Recently, Ramit from “I Will Teach You To be Rich” challenged Trent, from The Simple Dollar, to prove whose money saving tips were more effective.  Ramit argued that many of Trent’s frugal tips are erroneous, since putting time into frugal living will not yeild any significant savings worthy of your time.

He says:

Focus on big wins that matter… By reducing the number of things to focus on — and picking major, important items — you don’t need to worry about that one-off latte or extra $20 you spent on shoes. If you’re handling your major goals, the minor details fall out of that. Whether it’s spending $21,000/year going out or going out to a nice restaurant, you can handle your goals and use your money without feeling guilty.

The “major, important” items might be reducing the interest rate on your credit card or negotiating rates for a cheaper cable, internet or cell phone rates. Ramit makes some good points, but after some consideration I have to say I disagree with his over-simplified approach.  I’ve never believed that there is a one-size-fits-all solution to making or saving money, partly because we all lead lives with different complexities, and party because we have different values, and values are intricately connected to our financial decisions.  

Frankly, I think his challenge is irrelevant and he is using aggressive language to sell his money saving tips on the internet. He provides a list of 30 tips that will save you $1000 in 30 days.  Some are so obvious that any frugal person would already be doing them, like packing lunches or turning down the thermostat.  Others are just silly.  For example he recommends changing the date of Christmas AND abstaining from buying ANY gifts for Christmas.  I think the readers on Saver Queen have proven that Christmas can be frugal, fun AND held on December 25th.  (I also don’t see why you would change the date of Christmas if you aren’t buying any gifts, nor how that tip would help you save money in the middle of February.)

But I digress.  Mainly I am taking issue with his point that most frugality tips are useless, or in his words, “make me want to vomit”.

Reasons why I think focusing only on the “big wins” is a mistake:

1.  Why choose an either/or strategy when you can do both and save even more? 

2. What constitutes as “big stuff” might surprise you.  Ramit says not to worry about the latte factor, but it adds up.  A latte at Starbucks costs $4.  If you buy a latte every day for one year, that’s $1540 annually.  (Anyone want to calculate the compound interest on this for 20 years? I started but got lazy).

3. Not everyone is in the same financial position.  Ramit assumes that everyone has “big items” they can cut back on, like gym memberships, cars and cell phones.  Not everyone is in such a position; some do not have these items to cut back on, and others need to save every penny they can.  In fact, the savings of $100 or $200 per year might mean little to Ramit, but could be valuable to someone who is unemployed or struggling to keep food on the table.

4. Being frugal can be deeply satisfying. Learning to be happy with what you have and who you are without the constant barrage of new “stuff” is tremendously fulfilling.  Furthermore, learning how to cook, repair your own clothes or perform maintenance on your car can be both fun and empowering.

5. Being frugal often coincides with being environmentally friendly.  Both blogs poke fun at those who re-wash their Ziplock  bags but these little steps are important if we are going to take responsibility for the impact our daily choices have on the environment.  

6. Saving on the little stuff means you can save on the big stuff.  For example, by being frugal and saving up for a down-payment on a home will mean that you can avoid the premiums and additional interest that you would otherwise pay with a small down-payment.  It’s true that negotiating the interest on your credit card will save you money, and is a great first step to take, but paying down that credit card faster will save you even more.

7. People value different things. Ramit assumes that a new pair of shoes and a latte are pleasures that shouldn’t be sacrificed.  Maybe in some cases that’s true.  Personally, I tend to focus on saving in areas that are less important to me, so I can afford what really matters.  For example, I buy generic foods.  I rarely buy coffees from coffee shops but make my own instead.  I turn the lights off when I’m not using them.  I wear handmedowns and buy clothes from funky thrift stores or stock up on year-end sales.  These don’t really feel like big sacrifices to me, but they add up to savings that can be spent on something really important to me, like traveling to Sweden to see my best friend get married, which I will be doing this July.

I guess what bothers me most about the whole debate is that it’s not really just about how much you can save.  It’s about mindfulness.  Frugality is about paying closer attention to what we have, recognizing all of the vast resources that we have within our reach besides money.  Being frugal means you value everything you own and take little for granted.  It also means recognizing the resources you have within yourself, to learn new skills, to be more creative, to try new things.  The frugal philosophy also encourages sharing and community-building.  

Unfortunately, our societies have become rather wasteful and self-serving. Now we frequently look outward instead of inward for solutions.  Why are we asking questions like, ”why bother reusing that bag“?  Shouldn’t we ask, “why not reuse that bag?” Why do we assume that throwing away is naturally the best course of action?  This kind of wastefulness has led to environmental destruction, financial debts, and in my opinion, much unneeded stress and focus away from things that matter and/or bring great joy.

The bottom line: It’s not really about how much money you save by washing that plastic bag, as it is about the consideration that goes into looking at that bag and seeing a purpose beyond it’s immediate use.   It’s about recognizing our potential as well as our responsibility in the million different choices we make each day. This kind of mindfulness will not only help reduce our financial baggage but will be also a mandatory change of course if we are to build a sustainable life on this planet.

What small frugal steps do you take that add up to significant savings, reduced environmental footprint, or a more fulfilling life?

I came up with these cute ideas for re-purposing button bags.  In a recent issue of Real Simple, they presented the idea of re-using these little bags to hold pills when traveling.  But I realized they were quite handy in the kitchen, too.  They efficiently store bread tags and elastic bands in one central location.  I like this because I reuse all this stuff.  It especially comes in handy when you bake your own bread loaves.

I also finally finished off my last box of Ziplock bags.  I stocked up when these sold for less than $1 on a lucrative shopping trip to Price Chopper last spring. Using these bags sparingly means that my stock-up lasted nearly a year.  I admit I rarely wash them, just because I have not found an efficient way of drying them, so if anyone has any ideas I’d love to hear them.

I will be reusing the box to store bread bags.  I also reuse lettuce bags and other kinds of vegetable bags too.

Do you have a kitchen organization tip to share?

Image from answers.com

I have been reading the Tightwad Gazette III recently – you can see the book reviewed by Trent at the Simple Dollar – which contains heaps of money saving tips and tricks.  This version was published in 1996 – so a few of the tips are outdated (but not as many as you’d think!)  Of course, those which are outdated are also incredibly funny, so the book turns out to be an incredibly worthwhile read.

One of the tips that struck me was from a woman in Pennsylvania who explained that she simply allows her warehouse club membership to lapse and doesn’t renew for another three months.  She stocks up before her membership lapses and simply renews after that, essentially reducing her membership fees by 25%.

I do not belong to a warehouse club – since there is just the two of us, I figured that the costs of the membership would outweigh any potential savings, especially since I already shop the sales and use coupons. 

I just wondered if this tip would apply to anyone who belongs to a warehouse club.  Do you have to pay an initial sign-up fee that might outweigh the benefit of letting the membership lapse?  

I just published my first article on ehow.com. My article is called, How to find great Canadian coupons. If the mood strikes, please feel free to recommend me, rate my article or leave a comment.

Also be sure to check out the Guelph Mercury’s new food blog, Fuel.  Although some of the content is local, the majority of the posts will have appeal to anyone interested in food, especially Canadians.  It was birthed just last week and already I’m enjoying its witty, thoughtful and informative commentary.

Oh, one more thing: I will be gone from February 28th through March 8th.  I am setting up some fabulous guest posts and already have a number in the works.  But if you have a topic you’d be interested in writing a guest post on that has to do with frugal living, I’d love to hear from you.  Send me your idea to saver queen at gmail dot com.

I’m pleased to present another guest post by Canadian financial expert Gail Bebee, part two in her series for Saver Queen readers.  (Not a sponsored post.)

Tax Free Savings Account or Registered Retirement Savings Plan?

By Gail Bebee

Personal finance speaker and author of No Hype – The Straight Goods on Investing Your Money

E-mail:  gbebee – at – nohypeinvesting – dot – com
Web:  www.nohypeinvesting.com  

It’s RRSP contribution season, but you would hardly know it. No print ads boasting about the great returns of mutual funds (no wonder; most lost bundles of their client’s money last year). No TV commercials about how fund managers travel the world looking for great companies to buy.  Instead, the financial industry is selling Tax Free Savings Accounts (TFSA). 

Canadians should look past the TFSA hype and make sure they invest their hard-earned money to best serve their own personal situation. That could be an RRSP, a TFSA or both.  

Those who have the money to contribute to a TFSA ($5000 per year max) and RRSP (up to 18% of your previous year’s earned income) should in most cases do so and take advantage of two of the few legal ways to pay less tax. 

If you have only enough money to contribute to one of these savings plans, the following are general guidelines to help you decide what to do:

• Consider making an RRSP contribution and using the tax refund for your TFSA.
• If your present and future tax rates will likely be similar, the TFSA is usually the better choice because it is more flexible.
• If the money will be withdrawn from the plan when you expect to be in a higher tax bracket than present, a TFSA is probably the better option. E.g. saving up to buy a car
• If your current income tax rate is higher than the rate you expect to pay when you need the money, an RRSP contribution likely makes the most sense. E.g. usually the case if the money is for retirement years
• Those saving to buy a house or to return to school should investigate government programs which allow you to borrow money from your RRSP for a down payment on a first home (Home Buyer’s Plan) or for educational purposes (Life Long Learning Plan).  In these cases, an RRSP contribution may be the better choice.

You can put money into a TFSA anytime. You’ll need to act by March 2, 2008 to make an RRSP contribution which creates a tax deduction for the 2008 tax year. So, take the time now to review your finances and determine, which the savings plan(s) best suits your situation.

Are you taking advantage of the RRSP, TFSA, or both?