|4 steps to a simpler (and more frugal) life
|By Sheyna Steiner Bankrate.com
Frugality is not a quaint pastime from the pre-credit card era, but it is something of a lost art for some people.
Though frugal living can conjure an image of a Dickensian miser grimly squeezing every penny for all itís worth, it doesn't have to be like that.
"Being frugal to me is about valuing
your life energy," says Mark Zaifman, owner of Spiritus
Financial Planning in Windsor, Calif., and a contributor
to an updated version of "Your Money or Your Life."
A central tenet of the book is that most people must expend their energy to make money during their finite time on earth. Frivolous purchases waste that time and energy.
That concept is a lynchpin in the voluntary simplicity movement.
What is voluntary
"Voluntary simplicity is about coming into alignment
with what's more important -- more material possessions
or more time. It is about having more time and more
choice, because the essence of it is financial independence,"
The simplicity philosophy is a template for doing more with less -- something that financial planners heartily endorse.
"I believe the definition of being 'rich' is no longer a large dollar (figure). I define it as an excess of both time and money. For frugal individuals, this can happen long before retirement and is not dependent on your income level," says Trent Lickteig, a Chartered Retirement Planning Counselor in Scottsdale, Ariz.
Wealth is a relative concept, after all. If your income is over six figures and so is your spending, then that equals broke.
"The two most important assets you can have in the current economy -- and it's not gold, and God knows it's not stock and it's not your house -- but in my opinion, the two greatest assets you can have are no debt and, maybe most important, the ability to live very happily on very little," says Jeffrey Yeager, author of "The Ultimate Cheapskate's Road Map to True Riches."
4 steps to simply doing more with less
Chart assets and liabilities
Evaluating your financial
situation honestly will give you a clear view of where you are on the road
toward achieving your goals.
Lickteig says that opportunities for simplifying present themselves when analyzing household assets and liabilities.
"Do you need three vehicles? Could you sell one to pay the other two off? Could you use the additional 'found money' to pay down other debt or put toward savings? It is probing questions like these which engage the client to begin thinking about the direct benefits of a simple lifestyle," he says.
After accounting for your assets and liabilities, construct a budget. It doesn't have to be called a budget, but whether it's a spending plan or a cash flow plan, you should know the exact amount of money coming in and going out, where it's going and why -- and how you can change it.
"A lot of my clients think that the only way to work
through this capitalist system is to work until they're 60 or 65," Zaifman
"What I like to do is show people one of the ways that voluntary simplicity works: What if we sold your home, took that money and bought a smaller home and put the rest in the bank? Then you work part-time until age 65. Or you can stay in your high-stress job and keep your more expensive home, but you have to work full-time," he says.
|| What's your experience with investing?
|-- Posted: Oct. 27, 2008