There have always been frugal people and that will never change. What has changed is the image of frugal minded people by the rest of society. We went from being ‘cheap’ to resourceful. Rather than everyone looking down their noses at money conscious people we’re seeing the media interviewing ‘money saving bloggers‘ and ‘coupon queens‘ as experts in the newly recognized field of Frugality. Successful bloggers have become the gurus of frugality.
We’re all aware that the last several years have shown lower wages and higher unemployment. We watched our homes decline drastically in value along with our personal net worth. Now we are experiencing cost of living increases that are hard to measure. Everything from gas, household utilities to prescriptions are becoming increasingly hard to afford. Groceries are taking a larger percentage of our income leaving all most nothing left for savings and investments.
By the time the average family pays their monthly bills, buys groceries and budgets in the other household expenses there simply isn’t anything left. Things like daycare, insurance and medical expenses are replacing cable and going out as the new luxury expenses.
More and more people realize the only way to survive financially is to earn more money or learn to spend less. Making the dollar work harder is a tough pill to swallow and, for many, is taking a pretty big lifestyle change. Cutting costs here and there are temporary fixes at best. More people are learning to make frugal choices on every aspect of their lives. They are cutting expenses on everything from utilities, transportation, food and entertainment.
The frugal trend is growing out of necessity and social networks like Facebook and Twitter are helping things along. More and more people are coming together sharing money saving ideas, great deals, coupons and even cheap recipes. They are encouraging each other and lending moral support. Tough times bring people together and our tough economic times are no exception. Learning to live within our means by budgeting has never been easier.
I’m not the only one that has noticed the frugality trend and the recognition of the “Frugal Trend” is not new…
I’d like to expand on the topic by looking at the difference of mindset in that upper class and the middle class. There seems to be an interesting contrast and may explain a lot as to the path to wealth and the mental roadblocks most people develop.
Middle Class Scenario
Okay, let’s say Sam’s article is correct (I have a slightly different viewpoint) and most people have more money than we think. What about those people one step below the financially privileged? What about those in the mid to upper middle class. I’m referring to those earning around $70,000 to $100,000 a year. We see a completely different public image and mindset in this group, in my opinion. This is where we find a large percentage of people living in homes they find tough, financially, to maintain. Many are driving large and expensive vehicles they cannot afford. Trips to the malls and shopping sprees at the mercy of credit cards are almost the norm with many in this group. Unfortunately the public image is almost always far better than the real picture.
The Financial Roadblock
I don’t know what makes the person earning eighty grand a year feel the need to lease or finance a forty thousand dollar car when those that can easily afford the same vehicle in cash opt for better value rather than image but I believe it’s a huge roadblock for the middle class. Out of control spending and living beyond their means is what’s keeping those deep in debt from achieving more. It’s a case of mindset and self-control, plain and simple. So the next time you see that dressed to kill couple climbing into a Yukon Denali with bags from high-end specialty stores don’t be too quick to judge success. Rather than being impressed you might be closer to the truth feeling sorry for them. This is far too often the case. A true inside look at their finances might tell an entire different story. Which scenario do you want to be in?
This admittedly boring video will explain how the United States Fractional Reserve System works. Learn how the United States Government manipulates and creates the ‘money’ we use daily. The money reserve system is complicated and if everyone understood how it worked there would be public outrage like no one has ever seen. This video isn’t anti-government or another conspiracy theory, just a clear explanation on modern money mechanics. Thinking about money online? Learn to make money blogging by the blogging experts.
MONEY = DEBT: Modern Money Mechanics & The Fractional Reserve System
What is the lottery? There are many thoughts when it comes to the lotto. Some consider the lottery gambling, others think of it as entertainment. I actually heard someone call it an investment once. Crazy, right? The saddest one I’ve ever heard is that the lottery is their last chance. I agree with Dave Ramsey, “Gambling [lottery] is a tax on the poor and people who can’t do math“.
Lottery players who earn $13k per year spend an average of $1100 of their income per year on tickets. They contribute 82% of all lottery revenue! (Cornell University)
According to a study conducted by Cornell University [PDF link], “the poor are relatively more likely to see the lottery as a financial investment, and relatively less likely to play for entertainment”. A survey by the Consumer Federation of America and Primerica (1999) indicates that the poor are more likely to view the lottery as an effective financial investment tool.
The odds of winning the lottery jackpot can vary widely depending on a number of factors but according to Wikipedia, in a 6-from-49 lotto the odds are 1 in 13,983,816. To put this into perspective; If a person buys one lottery ticket every week for 250,000 years they would probably win one time. Mega Millions is even twelve times harder to win (1 chance in 175,711,536). The problem? Lottery players aren’t doing the math.
Have you ever heard this statement, “Why not play, someone has to win”? Please don’t take financial advice from this person. We’ve all heard the stories of lottery ticket winners going broke years after the huge windfall and I’m going to tell you how to avoid being one of those poor souls – GUARANTEED! Ready? DON’T BUY THE TICKET.
Side Note: State Governments are fully aware of the effect and financial impact the lottery has on the poor but lotteries are a very lucrative source of state revenue. Shame on the Government for taking advantage of lower income citizen’s ignorance and desperation. Don’t even get me started about the casinos.
Like many states, Michigan took a huge hit in the housing market and the mortgage industry. As of December 2010, according to my local township, I’m $38 thousand dollars upside down in my home loan. In other words, I owe that much more for the loan than the home is worth.
What To Do With Your Home Mortgage
What should I do? Nothing! Did you notice the ‘hooray’ in the blog title? I have no plans to sell or refinance the house so what’s the big deal? The big deal is that my taxes went down two times in a row over the last two years. The house still has the ‘living value’ as it always did to me.
We keep hearing about short sales and people just walking away from their homes because they’re so far in the red. Why? If the home was worth (fill in the blank) $___ each month ‘to you’ before the home value crashed, and you plan on staying there for a long while, what does it really matter?
But I’m In The Red With My Home Loan
Psychologically we tend to think, “I can buy a house twice as big for the same money”. Admittedly your net worth is taking a hit but, again, if you’re not seeking a loan what does it matter? If you simply can no longer afford the house for whatever reason, that’s one thing but we are still obligated to pay the debt even though the home decreased in value. There are no guarantees when it comes to investments and that’s what buying a home is. We’ve just been pretty spoiled with home values for years and reality is sometimes a hard pill to swallow.
The Future Housing Market?
As far as I’m concerned, I hope my home value, and taxes, continue to drop. Let the government squirm and struggle for a change. I’ll find somewhere more deserving to put that money.