Breaking Down the Numbers on Why Frugality Works

Marco writes in:

Most of your “money tips” are stupid. Why would I waste my time doing this stuff to save fifty cents? I want to learn how to make money not how to save a nickel.

Whether or not you take advantage of the huge benefits of frugality is all a matter of perspective. If you spend your time looking at just the short term, I’d agree that many frugal tips aren’t big savers. Quite often, a given tactic saves you just some pocket change or a dollar or two once.

That’s an incredibly shortsighted perspective to have.

Let me walk you through the math on three different frugal strategies we use in our home so that you can clearly see how these things can put a lot of money in your pocket. (I’m using Marco as a straw man below with his permission.)

Homemade Laundry Detergent
I’ve written about how we make our own laundry detergent in the past. Instead of going to the store and buying a jug of Tide, I’ll often make a bucket of homemade detergent instead.

Why Marco doesn’t like this strategy: It saves you eighteen cents per load versus Tide. Eighteen cents?
Why I love this strategy: It saves us about $60 per year – post-tax money that goes directly into our pocket – for a little over an hour’s worth of effort spread out throughout the year.

I can make a batch of homemade detergent in about ten to twelve minutes (with the help of my kids). This single batch contains enough detergent for about fifty five loads of laundry, according to my count. Thus, I need to make about seven batches a year – about an hour and fifteen minutes worth of work, annually, spread out over the entire year in ten to twelve minute increments.

On average, we do a load of laundry each day. Every time we use our homemade detergent instead of the homebrew, we save the eighteen cents that Marco doesn’t think is worthwhile. Yet, if you do that every single day for a year, it adds up to about $60.

Now, if I actually earned that $60, I’d have to pay taxes on it. There are also costs connected to earning it – transportantion, time spent working, child care for the time working, and so on. It’s easy to see that I’d have to bring home well over $100 to match what I get from the detergent over a given year.

Eating at Home
I love cooking at home, as I’ve mentioned many times before. It’s turned into something of a passion for me, but I got started on doing it when I realized that we could easily save a couple dollars a head eating at home versus eating out.

Why Marco doesn’t like this strategy: Making food at home is a lot of hassle to save two bucks.
Why I love this strategy: We save at least $100 a week – money that’s after taxes, of course, meaning it goes straight into our pocket – by eating almost exclusively at home. That’s over $5,000 a year.

When we eat out as a family, it costs us – at the bare minimum – $20 to eat a decent meal. Quite often, it’s more than that. But, if you were paying attention this summer, I posted eight (yes, one two three four five six seven eight) detailed meal plans – with lots of pictures – for family meals that cost less than $10 each. The series covered a wide variety of cuisines, healthiness levels, and ingredients in an effort to show that you don’t have to wed yourself to one certain kind of meal.

Thus, each time we eat at home, we’re saving a minimum of $2.50 a head over eating out – usually, our savings is more than that per person. Even if we just calculate one meal a day in this regard, that’s twenty eight meals a week – even at $2.50 a meal, that’s $70 a week. If you consider that the gap between eating at home and eating out is usually greater than that and that we often eat lots of leftovers, most weeks our savings is well over $100 a week.

“Yes, but what about the time?” Well, in order to eat out, we have to leave our home and go to a restaurant (15 minutes), go inside and get seated (another 5 minutes – hopefully), order and wait for our food (thirty minutes), eat (fifteen to thirty minutes), then leave the restaurant (five more minutes) and go home (fifteen more minutes). That’s an hour and forty minutes.

At home, I can usually get a meal prepped from scratch in forty five minutes – some meals take less time, some take more. If we spend a half an hour eating, we’re done in an hour and fifteen minutes.

Usually, it takes less time to prepare a meal from scratch and eat it at home than it does to eat out.

You can amplify both the financial savings and the time savings by using tactics like quadruple batch preparation as well.

Yes, there are some caveats. The savings isn’t nearly as great if you’re single. Also, if you live very close to a restaurant district, the time investment for eating out is less, too.

Installing a Programmable Thermostat
A programmable thermostat lets you set up a program that will automatically adjust the temperature in your home while you’re at work and while you’re asleep, allowing your energy bill to catch a breather.

Why Marco doesn’t like this strategy: You spend fifty bucks on a thermostat and it only saves you five bucks a month.
Why I love this strategy: You spend fifty bucks on a programmable thermostat then save sixty bucks a year for the next fifteen years with no additional effort – a total of $900 for a $50 investment with no work.

The idea that a programmable thermostat will save you $5 a month is a very low-end guess – in most cases, the savings will be much more than that each month. This is particularly true if your house stands empty during weekdays and also if you live in an area where the climate varies wildly between summer and winter. But we’ll assume $5 a month for argument’s sake here.

Let’s say you plunk down that $50 (or some similar amount) to buy the programmable thermostat of your choice. You spend an hour hooking it up and playing with the features. Yes, after the first month, it’s a big loss. After six months, it’s a loss. After a year, you’re just barely ahead.

The second year? Pure profit with no extra effort. The third year? The fourth? It’s all gas down the road – you use less energy without expending any effort to do so.

The Real Scoop
Most frugality tactics aren’t all that cost effective if you look solely at a single use. Frugality’s value kicks in when you alter something you do all the time, like eating a meal, heating your home, or doing the laundry. Shaving a few cents off of each of those uses adds up to a substantial chunk of change over the long run.

When you read frugality tips, ignore the ones that only apply to things you don’t do or things that you rarely do. They’re not really useful to you at all. Instead, look for the ideas that intersect well with your own life – the little tweaks you can make that don’t reduce your quality of life but save you just a little bit each time you engage in the activity. If you’re a meticulous cleaner, look for tips on cleaning supplies. If you use a lot of home electronics, look for energy-saving tips. If you’re a homeowner… the possibilities are endless.

It’s those “a few cents a day” tips that really add up. Do several of them and you’re saving “only” a few bucks a day. But those few bucks a day add up to a thousand dollars at year’s end – and that can make a huge difference, especially since they just fall right in line with your life.