Morning! Today I have a post from Betsy, let me know if you would like to guest post on RFI, I publish a guest post every Wednesday. Betsy writes as CollegeMom at ConsumerFu.com. She is the mother of two college age daughters. She and her husband live on four acres of old farmland with two dogs, a cat and a large number of gardens where she works hard on her farmer’s tan all summer. You can also find Betsy on Pinterest and Twitter.
Every now and then when I use the word frugal to describe our family’s lifestyle the person I’m talking with stares at me with a look of disbelief. I think there is a misconception out there that those of us who embrace a frugal lifestyle do so because we are deep in debt, don’t make much money or are lazy and out of work. We are none of these things.
Being frugal doesn’t mean being cheap. It doesn’t mean always choosing the least expensive option when you need to spend more to accomplish your objective. Frugal doesn’t necessarily mean destitute and for many a frugal lifestyle is a choice, not a requirement. If I had to come up with a substitute term or phrase I would say we live a common sense lifestyle.
For us being frugal has come in stages. We were more extreme when we were younger and income was limited. We knew that braces and educational expenses were looming for our young children. If we wanted to afford these things without going into debt we would have to scrimp and save. So we did.
The most important thing we’ve done along the way to financial independence is to talk our decisions out with our two daughters. Often, these conversations were over their heads, but we wanted them to understand why we made certain financial choices. They didn’t always know the intricate details of every decision, but we tried to explain our logic. I can illustrate this with the purchase of their first shared car.
In the spring before our oldest daughter’s senior year in high school we paid $16,500 cash for a two-year-old Honda Element with low mileage. It wasn’t the prettiest of cars, but it was in good condition, reportedly would hold its value and it was a little tank. Our oldest drove it to and from work and school for a year and then the car sat for a year waiting for daughter #2 to learn to drive. This past year, she drove it back and forth to her high school. In three years we put about 10k miles on the car.
In May, daughter #1 loaded up the Element with all her worldly possessions and moved to another city to take an internship. She planned to drive the car her junior and senior years in college and then once again pass the car off to her sister. Her plan was to then buy something that would be suitable for a young professional. At least, that was the plan.
Two and a half hours after pulling away from our home, she was hit from behind by a large work van. This triggered a five car pileup and in a split second all those plans went out the window. Fortunately, nobody was hurt and everyone was insured. It was determined that the person who ran into our daughter was following too closely and he was faulted for the accident. It was determined the car was a total loss and we were given $15,000 to replace it.
That’s right! We wound up paying only $500 each year for the use of that car. By paying cash, we avoided any interest on a loan. The only way this car cost us more than another model is in the poor gas mileage, but when we’re picking out a car for our children to drive safety trumps mileage. The other factor that comes into play is how well the car holds its value.
Here is where talking things over with our daughters comes into play. As my husband and I were at home worrying about how we would manage buying a car with our daughter in another city, she was doing her homework. She was test driving and doing research on safety ratings and gas mileage of the cars she thought were good looking. When it came time to buy, her organization and research allowed her to deliver a pitch that blew us away.
She told us she wanted a new car that would last her at least ten years and looked like something a professional would drive. She was armed with Insurance Institute ratings, Kelley Blue Book resale estimates and gas mileage information. Not only that, but she’d found a local dealer that was running a special on certain (less popular) colors of the model she wanted.
Basically, all those conversations about money and why we made the decisions we did had paid off. We did not have to explain what she should look for in a car. She already knew. We came out of pocket an additional $2500 for our daughter to have a new car that is safe, gets excellent mileage, and holds its value.
Why not make her pay for the car? Well, she already works two jobs – an unpaid internship and a paid job at the university she attends. She has been on the Dean’s list all four semester’s at a major university and maintains a 4.0. She pays a lot of her living expenses, buys her own clothes and is one of the most responsible 19 years olds I’ve ever known. I would rather she gradually accept the financial responsibilities of adulthood so she has a better chance of maintaining her grades.
A lot of times being frugal doesn’t mean buying the cheapest thing you can find. It doesn’t mean forgoing safety and comfort just to save a buck or two. We could have bought a clunker three years ago and saved a lot of money. Instead, we purchased a safe car that kept our daughter alive and we bought a car that was a good value at the time and held its value over time so our insurance settlement was much higher than it might have been.
Maybe we don’t look like the typical frugal family, but it has been our common sense approach to our family’s finances that has allowed us to save enough to pay cash for things we might otherwise only dream of owning. It has been our constant communication about finances with our children that will ensure these values are passed to the next generation.
This post was featured on Mom and Dad Money, Common Cents Wealth, thank you!
Glad to hear no one was injured and everyone was insured. The beauty about being frugal and/or achieving financial independence is that you can do with your money what you please. Sounds like you’re children are well-educated both financially and in the classroom, so I imagine it was an awesome feeling to be able to help them out like that knowing they will appreciate it and they will be poised for success as they come out of college. We hope to follow a similar path of communicating openly and educating our young boys on personal finance as they get older.
Thank you! My best advice – and it isn’t always comfortable – is to tell your children that you can’t afford something if they ask for things while out. When the girls were young we typically couldn’t afford what they were asking for and I would usually respond with something along the lines of, “Mommy can’t afford that today, maybe for your birthday (or Christmas or _______).”
I’m sure they didn’t really know what I meant, but all those puzzle pieces fell into place once they had their own money to spend. Also, my girls never had an allowance. When they were young, we couldn’t afford it. They learned to save anyway with only 2-3 infusions of money from gramma and poppy each year.
Oh no, I’m glad everyone’s okay. This is a reminder that we just never know what can happen and how important insurance can be. I don’t think frugal means being cheap at all, it’s about making smart financial choices and making the effort to save money.
Agreed! I’m a firm believer in insurance. If you reach a point where you can self insure, that’s great, but most of us don’t start out there and you will still need liability insurance. It is required by law in every state to drive a car. If you’re wealthy, you will want to protect that wealth with personal liability insurance.
Great story! Congrats on passing on such responsibility to your daughter. You must be very proud parents.
Thank you! We are really proud of our girls. It’s fun to watch them accept more responsibility. The oldest is obsessed with being independent. We’ve actually had to ask her not to get a third job. We do wait for her to ask advice so she has the chance to think things through first.
The youngest has always been very shy but burst out of her shell at college orientation. The college took some of their Honors College students for a team-building sail on a schooner and she texts me this picture of her at the top of the 50 foot mast. She was harnessed….but still! 🙂
Definitely a good decision! Three things struck out as you guys being *not* normal – you paid cash, chose a very safe and fuel efficient car and finally, bought used. Very, very smart decisions and not typical at all!
Well…if you ask our daughters we are certainly “not normal.” 🙂
I do remember the days when the idea of paying cash for a car seemed like a fantasy. It still hurts to shell out $15k – $25k for an automobile or truck, because that is a huge chunk to take out of savings. It helps to always remind yourself the total amount of interest you are avoiding paying for a loan and since this money comes from liquid savings we certainly aren’t earning much on it.
So glad everyone’s ok, Betsy! Yes, we are like you, in that we are frugal, but also believe that safety trumps money. Some get confused, as we are so money conscious about so many things, but I guess that’s the whole point of being frugal, at least for us, so that we can spend our money on the things that are most important to us. Also, I think that, in your situation, it’s perfectly fine to pay for this car for your daughter. She’s proven that she doesn’t have the entitlement attitude that so many people have. That kind of responsibility and maturity should be rewarded. Great job, mom and dad!
Thanks, Laurie! It is much easier looking back and being able to point out what we did right. Of course, we had no idea we were doing anything right at the time!
It isn’t fun telling your kids, “no,” but it sure is nice seeing where all those noes led them.
I am so glad everyone (especially your daughter) was ok Betsy! That said, I could not agree more with your approach to viewing frugality as it really does come down to using common sense and not getting the cheapest thing because you can save a buck or two. Kudos to you and your husband for passing on such wisdom to your children! That is our desire, not to mention felt duty, to pass on to our children.
Thank you, John.
It’s much like reality tv…people pay attention to the extremes and that’s what gets the press instead the millions of people who just apply common sense. Common sense is boring because you can’t make fun of it.
I’d rather pass along a strong work ethic and common sense rules for life to my kids…but I wouldn’t mind passing along a little money when the time comes too. 🙂
Really great stuff here. I never really get it when people are laser-focused on spending as little as possible today. Being conscious of what you’re spending is important, but I’m always of the mindset that long-term value should really be the goal. It sounds like you’ve done an awesome job of passing that mindset on to your children, which I can only hope to emulate.
Hi Matt and thanks!
I think there will always be people who brag about being so cheap they use leaves for toilet paper. Maybe that’s a bit extreme, but you get my point.
For others, it may have been a bit of overcorrection as a result of the economy or job loss, medical bills – any life situation that forced them into a financially extreme lifestyle. After a while it becomes habit.
I agree that long-term value is a great goal and along with that understanding where you’re justified in spending more. Little things like understanding when to spend more on an article of clothing are important lessons for kids. I know it sounds silly, but they aren’t born knowing these things.
Great post, Betsy! I love how you have influenced your daughter in a positive way when it comes to money. Kudos to her for working an internship and a job at the same time. I feel like I have quite a bit in common with her as I did this for some time while in school, all while maintaining a high GPA. I am NOT like her in that I am currently driving a car with 210k miles on it 😉 I do agree that frugal is too broad a term for most people to wrap their heads around, and most people have conflicting definitions and perceptions of what the term means.
Ha! She would be eventually driving a car with 210k miles if someone hadn’t run into her on the interstate!
I have friends who coupon, scrimp and save but they don’t think of themselves as frugal. I guess it doesn’t really matter what we call it as long as we live it!
I don’t think there is such thing as a typical frugal family! Each family is different. My mom gifted me her 10 year old car after graduation, and I LOVED that car. It was great. It got me from point a to point b and while it wasn’t super stylish, I didn’t need that!
Daisy, I think I had the ugliest car in high school. It was my family’s 10 year old Ford Country Squire station wagon with wood panel sides and a brown vinyl roof. The roof and paneling were faded, but I washed, waxed and treated that car like it was gold. It had the little fold up seats in the back and all my friends loved my car. I’d hate to pay for gas for it at today’s rates!
Almost every car I’ve ever owned I’ve driven at least 10 years. My husband had to force me to replace an old beat up Buick Park Avenue. He was so embarrassed of that car. 🙂
Sorry to hear about the accident. Luckily no one was hurt and that you provided the tools that your daughter needed to make good financial decisions. That is education that will really carry her a long way.
Thanks! Probably the best thing we did as parents is be consistent. Daddy wasn’t pulling out the plastic/cash or checkbook right after mommy said no to something. My husband and I don’t agree about everything, but when it comes to money we are on the same page.
Sounds like you made a well-informed and smart decision. A new car isn’t always a waste of money, so I commend your daughter for the research she did. I agree with you that it’s possible to be frugal, yet have nice stuff. Sometimes the extra money paid for the “nicer” items ends up saving you more money in the long run.
I think the real art to living a frugal lifestyle is knowing when to pay more.
My grandparents bought me my first car, and it made me start out life out of debt. I was able to take an engineering internship in another city because I had transportation–and accept later jobs, too.
My parents helped me buy my first car and it absolutely helped. I made pretty good money right out of college and it was still tough to make ends meet. Come to think of it, both of my first two positions (same company) were in rural areas with no public transportation. I wouldn’t have been able to accept those positions without a car.
It’s good to know that the apple doesn’t fall far from the tree. Here’s to hoping our daughter will make smart decisions and be responsible when she grows up.
I bet she will! I don’t know how old your daughter is, but talk through decisions with her. I honestly didn’t realize at the time how valuable that would turn out to be.
This article was fun to read and flowed very nicely. It also goes a long way to showing how common sense ain’t so common any more. Choosing not to buy what we cannot afford and have not saved up is counter-intuitive in today’s culture. Many people, including loved ones, think we’re nuts for not spending every dime we make. But I am just as sure that they’d be turned off if we asked for a loan or a handout if we overspent and needed more;) Heh, heh, heh…
cj, thank you and you are so right. We read more about the consumer confidence index than the consumer savings index. Don’t know about you, but my consumer confidence shows a direct correlation to my consumer savings! 🙂
Great story, especially because nobody was hurt in the accident. But also, it’s nice to read that all those financial conversations were listened to, and absorbed. Good stuff.
Thanks! Now we’re in that perilous stage where we’re not sure how much advice to give without being asked for it. I’m sure we’ll stumble through it like everyone else!
I think that, too often, people’s only exposure to frugality is through people desperately trying to save. It’s only more recently that I’ve run into people using frugality (or perhaps it’s better to say efficiency) as a lifestyle.
I’m glad to hear all your hard work with your children is paying off!
Efficiency is a good word. I’ve used self sufficient too, but we’re in a rural community surrounded by farmers. There’s still very much a make do and help your neighbor attitude out here. Being frugal is a way of life.
Good thing that no one got hurt and everyone was safe. And that’s a great story about insurance. You never really know when accidents will happen. You can’t foresee when something will go wrong. It’s not just about being frugal but being smart.
I am a firm believer in insurance. There are ways to save money on premiums and there are often bells and whistles you don’t need on your policy, but the peace of mind is worth it. (Just my opinion)
My parents are frugal, but it doesn’t mean they buy low quality items. Quite the opposite my mom likes high quality items. I’m the same way. Even though some people may think I’m cheap because I always think of the cost. I’m not cheap, just dollar conscious.