want to meet/stay at Starbucks. I’ve been to Starbucks countless times, but I’ve never bought anything – simply because I don’t like coffee (although someone bought me a coffee and dessert once – they were being insistent). If you like Starbucks coffee, then go ahead. The point is that if what your friends are buying isn’t worth it for you, or it’s something you don’t like, don’t force yourself to buy. Sayang lang. After all, if you’re going to spend money, you should do so with something you like.
You don’t have to do all these things every time you go out with friends. You’re supposed to be frugal, not cheap. However, using a combination of 2 or 3 of these things can make your next gimik more wallet-friendly.
Read MoreStretching the peso against the high cost of living (Part 3)
This is the third and final part of the Frugal Pinoy series on “Stretching the Peso Against the High Cost of Living“. In this post, we’ll discuss how to augment income, as well as how to maximize savings.
If you want to review the first two parts of the series, here they are:
- Stretching the peso against the high cost of living (Part 1) – Food, household needs, and utilities.
- Stretching the peso against the high cost of living (Part 2) – Entertainment and transportation.
Income and Investments
Think outside your job. Your job doesn’t have to be your only source of income. Although my “job” is mostly being a freelance blogger, I’ve earned money performing other services such as graphic design, research, and being an art teacher’s assistant. Also, I sometimes sell some of my things that I no longer need – including junk. I’m also a member of several advertising and affiliate programs which allow me to earn some side income that requires very little maintenance. I’ve even earned money and equipment from joining online contests (examples of things I’ve won: an ergonomic keyboard and mouse set, money, a jacket, and Amazon gift certificates).
The key is to be creative and to think of your skills as business opportunities.
Consider earning in a better-performing currency. Our OFWs have discovered this ages ago – a dollar can go a little further in the Philippines than it does in the US. That’s why they work abroad and just send money to their families here. While the US dollar isn’t the most stellar currency, I find that it’s better for me to earn in dollars rather than pesos. Here’s why:
- I’m paid in the same amount an American of my experience and job description is paid. This is a big deal, because the payments tend to be more than what I would get if I accepted freelance work locally.
- When the peso weakens, such as P40 = $1 going down to P44 = $1, I’m getting more pesos with each dollar I earn. It doesn’t completely offset inflation, but it makes my economic woes hurt a little less.
If you can find a way to earn in Euros, good for you!
Savings
Start or bulk up emergency fund. I probably sound like a broken record, since I always bring up emergency funds. The thing is, if you don’t have one yet, you should start one now. It’s the financial cushion that will catch you in case of emergencies such as getting laid off at work, unexpected medical expenses, and when your car or house suddenly needs repair. Because of inflation, you’ll need this now more than ever. My personal goal is to have a year’s worth of living expenses, and I’m almost halfway there.
Automate savings. If you can automatically send money on a monthly basis to your savings account from your payroll account (ex. the account your employer sends your salary to), this will make saving money much easier.
Most banks now have online banking facilities, and what you can do is to set up an account separate from your payroll account (or main income account), then set up automatic transfers from your main account to your alternate account using online banking functions. You can also select the amount and intervals (say, P2500 every 15th).
BPI Direct has even come out with a new product called Save Up that offers not only automatic transfers from your existing account, but also entitles the depositor to life and accident insurance, the amount of which will depend on your Average Daily Balance (ADB). HSBC also has a similar product called AutoSaver, though without the insurance. Check with your bank first, as they may be providing similar products.
By automating your savings this way, you’re less tempted to spend the money elsewhere and you won’t use “I forgot to save this month” as an excuse. It also helps if the alternate account where you’ll send your savings to has higher interest.
Look for high interest savings accounts. Information about these deposit products usually circulate through word of mouth in the blogosphere or online forums. It’s best to ask your bank if they carry these special deposit accounts. The bank would probably call their product “participation in the BSP’s Special Deposit Account” because technically, only banks would have the capability to take out an SDA with the BSP. Click here to read an article from Inquirer.net about these accounts. It’s likely that I’ll be moving my emergency fund and savings to these types of accounts when my TD matures.
In the end, it takes both a frugal lifestyle and increased income to battle the effects of inflation. Throughout the month, we’ll be discussing the above points in detail.
If you’ve anything to add/recommend, feel free to share your ideas with us in the comments.
Read MoreStretching the peso against the high cost of living (Part 2)
In the first part of this series, we discussed how we can be frugal with our food, household needs, and utilities (if you haven’t read it yet, click here). Basically, the post is my personal response to the news about inflation reaching 9.6% this month. There’s also an interesting discussion on the effects of inflation over at the MoneySmarts blog, which you might want to check out.
I generally don’t like those who proclaim that the end of the world upon us, but the rising cost of living presents the perfect opportunity for people to look at their expenses, savings, and income. In this installment, we’ll discuss how to save money on entertainment and transportation to minimize the effect of inflation on our expenses.
Entertainment
Although computations for inflation doesn’t really cover entertainment, cutting a few corners in this aspect can help stretch your income to pay for the rising costs of food and energy.
Movie and book swapping. We discussed the benefits of book swapping in a previous post. The same could be applied to DVDs, VCDs, and video games. Not only is it cheaper than buying things brand new, but it’s a good excuse to meet up with friends and acquaintances.
Look for cheap/free screenings. The UP Film Institute holds several screenings each month, and the tickets are often cheaper (if not free) than regular movie houses. Of course, they don’t show the latest blockbusters, but they have great alternatives in case you want to see something different from what everyone else is watching.
Wait for blockbusters to come out in video or cable. Not only is it cheaper, but many people can watch at the same time without the cost adding up.
Of course, there are some movies where watching in the big screen makes a difference. These are generally movies with a lot of special effects, such as Lord of the Rings or war/sci-fi epics. It’s okay to watch these movies in the theater, but not all movies lessen in effect/impact when watched in the small screen.
Transportation.
Walk or bike. I have a friend who bikes extensively and doesn’t really commute that much. If you’re going somewhere nearby and have time/energy to spare, walking or biking there might be a good alternative.
Practice frugal travel. We recently posted some frugal travel tips, which you can consider when taking an out of town trip.
Tomorrow, we’ll discuss some ideas on increasing income and managing investments and savings.
How are you dealing with inflation?
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