Saving money: only as frugal as you need to be

Many of the financial fitness gurus have banged the drum ad nauseum—don’t buy lattes, don’t eat out, buy your clothes second hand, clip coupons. Then there’s the other side of the fence—start your own business, make money by investing in (fill in the blanks), etc. Who’s right?

Well, I say only pinch as many pennies as you need to (unless of course you enjoy it). Do you have an emergency fund equal to at least 3 months income? I like six months to a year better, maybe two if you’re really close to retirement, but you’ll have to assess how secure your job is and what other sources of support you can access—like living with a parent, a partner with secure employment, a good side business. Are you saving at least 10% of your income (if you’re younger than 40) or 20% if you didn’t save much before 40? Are you nearing retirement with savings of 20 times your current income? Then don’t bother—buy anything you crave at the grocery store, indulge in that dinner out without an Entertainment book coupon, park at Starbucks. If your financial picture is already in good shape, you’re probably not the type to go wild anyway.

But let’s take it down a step. If you’re carrying a balance on your credit card(s), aren’t saving, don’t have an adequate retirement fund for your age, it’s time to become a frugalista. And I mean that whether you’re making $50K or $500K. Unfortunately, any financial planner can tell you hair-raising tales that prove income has no relationship to savings. But even being frugal has a hierarchy: tackle the big wins first.

Re-evaluate your big bills first—get some new insurance quotes, see if you really need the super premium cell phone service, and (gasp) calculate whether you really can afford your house or if a sale or refinance makes sense. The afternoon spent doing this can easily pay you back $100 or more per month, and that buys a lot of lattes. People who spend all Sunday afternoon clipping and sorting coupons to save $5 often never take a look at their car insurance or their cable plan. Dumb.

Then what? Calculate how much time you spend to make sure the money saving is worth it. Now, I’m my mother’s daughter so I do clip coupons and probably always will because it’s a fun form of shopping for me, from the comfort of my bed on Sunday mornings. But I only clip coupons for stuff I buy anyway, or might be interested in trying. Since there are rarely coupons for fresh fruit or grass fed beef, I don’t make much on this. However, I can usually find enough coupons to pay for the cost of the Sunday paper, making it worthwhile to me. Also, when I use coupons I generally try to get the value back in cash (just ask) and put that cash in the change jar in the kitchen. I like to see it add up and it turns out to be fun (for me) mad money. Even though I’m awed by people who do it, super couponing is not my style—too much effort for too little per-hour return. But if I were really, really broke or simply enjoyed the gaming aspects of it, I’d do it.

Still short on the silver? Then it’s worth evaluating what IS important to you and what’s not. Brown bagging it is almost always worthwhile not only for cost, but also for taste, identifiable ingredients and weight control. But if you can use lunch to network or accomplish something, then grabbing something to go, or eating in the most plush restaurant will be a worthwhile investment of money. Office coffeemaker or Caribou? Again, is it a satisfying luxury or a reflex. I vote for pleasure, but only if it really is a pleasure. Otherwise, save the dough.

Our strong “Protestant ethic” considers frugality a virtue and an end in itself rather than a means to a goal. Not me, I say enjoy life. I can’t enjoy myself if I’m not paying the bills, and opening up banking statements with a hefty balance is more worthwhile to me than a brand new car. I clip coupons but I like to stop at Starbucks. So, I say adjust not only your spending but also your savings to your needs. Decide if you’re getting a good return on any investment involving money, time, or effort.


The Value of a Side Gig

You’re already too busy. Either your primary career demands more than the old standard 40 hours (how long ago was that!) or your so-called freelance life leaves you free to work 24-7. Or you’re out of work and the ennui is killing you.

Get a side gig! A side gig is something you’ve always wanted to do, or a brilliant business idea you’ve had but never tried out, or something you think might make money and be fun, too. Maybe it’s producing a food product, or writing articles, or dog training, or some craft product, or consulting. Here are 10 reasons why:

  1. It stretches your brain. Even if you’re a busy, successful professional you can get stale by only concentrating on one thing. A side gig potentially introduces you to a whole different group of people, ideas, and ways of looking at the world, and gives you an opportunity for cross fertilization.
  2. It gives you new contacts. Instead of the same old colleagues doing the same old things, you can meet people from worlds you never encounter in your main job, and perhaps friends you never would have met in your primary circle. When people are unhappy in retirement, one of the reasons why is that they lose their “friends” along with their job. A side gig can widen your circle of friends, and they won’t all be based on shop talk.
  3. The extra money can be important. A good side gig makes at least $500-$1,000 per month. For some, that can be the difference between the basics and the luxuries; for others, it’s chump change or, better, fun money. But for most people, saving an extra $1,000 per month wouldn’t be a bad thing for either their emergency fund or their retirement. Even if you don’t need the money, setting a goal to actually make money forces you to test your great idea or refine it, all good. Or just give it away—I can think of one or two charities that would welcome a $12,000 yearly donation.
  4. You can laugh a little more at the boss. You know you have at least a little money coming in on the side.
  5. It gives you something else, hopefully fun, to think about. Even if you are the boss.
  6. You can employ your kids. This has the benefit of transferring cash for college to them in a potentially tax advantaged way, as well as teaching them a lot about entrepreneurship, another good thing.
  7. It can be very successful. More than one side gig has morphed into at least as good or better business than the main one. Think Paul Newman or Scott Turow.
  8. It can tide you over in an emergency. It’s a lot easier to cope with a job change or loss if you have a little coming in on the side, and something else to think about.
  9. You can test a new business on the side, with far less risk than quitting and starting from scratch. Similarly, you can dump a bum idea and try another one. You’re less likely to waste time and effort, and even if it’s a bust, you haven’t invested everything in it.
  10. It’s an excellent retirement plan. If you pick a side gig that doesn’t require a great deal of physical labor, it can go on as long as you wish, and promote your engagement with the world—you’ll have to keep your “edge”. Also, it can be financially significant in retirement. To generate a $12,000 per year withdrawal from investments, you need an extra $300,000 in principal.

Obviously, I’m not talking about bagging at the grocery store or delivering pizza, although I admire people who make those efforts, too. Go out and create something new and useful—we’ll all be better for it.

Debt Reduction—10 ideas on finding money to pay

1. Take any opportunity to generate cash.  Best if part-time or “on-demand” so that a main business can be developed or employment maintained.  Ideas include:

  • household services—lawn mowing, pet sitting, pet walking, newspaper   delivery, house-sitting, babysitting
  • substitute teaching & tutoring
  • retail (evening)
  • sell stuff on ebay

2. Build your local business or search for a job by obtaining and calling a set number/goal of potential clients or employers per day. 10 can be called within 2 hours. Follow up with email, then another phone call. Use a prepared script—one if you reach them, one if you reach voice mail, one for follow up. Always ask if they know anyone else who might use your services.

3. Develop a side business.  Make a goal of how much you want to earn in a month then focus your efforts on finding a way to do so. $500-$1000 is doable even with a regular job. Good websites:,, For sales of craft products:

4. Cut living expenses. The biggest expense that most people can cut is their rent or mortgage. Get a roommate, rent out a garage (check with your insurance first), and get a house-sitting gig for a while (perhaps realtors would know of a place that can be house-sat). Rent or buy a cheaper place.

5. See whether credit card balances can be transferred to “no interest for first x days” deals. Then DO NOT use that new card AT ALL. Be sure you understand all the terms before you do this. Alternatively, see if you can negotiate a lower interest rate on current cards.

6. I recommend the Dave Ramsay “debt snowball” method. Here it is:

  • Put some portion of the “new” money in emergency savings. If you put everything toward debt repayment, you will never get out of debt because every time there’s an emergency, you’ll charge it again. Try to build to an emergency fund of at least 6 months of bare bones living expenses. Don’t start paying any extra on debt until you have $1,000 in emergency cash.
  • Take most of whatever money you generate by #1-4 above and put it toward the SMALLEST debt
  • Pay the minimum balances on all the others
  • As soon as you pay off the smallest debt, take the money you were paying and add it to your minimum payment on the next smallest debt.

7. Apply for any state or federal benefit you might qualify for—food stamps, Veterans Disability programs, Social Security disability (hard to get) immediately. Your doctor should be able to help you with this. These programs are designed to help the needy, and if you are needy, they’re for you.

8. Don’t touch your retirement funds. These are essentially immune to creditors, even in bankruptcy, except for debts to the IRS. If you have no other assets, you are essentially “judgment proof” and most creditors will not be able to collect against you, although liens can be placed on bank accounts, wages, cars and homes. People are often tempted to clean out retirement funds to pay off debts and relieve the stress. Then what? Unless you are on the verge of being homeless, don’t do it.

9.  Consider whether you should investigate bankruptcy. One indicator: figure out whether you can meet living expenses + pay off the debt within 5 years. If not, at least talk to a reputable bankruptcy attorney. Bankruptcy exists to give people a fresh start. If you have already thought through a plan to change your financial situation (better job, side job, change in spending), then you deserve a fresh start.

10. Seek professional help, but be very aware of how your advisors are being paid. Make sure any non-profit credit services are reputable. A fee-only planner can take a comprehensive look at your situation. A bankruptcy attorney who is also a CPA or can work with a CPA might be very helpful.

When you’re in such a stressful situation, it’s very difficult to think strategically and not be depressed. Nevertheless, the best way to start over is to focus on a problem solving (rather than self-blaming) approach. This situation is an opportunity for some real life transformation.

These ideas will not work for everyone in every situation and should be regarded as ideas only, not specific advice. It is very important to get advice that is specific to you and your situation.