Category: Frugal

While digging through the I Will Teach You To Be Rich archives, I came across an interesting post about Cheap versus Frugal.

Although I am *MISTER* cheap, I’m actually quite hurt when someone I care about says something that implies I’m cheap. Amusingly, I actually don’t mind if they CALL me cheap. An insight about me that a friend once had was that I’m “generous to other people but not to myself”, which I think has a good deal of truth to it. I’m certainly not Mr. Stingy.

I agree with Ramit that frugal people focus on value, while cheap people focus on price. I *NEVER* expect anyone to foot the bill for me (and err on the side of giving more myself to be sure that this never happens).

Overall I think being frugal is one of the greatest virtues. It involves soul-searching and an understanding of yourself and your environment in an effort to ensure that your resources are distributed in line with your values.

Who could complain about that?

After a lively discussion broke out in my “About” section where Money Gardener and Four Pillars were shocked at how cheap Mr. Cheap really is, I figured it might be time to update my cost of living calculations.

My monthly fixed costs are the same:
Rent – $440 (half of $880 rent paid by gf on 1 bedroom apt)
Cable – $40
VOIP – $22.45
locker – $12.50
phone+internet – $40.25
transit pass – $99.25
Cleaning – $45
Total: $699.45

I’ve been carrying around a notebook with me and writing down every time I buy something. I enter this into an Excel spreadsheet at night and track my average daily spending (and multiply this out to estimate my variable spending on a monthly basis). I’ve severely tightened up my food spending (I bring my lunches to work now, have started shopping at No Frills, and am taking my girlfriend out for dinner a lot less). I’m spending around $14 / day on food (~$420 / month). Additional spending accounted for about $6 / day ($180 / month).

Added together, my monthly cost of living seems to be around $1300.

These are obviously estimates, not a hard and fast budget. I purchased my ticket to NY before I changed my eating habits, so this level of spending basically assumes no travel (I expect my “daily spending” will shoot up after the NY trip). With a little work I think I *may* be able to get my food spending down a bit (I’m hoping to hit the $60 / week that the “average” single male supposedly spends).

What does welfare pay a single man in Ontario? My girlfriend and I guessed around $800 (we were both wondering how my level of spending would compare to people on social assistance 🙂 )

Canadian Capitalist wrote an excellent post about the cost of children. As someone who doesn’t have children (and doesn’t really expect to) you might think I wouldn’t have anything to add on this topic.

You’d be wrong.

An interesting article I came across (sorry, can’t find it again to provide a link) was about the idea that historically children were a “producer good”, that is they were an investment that you expected would pay you money over time. In the early years you invest your time and resources into a baby, and as they get older they’re able to contribute an ever-increasing amount back to the family (by working the farm, helping with the family business, etc). There’s risk to the investment (it’d be ghoulish to list them all), but the expectation is that you’d more then get paid back your early investment. To this day, in developing countries large-families are often a way for parents to insure that SOMEONE will take care of them in their old age. I briefly dated a woman who’s parents came from an African country, and whenever they had an expense in their lives (like putting in a new deck at their house), they’d hit the kids up for a contribution towards it.

A Chinese woman I talked to gave all her salary to her parents, who “invested” it for her and provide her with room and board. From a parents’ perspective this sounds like a pretty sweet deal, but I wouldn’t want to be the child!

In the west in modern times, children have instead been viewed as a consumer good (costs us money we don’t expect to recoup). The general view is that a child adds far more enjoyment to your life then the monetary costs. Mike from Four Pillars comments that he’s spending time with his girls instead of “expensive dinners, sporting events, booze etc.” and he doesn’t seem to regret it (so therefore he values the time spent with his children more then what he’s given up, i.e. they’re worth more to him then these things). These days often parents are providing housing or a monthly allowance for grown children, and in many cases are reasonably happy to do it.

Something being a consumer good isn’t a bad thing. If it adds more enjoyment to your life then the other things you could purchase (for an equivalent price) with your discretionary income, then its a very wise purchase. I hope that every potential parent weighs the cost/reward of having a child and makes the right decision for the lifestyle they want. In my view a lot of misery is added to the world by parents’ NOT making this decision (and instead allowing random chance to dictate their lifestyle for the next 18 years).

I love kids and when I spend time with them I definitely find it enjoyable (they have a really unique perspective on life and say things that really make you question some of your most basic assumptions). My one fear with having my own children is that its a consumer good with a “no returns” policy :-).

I’ve been amazed at how much I’ve been able to save on my food spending. By simply taking my lunch every day and eating at home more often at night (and shopping at No-Frills), I’ve cut my food spending from ~$21 / day to ~$14 / day. Ideally I’d like to get it down to $8.57 / day (which is supposedly what the average single male spends), but I think future reductions will be harder then reductions so far (law of diminishing returns, picking the low-hanging fruit and all that).

Previously when I had half-heartedly checked No-Frills, they hadn’t seemed THAT cheaper compared to Loblaws. When I checked more in detail (took my receipt from Loblaws and compared prices) it was AMAZING the difference in price. $30 at Loblaws gets you a small back of groceries, $30 at No Frills gets you enough groceries that you can barely carry them home!

My currently thinking is that I’ll start budgeting myself $20 / week for eating out (which leaves $40 / week for groceries) and see how that feels. Definitely less then I’m spending right now, but might be doable (basically one lunch out and one dinner out a week).

Is $40 / week of groceries from No-Frills doable? Am I going to be eating dog food?

I’m trying to “put my money where my mouth is” (or maybe change the money going into my mouth) and pull back on my food spending a bit. I packed my lunch for the first time yesterday and brought two tuna and mustard sandwiches (mustard as a healthier alternative to mayo), a bag of carrots, an apple, chickpea salad and coucous. It took about 5-10 minutes to make the night before and cost around $3.50.

If I could cut *ALL* my food spending in half, that’d be an extra $4000 per year (after taxes). In addition to being extra money to save/invest, that’d reduct my annual spending to $24,228.85, which (assuming the 4% retirement figure) would allow me to retire on $605,721.25 (instead of $705,721.25). Very significant savings from packing a lunch and eating out a little less often.

It’d be interesting to prepare an Excel chart looking at my savings rate and retirement target and calculating how much “time to retirement” cutting back on certain expenses would provide (the double-whammy of lower expenses and increased savings would be powerful I think). Might definitely help “cut-to-the-bone” if you saw that cutting something out would let you retire 3 years earlier.

I still don’t quite get how Derek Foster is able to support a family of 4 on $400k, but I’ll keep thinking about it. I suspect that once you factor in CPP and whatnot it can reduce how much you need for retirement.

I’ve been tracking my daily spending (basically every time I buy anything I make a note in a notebook I carry around with me. As mentioned, I’m spending far more then I thought I was, especially on food.

I’ve tracked spending from May 7th to May 26th I seem to be spending on average $54.49 per day ($21.93 of that on food). My big purchase for the last few weeks was a plane ticket to New York (for $440). Adding in my monthly fixed costs of $695 (rent, internet and whatnot), it looks like I’m spending around $2,352.40 / month, or $28,228.85 / year.

My “annual” food spending of $8004.45 is about the same as the average Canadian HOUSEHOLD spending on food (8,035 in 2005 for Toronto), so I think there’s definitely room for improvement.

On the other hand, I’m very frugal in other areas (in the last 3 weeks I’ve spent $24 on entertainment).

In theory, if you accept that you can live off of 4% of your savings indefinitey in retirement, I’d need $705,721.25 to retire on, which seems awfully high. People often say they want 1 million to retire on, and that’s considered too high a sum (and I usually think my spending is lower compared to most people).

In a future post I’m going to try to estimate what my current “passive income” is, considering my investment condo (which arguably isn’t so passive) and my dividends. I’m also going to start trying to cut back on food spending (I shopped at “No Frills” today, and it acutally *IS* cheaper, at least for bananas, yogurt and no-name pop, three things I checked). If I can start making and taking my own lunches (and eat at home at night), I think I could dramatically lower my cost of living.