Financial Literacy - Growing your bottom line
smart spending
4 steps to a simpler (and more frugal) life

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 it’s 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," due out in March 2009.

4 steps to doing more with less
  1. Identify goals
  2. Chart assets and liabilities
  3. Make a choice
  4. Clean house
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 simplicity?

"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," says Zaifman.

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."

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Identify goals

People often don't know what their goals are, says Joe Kapp, a financial planner in Bethesda, Md.

"Unfortunately, all too often people end up in a job and expand their spending capacity to meet the amount that they're receiving from an income perspective. And a lot of times they end up exceeding that, so they end up with a lot of credit card debt," he says.

Kapp himself became a financial planner after a serious car accident compelled him to re-evaluate his life. He learned about the simplicity philosophy, went on a long trip and returned to start a financial planning practice focused on the needs of the gay and lesbian community.

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