The Year of Living Frugally – Week 2

The Year of Living Frugally – Week 2

I have no doubt the average citizen of this country is traveling through a jungle of debt. During the last decade, the average saving rate has turned negative. Credit became easier to obtain, and we were all encouraged to spend and buy and consume. Not because it would make us a healthier country – but because we needed to keep the Gross Domestic Product growing, and we no longer produce any real goods to sell on the global market. Our major export from this country is our debt. Our largest product is our debt-spending and consumption.

Even though we are traveling through a jungle of debt, there is a well-worn path for us to follow. The companies and politicians who need us to spend ourselves deeper into debt (keep the GDP growing!), continue to clear their preferred path through the jungle for us.

When one tries to get off of this path and escape the jungle, is when one really finds out how difficult and dense this jungle really is.

My first month of The Year of Living Frugally is full of ideas on how to balance my budget and live without debt. Due to the sheer number of places I can adjust my lifestyle, I have become very busy this month trying to start multiple projects. Some areas have achieved more progress than others.

For this week’s check-up, I will list progress and resistance encountered to various areas.

Housing

This one is huge. I am reducing my rent from $850/month to $275/month starting in March. My utilities should see a huge drop also – since the new house does not have heat. I will be splitting the cost of the DSL connection – so more savings there.

My cell-phone 2-year-contract is finished on March 10. I will not be extending my plan beyond that. I’m going to do some internet research to see if I can unlock this phone and buy pay-as-you-go minutes (anyone out there know a good service?).

I purchased a Skype account. Skype is a VOIP (Voice Over Internet Protocol), that allows users to call other Skype users for free (with voice and video chat). I chose the upgraded account, Skype Pro, which allows me to call all traditional land-lines and cell-phones for free for $3 a month (which includes a voicemail account plus other options). I also purchased the SkypeIn, in which I’m renting a “traditional” phone number so all the “old-timers” can still call me. With the Skype Pro account, the cost of having my own non-changing number is $2/month. So for $5 per month, I now have a phone account – that is somewhat mobile – as long as I can find a computer terminal or a WiFi hotspot.

Unfortunately, my home computer was created with a defective soundcard that was never addressed by Dell (look up microphone problems for the Dimension 9100). I suppose that very few Americans actually use their microphones, so only a small percentage are calling to complain. So, now I need to find a sound card. I may be able to get a free, older one from a friend in IT. If I do need to buy one, I’m sure something suitable can be bought for $30 or so. The other option I’m working on is to reconfigure my 9-year-old laptop to a Linux operating system and use that for a “phone”. Maybe a blog-post is in order on how to switch an older computer over? It appears that it would run quite efficiently off of the free open-source software available…

Down-Sizing

Craigslist is my friend. There has been a constant stream of “for sale” ads created (don’t forget the pictures!), and people visiting to buy the things I no longer use. I will also need to get a storage unit to hold things I will not have room for (tools, kitchen small appliances, etc) – and do not wish to sell.

So far, I have had to spend additional money (storage, Skype and microphone headset), without any real savings on housing yet. Next month this should pay huge dividends. Hopefully, my savings in other areas will get me to the black for the month of February. At the very least, the money from selling off my junk well cover the difference!

Resistance from Family and Friends

When you tell people you are moving out of the nice house you live in by yourself – and are moving into a room-mate situation and down-sizing – they wonder if you are a little crazy. I can explain the debt and the money savings, but the most popular response is a glazed look and a mumbled, “So what? Everyone has debt.” Perhaps I will become a social pariah because of this year long project?

Not All Debt is Bad

Also, just so we are clear – I do not think that all debt is bad! Debt can be a valuable tool, especially for purchasing a house and paying for education. The money I spent on student loans is the best debt I ever created! It also appears that if you have zero debt, it is actually harder to get a loan! Zero debt means that you are not a good customer. The ideal customer is one who takes as long as possible to pay off the debt – thus paying the most in interest.

Anyways, I am not going to take myself completely out of debt. I have no intentions of paying down any extra money on my student loans at this time. These loans are locked in at 2.25% interest. Yearly inflation is significantly higher than my interest rate – even if I was paying zero payments to them, the value of the loan is actually decreasing over time. Even if I was gifted the money to pay off the loan, I would put that money in an ING account earning ~3.4% (and still get the tax deduction on the interest paid on the loan payments).

I have a feeling the dreaded food bills will make or break me this month, the dirty deeds…

(continue on to Week Three)