I have a friend who has been out of work for eight months, now. You’d think she’d be stressed out, worried about money, and ready for a meltdown, especially with two kids. But she’s not. She’s using her time off to travel a bit (under a strict budget), tackle some home improvements she’d been putting off (doing the work herself), spend some time with aging family members, and just relax. Her husband is still employed so they have some money coming in (and benefits), just not as much as before. She’s looking for work, but she isn’t pounding the pavement every day and having to take a job she doesn’t like just to make ends meet. (And, no, she isn’t even collecting unemployment since she’s only been looking for work off and on.)
So how is it possible that my friend has all this leisure time and isn’t concerned about money? Neither she nor her husband earned a super-high income. Combined they made about $60,000 per year. Now they’re making about $35,000. There is no big secret as to how they managed to obtain a stress free life; they do the things we preach here all the time. They live frugally, save wisely, and learned about money. There are some key areas, however, where this couple really set themselves up for financial success.
They bought a small house and paid it off early: My friend could have qualified for a much larger mortgage than she got. Instead, she bought a smaller, older home and did a lot of the fix up work herself. Their house is about 1,000 square feet and they find it to be plenty. They also paid off the mortgage quickly. They channeled much of their extra money into extra payments and now own the house free and clear. Since my friend has been unemployed, not having mortgage payments has been a huge stress reliever.
They don’t buy a lot: One advantage of having a small space is that you buy less junk. Since there’s no place to store anything, they don’t buy much. The kids don’t get every game or toy. They don’t have a lot of electronics. They rent movies and borrow books from the library. They only buy clothes when they need them. As a result, they save a lot of money which is put toward savings.
They save religiously: They save a portion of every check in an emergency fund designated for times such as these. When the money was coming in regularly, they always put extra aside. They also saved for retirement. Even now that they’re living on one income, they still save a portion of her husband’s paycheck.
They live frugally: These people live very low to the ground. They don’t eat out a lot. They wear basic clothes. They don’t waste food or anything else. They watch their utility usage. They do everything they can to avoid wasting money. It gives them much more to save. They don’t live a deprived life, just a sensible, moderate life.
They learned about money: My friend made it a point to learn about investing and saving. She learned about taxes. She educated herself on frugality and basic life skills. Then she applied her knowledge to the family finances, enabling her family to earn more interest and save more money.
So why am I telling this story? Am I trying to rub it in for those of you who are having a hard time? No. Am I trying to make you feel bad for poor choices you made earlier? No. I’m trying to show you how, with care and work, you can end up like my friend. She did not have a high earning job, a trust fund, or a wealthy husband. She isn’t “special” financially. She simply made it a point to save money when jobs were plentiful and to live her life very low to the ground. When times got tough, she pared back immediately and worked even harder to stretch her money. Now, when times are hard, she can relax a bit and enjoy her time off, knowing that the bills are covered. When she finds work again, she will replenish her savings and keep doing what she’s always done: Live frugally.
It’s not rocket science or brain surgery. This stuff isn’t hard and my friend is a real world example of how well it works, even if you don’t make a fortune. The things we preach here at Saving Advice are simple, but they can make all the difference when times get hard. If you follow her example you could be in her position the next time an economic downturn happens.