Secrets of the Rich and Frugal: A Story about Lifestyle Inflation

I remember when I graduated from college a little over ten years ago. I was so excited to make money and close that chapter in my life. I was also tired of rationing my money, so I could enjoy and was happy to get a job that had benefits, a cube, a little bit of travel, but most of all a stable paycheck. It was fun working downtown Minneapolis and going to my daily coffee runs at Starbucks. It made me feel like it was important to grab a cup of coffee every morning from Starbucks, slide into my cube, and begin my day as an Audit Associate. I also remember going to lunch 2-3 times a week since I was still living at home and could afford to do so. I brought my lunch to work whenever there was a lot of leftovers, but most days, I paid for lunch to ensure that at least I would be eating well at work. On my breaks, when I wasn't catching up with friends over the phone, I was shopping and buying things I didn't always need. I was saving vigorously to move out within the next nine months, and honestly, if we weren't going to Nigeria to see family in December over the holiday break, I would have moved out faster.

When we came back, I quickly submitted my application and was all set on February 1st to move into my first apartment. I soon found out the reality of what it means to pay rent and not live a rent-free lifestyle. I was paying already $270 for a car note and my rent, although $705 took a large portion of my already modest paycheck. I was only contributing 2% to my 401K and mind you this was after working there for six months already. I knew right away; I would need to alter my lifestyle and budget carefully to make sure I could pay my bills. At this moment, is when I first learned what it means to pay your bills and save as a young person living on their own. I had a budget sheet that I had downloaded from a savings website that I started using when I moved out, to help keep track of my spending. I was not a perfectionist at it, but at least I was tracking what I spent on coffee and lunches. By the time a year had passed, I had already met my husband, and we were in full wedding planning mode, so I never got a chance to solidify those financial habits. I always had an emergency savings account, and even after the wedding, we made sure to pay off our remaining debts, add more to our savings account because by now our rent had doubled to what I use to pay at my old place.

Although I was making more money, my lifestyle had inflated quite a bit, and I was keeping up with new expenses with the new money I was making. The mistake I made as a young person, was not just living within my means, but not living well below my means. It was easy for me in my 20's to be too impressionable about what I thought I should have or what I thought I deserved. So much, I had to take moments to re-evaluate my spending and slash my expense by dumping my emergency fund into credit cards or line of credit debt. This cycle repeated itself over and over until the end of 2017. I had had enough with my overspending and bailing myself out. We also had just had our son earlier that year, and it meant a lot to me to be able to buy a home for him to grow-up in.. My husband and I buckled down, he often gave me the lead, sat down with me as we listed all of our expenses and the money coming into our bank accounts. I started destroying debt left and right, taking small amount debts and paying them off as quickly and then using that money to pay the next debt amount in line.

As I was doing this, I began thinking of creating new habits, so I could break this cycle and ultimately get to a place where I could live below my means. People often think the answer to these sorts of problems is to make more money, but the truth is no matter what amount of money you make, it will never be enough with bad financial habits. After going through that all 2017 into 2018, my husband and I were able to buy our first house with a 7% down payment. We didn't do the full 20% because we plan on moving out of Minnesota in the next five years, and we felt if we did end up staying, we would end up refinancing at that time for a lower mortgage rate. I had learned some valuable lessons in the last 18 months, and I wanted to share my habits of being frugal and ultimately building wealth one day. Here they are:

1. Create a Budget and Stick to it.

There were times in the last 18 months, where I created a budget and did not stick to it; however, I stuck to it 90% of the time. I give myself fun money to pay for outings with friends or items that I wanted to indulge in, like getting my nails done or buying a pair of shoes. However, I still stick to a budget and plan. I feel like it is relatively easy to fall off the train in the era of social media, but it's important to remember that do you want to work for the rest of your life or do want to enjoy your life with little to do later on. Creating a budget worksheet was something I've been doing for the past 2 two years. There are times where I don't stick to it because sometimes things will come up, but for me, it's an excellent way for me to have a projection on what type of money is coming and where exactly it's going. I'm not too fond of the thought of not knowing if I have enough money to cover things before my next paycheck being deposited into my account or what I should do. Having a budget eliminates all that anxiety because then you start to build buffers into your account to handle if something does come out of the left field.

2. Be Intentional with Savings and Invest

I admit I have been taught to always put away a little something for a rainy day. However, there is a point where your rainy day fund has hit the emergency fund limit and no longer needs padding. I would say think about investment options when it comes to saving your money. You want to get to a point where your money works for you. I opened up an Acorns account in the Fall of 2018. It's a great way to make money with the change in your checking account. See what savings can't do for you is provide you with compound interest. Never underestimate the time and the compound interest! The truth is investing is scary and risky but it's worth it, no matter where the stock market is, with the time you are always going to make money. What I hadn't learned growing up was what to do with your savings and how much savings you actually needed. I had to look on blogs and see other financial experts talk about saving 3-6 months and honestly after that invest the rest of your money because it should never just sit in your savings account. One goal that I have is to start investing in real-estate through crowd-funding. I wanted to use Fundrise to do this because I've read through their reviews. People typically get an 8-10% return on their investment within five years. Once I do this I'll write a post about it.

3. Find Deals

I remember watching that show Extreme Cheapskate, where extremely frugal people would search for food in dumpsters to get a good deal on their grocery budget. I, of course, think this is extreme; however, it is safe to say it never hurts to try to find the deals and discounts. Try shopping at local bands and see what discounts you can find. Start shopping at wholesalers like Costco and Sam's club, so you can save on food and household items by buying in bulk. I never really understood this concept until I tried it last month. I literally only went to the grocery store three times in a month just because I had stocked up on all the big stuff.

4. Always ask yourself in you really need it

Listen, folks, just from my experience when you pick up something you think you want and can put it down and walk away and forget about it the next day, you probably didn't really need it. Sometimes we buy with our hearts and not our heads. I'm totally guilty of doing this and I realize that I want to live a simpler, minimalistic lifestyle where I don't want a ton of things. One of my favorite shows is on HGTV call Tiny Homes and I absolutely love watching people squeeze their average size life into these tiny homes. I always think to myself that's a great way of curbing your spending habits. If you spend too much you literally will not be able to fit it in your home. You would be surprised on how much you can actually live on and not always feel the need to overspend.

To conclude, there are so many ways out there to make sure you are changing your lifestyle to become more money-conscious. It just starts with making better decisions on where your money is going and how fast it's going. Remember, it's always important to have plans with your money so you save and invest it. What good is having money if you do nothing with it or worse end up with a bunch of stuff that isn't worth anything? This year I plan on building better financial plans for our family and sticking to our goals. I want to build a nicely stacked nest egg, max out my 401K and try to add money to our Roths. What do you plan on doing with your money in 2020?

The Lioness is a financial blogger based in the Twin Cities. After spending most of her career in accounting, she decided to leap into the world of small business, investing and savings. As she is on this journey of juggling both her career and small business, she wants to share what she is learning along the way, as she builds her passive income.

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