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How to live frugally

Just buy the house you need

If you are content in a 1-bedroom apartment then buy a 2-bedroom condo. If you are content in a 2-bedroom condo then buy a 3-bedroom townhouse. Only buy a house when you need it. When you just buy what you need you save enormously on mortgage interest, property taxes, utilities and maintenance every year. Too many people jump from living in small quarters to buying a house. They buy more than they need and end up paying a large price for that unneccessary space.

Contrary to what real estate agents may tell you, a home is a liability , not an asset. You can minmize the size of the liability buy buying small .

Pay off your mortgage and other loans as soon as possible

Always aim for a 10-year or 15-year loan and overpay your monthly payments. Basically you are paying yourself a guranteed rate of return equivalent to your loan interest rate. Which bank or stock market can guarantee the same rate of return as your loan rate? The answer is none!

That is why it is best to pay off your mortgage first before trying to invest too much in other investments. Some diversification is good, but the best investments are those with zero risk and high returns, which is the same as paying off your mortgage.

Make your food from scratch

You are probably thinking that takes a lot of work and is not worth your time. Actually you can automate and mass produce your favourite recipes . I like to eat a lot of lentils and beans . These I cook in bulk and freeze in small containers to eat when I need . I also have a bread maker and yogurt maker which saves quite a bit of money. Food made from near scratch tastes noticeably better and is much healthier for you.

Raw ingredients such as wheat flour, sugar and beans offer high calories per dollar of cost. The more processed the food, the lower the calories you get per dollar spent.

Bike to work and take advantage of public transportation

I am able to multiply the value of my time by accomplishing all the following by biking to work:

A bike is a much simpler machine than a car so is cheaper to mantain. While it costs 20-50 cents a mile to drive a car, it only costs 2-5 cents a mile to ride a bike. In other words, one tenth the cost of a car.

Of course your appetite will increase with bike commuting, but read my previous advice on making food from scratch and buying high calorie per dollar natural ingredients. Needless to say, you will savor food much more when you are healthy and fit. I also use public transportation with my bike commuting on days when I am tired to ride the way back home. I put my bike on the bus on its rack.

Shop at thrift stores

While 99.9% of stuff at thrift stores is junk, it is that 0.1% you are after. I have picked up many fantastic unused items for next to nothing. As the saying goes, " one man's junk is another man's treasure ". I make it a habit to visit my favourite local thrift store every few weeks. I rarely come back disappointed.

Lower your thermostat to 55 in winter and never use the AC in summer

Instead of spending hundreds of dollars on your heating bill, I just put on a few extra layers of wool and don a cap ! I also use a simple space heater in my computer room. Rather than heat the whole house, you just heat the area you need.

I get the deepest and soundest sleep when my room is at 50 F. Your dreams are very vivid. Within 10-20 minutes the bed warms up to your body temperature and you find yourself snug in a warm cacoon that you never want to get out of!

Also the low temperature prevents me from taking naps in the late afternoon/evening. So I am forced to stay up till midnight, at which time I can look forward to a solid night's rest. I would lower my thermostat even lower were it not for the risk of pipes freezing.

Similarly I never use the AC in the summer. I keep the house dark during the day to prevent the home from heating up. And at night I use window fans to blow the cool air from outside in.

Dont't get cable, just watch PBS and local channels

Cable TV wastes money and your time. There is too much programming trying to grab your attention. The shows are over-hyped, exagerated and give you a distorted view of reality. PBS has many great programs you can rely on for unbiased education. For your comedy needs, the local channels, of CBS, NBC and FOX provide plenty to satisfy.

Take advantage of credit card and bank promotions

See my article on this here.

Use Freecycle and Craigslist

Freecycle is a grassroots and entirely nonprofit movement of people who are giving (& getting) stuff for free in their own towns. It's all about reuse and keeping good stuff out of landfills. Freecycles mission is to build a worldwide gifting movement that reduces waste, saves precious resources and eases the burden on our landfills .

Basically you can sign up for a local freecycle list through yahoo groups and post ads to get rid of stuff do not need. You can also browse posts to find things others are giving away. Everything is given away free with no strings attached. You can also use craigslist 'Free Stuff' category for the same purpose. For bigger cities, craigslist is better. In smaller cities Freecyle is probably all there is.

Don't buy toys

Everything you buy should have value and serve a need. Ask yourself what your return on investment is for the item you buy . Your purchases are meant to enhance your productivity. If not, then what you are buying are toys.

Take advantage of your library and used books

I buy almost all my books used from Amazon for 1 cent plus whatever shipping is. I have bought over 100 books and only once did I receive a defective book. And even that defective book which was an audiocassette, I was able to hear. The trick is to invest in a walkman which you can get from ebay or walmart for cheap. Then you will find a huge selection of audiobooks on tape for cheap since nobody listens to tapes anymore.

Slowly become vegetarian

Meats are expensive and a nuisance to cook. Plus they stink in your garbage . Vegetables are healthier and tastier. In vegetables you can find many flavors and tastes. Consequently food is much more interesting to eat. Vegetable have been on the earth a lot longer than animals. They are much simpler in the evolution of life so are time-tested. They serve as the building blocks of more complex organisms. So you can be assured that by eating them you are not doing your body any harm.

Meats on the other hand, are bland and one-dimensional. There are also ethical considerations about eating meat. Does an animal really have to die to feed us? If we are ok with killing animals for selfish reasons, then what prevents us from killing each other?

My suggestion is to slowly but steadily reduce red meat first from your diet. Then move on to chicken. Just make incremental steps towards a more vegitarian diet.

Cut your own hair.

A decent quality electric clippers is all you need to give yourself a short haircut. It does not look like a crew cut or buzzcut but it is a length that is typicly considered a men's cut. If you don't want really short hair you might want to find another option.

These can be bought for $30-50 from amazon.com

Take care of your clothes

Your clothes will look new for years if you properly take care of them. The most important tip is to cold wash on delicate cycle and hang dry. The delicate cycle prevents your washing machine's agitator from adding extra wear and tear to your clothes. If you have a front loading machine then you do not have to worry about this. Using cold water prevents colors from running. Last, hang drying keeps your clothes looking bright and new as dryers will fade your colors.

Try and wear wool the most since it is a miracle fabric. It has anti-bacterial properties that keeps it clean. You almost never need to wash wool as it never starts to smell like cotton. Wool is also very warm in the winter. It also wicks away sweat and moisture so keeps you dry . Plus it looks very classy, especially cashmere and merino wools.

Also you only need to use half the soap recommended by the detergent box. Using too much is just unneccessary unless you play rugby all day!

Another tip is not to wash clothes so frequently. Most people wash clothes after just a few uses. This just wears and fades them out much faster with each wash/dry cycle. I usually wash only when they begin to have a slight odor or if any sweat stains begin to form on shirt collars. You should also protect your dress shirts with a v-neck vest to keep them from staining from underarm sweat.

Maintain what you own

Almost anything you buy needs to be maintained. Regular maintenance can exponentially increase the useful life of the product compared to doing no maintenance at all. The key word here is exponentially compared to mere incremental improvements. One can expect major increases in useful life when a product is properly mantained. Unfortunately, most people only realize this the hard way from many years of neglecting maintenance.

Consider a pair of dress shoes. If you never polish them, then the leather will start to dry out and crack after a year of use. If you regularly polish them once a month then they will look shiny and new for ten or more years. If simple shoes are so sensitive to maintenance then you can only imagine how necessary maintenance is for more expensive items.

Often people think that an expensive product requires less maintenance since the higher cost must be for some inherent robustness. Unfortunately, the opposite is true. The more expensive the item then the more complex it is, thereby requiring more maintenance. This is a simple fact of engineering. See my article on this here.

A typical example is buying a BMW compared to a Toyota. The BMW will cost more because of higher-end features. These higher-end features are more likely to break and require more maintenance to ensure they work reliably. The Toyota has fewer features and will require less maintenance to run.

The key point is regular maintenance will increase the life of your prooduct by orders of magnitude. So it is well worth it to invest a little time and money in performing regular maintenance.

Invest in tax-deferred accounts first

Always max out your tax deferred accounts first before investing in specific mutual funds or stocks with after tax money. This would be your 401k, Traditional and Roth IRA's. If you have a side business you should also open a SEP ( self-employment plan) which is also tax deferred. Make sure each account has a different risk profile. For example you could make your 401k aggressive , but keep your IRA's conservative. After you have maxed out your tax deferred account, then you should build up some cash reserves through bank CD's. The great thing about bank CD's is they never lose money. If you shop around you can find good rates that easily beat inflation by one or two percentage points.

Buy refurbished electronics

People incorrectly assume refurbished means used items that were returned to factory for repairs. Refurbished actually means a new item that was returned to factory for a repair. The factory restores it to like-new condition and provides a warranty. So basically you are getting a new electronic with warranty.

The probability of encountering a problem is the same as if you had a brand-new electronic. So with the warranty in place you have nothing to worry about. I easily save 25-50% off brand-new prices by always buying refurbished.

Start a side-business

See my article on this here.

Drive below the speed limit ( 55mph )

Most Japanese 4-cylinder cars give the best gas mileage when driven at 45 mph. If you drive 55 mph, you will still get excellent gas mileage, around 20% better than driving 70 mph. Additionally, the car will be a lot quieter and safer as you can stop it very quickly.

Remember, basic physics says the energy of an object increases with the square of its speed. So a 70 mph car has 60% more energy than a 55 mph car. This translates into significantly less damage should you get into an accident. Reaction times are also increased when driving slower, making avoiding an accident a much more likely outcome.

Also cars that are driven slower experience significantly less wear and tear. Steel has an exponential relationship between stress and life. So driving a car slower corresponds to orders of magnitude increase in fatigue life and durability of the frame and components.

Last, driving slower is more enjoyable. One hour of stress free driving is certainly worth the 10 minute opportunity cost of arriving later.