Cheap Living - have a Life Plan, Goals and Wise Spending Criteria

The whole idea of cheap living can be bothersome to many people. Nevertheless, if we are to create and implement wise spending criteria to get ourselves out of debt and stay out, we'll have to focus on frugal living, and that involves living cheaply.

There isn't any other way around it. You can't live "high on the hog" and do it inexpensively. The words "cheap", "frugal", "thrifty" and others might not be so appealing, but the word "bankrupt" isn't appealing either.

The word "cheap" conjures up thoughts of sub-standard living, doing without, limited choices, dumpster diving and needlessly depriving yourself of a fulfilling life. Frugal living doesn't have to be that way.

Living cheaply can also be a life of abundance. It all depends on your attitude.

If you have careless or reckless spending criteria (or none at all), then your lifestyle will be more expensive than necessary, you'll quickly run out of money, and debt will likely overtake you. And then... guessed it, you'll find yourself immersed in sub-standard living, doing without, limited choices, dumpster diving and needlessly depriving yourself of a fulfilling life.

All because of unwise decisions that were made.

So, the choice is yours; create and implement wise spending decisions that orient you to cheap living, or be forced into a meager lifestyle out of necessity.

This discussion is about establishing wise spending criteria so you can make better financial decisions. We'll be talking primarily about being conservative (financially), and focusing on standards for frugal spending that are based on:

  • reasoning, instead of emotions
  • logical priority, not false urgency
  • planning, instead of dreaming
  • needs, not wants
  • far-sightedness, not immediate gratification
  • clear goals, not impulse

Let's discuss six basic steps that are involved in a good financial decision-making process. This is generally how I make financial decisions, and these have proven themselves to be reasonable criteria to use to make certain I'm engaged in wise spending.

The objective here is to craft your own standards from these discussions. You'll be much more likely to implement your own standards, so I leave that up to you. I'm only going to suggest general areas that we should consider in order to build an approach to cheap living.

The six steps presented below are ordered in a manner that I think is conducive to helping you think through and sort out the basics of creating wise spending criteria.

Here are the six steps in the order presented:

  1. Create a plan for you life - general or specific.
  2. Establish specific goals in support of the plan.
  3. Identify need for spending to achieve your goals.
  4. Evaluate spending decisions based on return on investment.
  5. Temper spending decisions based on evaluation of risk.
  6. Prioritize spending based on urgency.

Life Plan

It is best if you have a plan. Think of it as a road map. If not a road map, then at least a crude drawing in the sand that helps you understand where you are headed.

You can have a specific life plan such as:

  • Work from home to focus on a family life. This could involved self-employment, marriage, children and application of special skills that you have or will acquire and hone.

  • Lifetime employment in a regular job where you work as a "company man" and retire with some sort of pension plan.

  • Professional career orientation, running your own business, extensive travel, and early self-retirement.

You could have a general plan that involves fewer specifics, but still have a fuzzy view of where you are headed. It is possible that you have no plan at all and will create some sort of plan after you have had a chance to figure out who you are and what catches your interest.

Whether you have a plan or not, it is also important to know what isn't part of your plan. In other words, where you are not headed. Here are some examples of where you probably don't want to be headed:

  • incarceration
  • flophouse
  • vagrant
  • gambler
  • migrant worker
  • drug addict
  • debtor

Think of your plan like a trip plan that you might put together for a summer vacation. You wouldn't accept "anywhere" as your destination, and you wouldn't accept "any way I can" as your means of getting there. You also wouldn't accept "I'll figure it out somehow" as the way in which to fund the vacation. So, don't accept anything like that for your life plan either.

Understand that life plans can be rather fluid. Things happen and every now and then you'll have to modify your plan and its associated goals. That's okay, just as long as you have some sort of plan.


Having a life plan allows you to establish specific goals to achieve in support of your overall plan. These are milestones that show progress along the way. Most people that find themselves in any sort of trouble are those that have no goals to work toward.

Goals are "bite size" pieces of your plan for life. It is at this "bite size" level that we are going to figure out how to accomplish the plan through cheap living. The idea is that frugal spending will allow you to accomplish more of your goals that would otherwise be very difficult, if not impossible, if you weren't a good steward of your financial resources.

Like our plan, goals aren't set in concrete either. If your plan changes, your goals will likely change. You might also see the need to change a goal (because you've done better thinking on it lately) even though your plan remains the same.

Also recognize that you'll have to walk before you run. Start out with reasonable goals that are relatively easy to achieve, then add more goals and use them as stepping stones to reach even more challenging and meaningful goals.

In this way, you can help encourage yourself by showing accomplishment and then build on the accomplishments. This will build confidence in your approach to cheap living and wise financial decision making.

So, let's say that you have a plan to be a "company man" and work for a large company with an aim to retire after 20 or 30 years under their pension plan. That's a reasonable plan, so let's put some goals together in support of the plan.

In order to accomplish this plan, we might have goals such as:

  1. finish high school
  2. have reliable transportation
  3. get in a couple years of college
  4. invest in specialized job training
  5. apply for an internship in a related career field
  6. seek employment at firms: ABC; XYZ; and A to Z
  7. work a few years with some firms until you find one that you can really appreciate and you want to be part of
  8. participate in the pension plan
  9. buy a home
  10. find a partner for life and get married
  11. adopt a child
  12. have an individual retirement account
  13. focus on becoming debt free in year 20 of your career path

These are all reasonable goals. They are sequenced from the simple stepping stones to more challenging milestones. Now, all we have to do is find a way to do this while we engage in cheap living.

Much of our success with cheap living will depend on our focus on needs, so let's look at that next.


The idea of "need" is certainly very important. It is an issue that can be very confusing when it comes to creating an approach to cheap living.

Many of us don't seem to be able to distinguish between needs and all of those wants we often have. The two are very different, so we must become more skilled at distinguishing between them. Our financial success depends on it.

Think of a "need" as something essential to our well-being. It should meet some functional requirement we have for effective day-to-day existence at a fundamental level.

Let's look at a list of items that I would consider squarely meeting the concept of "need" for the average person. I'll offer comments on how they might be seen as a need and therefore something that we'll probably be interested in funding as part of our approach to cheap living.

  • income - if I don't have enough of it on a regular basis (or a suitable alternative such as barter or trade), I become boxed in with respect to my options for nearly every portion of my life.
  • nourishment - without it, your health deteriorates, your function as an individual falters, and eventually your life ends.
  • shelter - provides you protection from the elements and that directly relates to maintaining health.
  • clothing - more protection from the elements and necessary to function in polite and civil society.
  • communications - having an ability to call for help and maintain contact with family, friends, community and employment is essential.
  • utilities - having a warmed, cooled, lighted and powered home is going to be necessary for many of us to stay healthy and "on point" with respect to our future.
  • health - necessary for longevity, effective function at home and work, and a high quality life.
  • transportation - you need to go places and obtain things from sources that are remote to your home, even if that means using your feet or a bicycle.
  • safety - a key element in protecting your health and well-being so you can function effectively at work and home.

Okay, so we can probably see that this is a listing of all of our basic needs. There may be others. It all depends on your situation and your goals.

How we meet these needs is really what will determine whether we engage in cheap living, or point ourselves in the direction of debt.

To stay focused on cheap living, all of our needs must be tempered by our goals. Consider the list of 13 goals from above in light of opportunities to purchase or invest in something like:

  • a timeshare for vacations
  • rental property
  • cabin by the lake
  • recreational vehicle
  • interest in a business

What we should to do is determine if any of these "opportunities" meet the definition of need as tempered by our goals. Let's take each one and review it to see how it stacks up to the idea of cheap living.

  • a timeshare for vacations - it meets the need for shelter, but it's unnecessary because I have a home. I can always rent a room somewhere while on vacation. Therefore, it isn't a need for shelter, but rather another financial drain that will have me paying taxes, maintenance fees and what not.

    This is not a good investment opportunity for me. It isn't my idea of cheap living. If I owned one, I'd feel obligated to take regular vacations in distant locations, and that will obligate me to spend money that I might not otherwise spend. I view this as a liability. Most certainly, this isn't part of my approach to cheap living - at least not now.

  • rental property - a form of income that can help meet one of my basic needs. It also provides a "loss on paper" from a tax perspective since I can depreciate the value of the property. From what I know about rental property, there can also be problems with tenants, repairs, maintenance, property taxes and other headaches.

    It meets one of my needs for income, and a property manager could be hired to handle most of the other issues, but then I'll have another mortgage to pay, additional insurance for the property, and it could be a big interference with my full time job that needs my full time attention.

    A rental property would be an asset, but I'd be taking a risk that this would turn into a liability for me, and I don't need that now. For right now, I'll say this isn't part of my "profile" of cheap living.

  • cabin by the lake - what a great idea, but this is probably a worse investment than rental property. I won't be able to rent it out during all the times I'm not there, so I'll skip this and just rent a cabin for the few times that I'll be interested in relaxing by the lake. The verdict is in - this isn't cheap living by any measure.

  • recreational vehicle - immediately I can see that this won't likely be a form of transportation for me. It will also be used on a limited basis, yet will still require insurance, maintenance and repair. Not part of the cheap living course I have charted for myself.

  • interest in a business - now here is an opportunity to create some income. It's also a risk. I could lose my investment or wind up in an expensive lawsuit. My full time job requires my full time attention, and so I just don't see me investing in a business unless I know it well and can devote time to making certain my investment is well cared for. If I'm going to put eggs in a basket, I want to make certain I can effectively guard the basket.

So, you can see how we might temper our thinking about needs in light of the goals we have established for ourself - goals that support our overall life plan.

The key to identifying specific needs that support achievement of your goals is to remember that you can talk yourself into just about anything. Be on guard for that and resist "scope creep" where the scope of what you truly need slowly migrates out of the arena of "essentials" for cheap living and starts to become another financial burden.

Another good way to limit "scope creep" is to temper needs with the idea of return on investment. You'll notice that I used some of that thinking while analyzing the "opportunities" above. Let's take a basic look at return on investment as a way for us to determine if something fits well with our intention to engage in cheap living and efficient use of resources.

Return on Investment

The idea of "return on investment" is key to creating criteria for wise spending. It's a little bit subjective because the "return" is the value that you perceive the item provides.

Think of value in terms of equivalence with something else - in this case money. If something is equivalent to something else, then it is a good value. You should also know that things can be of lower or higher value.

To determine value and return on investment, think about the following:

  • overall cost - upfront, ongoing, incidental, recurring, etc.
  • what you get for your money - trading dollars for an item or activity
  • usefulness - now, later, over the long haul, everyday, emergency only, special occasion only
  • life span - long, short, moderate, unknown
  • versatility - one purpose, special purpose, multi-purpose
  • equivalence with other things - means of measuring worth, other than dollars

The idea of equivalence can be a bit tricky, so let's look at that for a moment to see what this means. If we are looking at the "equivalent" of a used gas powered lawn mower for $50, we might think of:

  • How long do I have to work to earn that $50?
  • How much of my time will this $50 save?
  • How much lawn service can I buy for $50?
  • What does a bicycle cost, and will I get as much enjoyment from $50 worth of bicycle as I'll save in labor with $50 worth of lawn mower?
  • How much of a dinner out does $50 buy me?
  • How much would I have to pay to change the landscape to avoid cutting grass, or at least make it something I could easily do with that old push mower in the garage?

The most important item is to think of the equivalent amount of time you would spend at work to earn the money that it costs to make the purchase or engage the services of others.

The whole idea of making a judgment of return on investment will help us appreciate the value of an item or service. If it clearly has limited value, then we will ignore it, as it will only become a distraction in our quest for cheap living. But how do we assign a value to something?

Let's look at the list of needs again (except for income) and this time let's ignore the return on investment to see how we might confuse wants, wishes and desires (typically things having low value) with the good and high value that we are aiming for - that which is essential to our well-being at a reasonable cost.

I'm going to exaggerate here to make a point. I want you to see the difference between what is essential and what we might convince ourselves is a good value. It isn't hard to blur the line between needs and wants, so bear with me as I attempt to make that line more clear in these examples of assigning too high a value to a list of needs.

  • nourishment - name brand products only, the finest of ingredients, always fresh, always organic, wild caught - not farm raised, prepared by others, "fair trade" items only, and perhaps even delivered to my location.

  • shelter - new construction, custom design, spacious, the finest of neighborhoods, tastefully decorated, top of the line materials, flawless workmanship, professional grade appliances, plenty of room for guests, and spacious grounds for privacy and outdoor recreation.

    Not exactly the cheap living you probably had in mind, is it?

  • clothing - the latest of fashions, highest quality, name brands only, finest materials, new clothing only, and replaced when showing any signs of wear or fading.

  • communications - land line, cell phone, blackberry, blue tooth, land line for each member of the family, a cell phone for each member of the family, and unlimited long distance calling on each line.

  • utilities - a completely air conditioned home, the latest in air filtration and heating, room lights, lighting for ambiance, cable TV, pay-per-view service, TiVo, and high speed Internet.

  • health - let's go for a health club, personal trainer and diet coach, membership in sports clubs and associations, lots of vitamin and mineral supplements, private physician, regular massage therapy, personal nurse, visits to medical facilities for tests and medication at the first sign of any condition that isn't perfect health, and regular appointments with experts in acupuncture.

    This doesn't sound like cheap living to me. How about you?

  • transportation - new luxury car each year, personal driver, dedicated "carriage house", one vehicle per member of the family, multi-purpose vehicles, specific purpose vehicles and of course, recreational vehicles. All with full coverage insurance, of course.

  • safety - alarm system on the home with a monthly monitoring service, alarm system on each vehicle, built-in fire extinguishing system in the home, all manner of safety gear for any activity, the latest sunglasses with superior UV protection, contractors hired for any job deemed not entirely safe, and a personal bodyguard 24 hours a day.

Some of the examples are ridiculous, I know, but you can imagine how cheap living with a focus on needs can slowly "creep" into a more lavish lifestyle, all under the guise of something that we truly need. That's why our approach to cheap living has to carefully consider value.

The key is to temper things with the idea of "return on investment". In other words, we need to determine whether what we are getting is really worth what we are paying for it.

People today are making crucial value decisions every day. Some make decisions about spending money on medicine or food because they can't afford both. Which is more valuable to you? Both affect health.

It's not always an easy decision. In many cases you'll need more information to make an informed decision. If your medication prevents a life threatening condition, then medication is more valuable than food, but you'll need both.

If you have transportation and proper clothing, and you keep yourself safe from being disabled, then you'll also be better positioned to obtain and hold down a job that will provide adequate income for your needs.

So, clothing, transportation and safety equipment can be seen as valuable "investments" that enable you to obtain and retain employment for earning income.

Communications and utilities can also be viewed as valuable, but we'll need to sort out needs from wants. Is a cell phone necessary or just a convenience? Is cable TV a necessary utility expense? Can you cut that back to basic service or cut it out completely?

I think you get the idea here - this is a balancing act to determine what we might spend money on. We need to determine the "return on investment" before we can clearly see the value.

Risk and Liability

I just want to touch on the idea of risk and liability as another way to temper spending decisions. Many things are either an asset or a liability, and sometimes they hold a little of both.

Let's look at some examples:

  • swimming pools - they enhance the value of property, but they are a liability from a safety and insurance standpoint
  • financial investments - can offer income as well as potential for loss
  • multiple vehicles - are convenient, but require maintenance, repair and insurance
  • pets - are very enjoyable, but require food and health care, and may need boarding when you go away
  • nice large homes - can be a great investment and a wonderful place to live, until you find out how much it costs to furnish the home and what the annual property taxes are

You can see by this short list that there are two sides to the coin when it comes to looking at the value of an item. What is first perceived as an asset can later turn out to be a liability. You have to carefully consider both sides before making a decision.

For cheap living over the long haul, consider both the immediate and apparent benefits of a spending decision, as well as the potential risk involved. Temper each of your decisions with a careful assessment of the immediate and longer term risks.

Sometimes achieving our goals requires that we take risk. Regardless of the potential gain, you'd be wise to stay on course with cheap living by carefully evaluating each decision so you know the benefits and potential drawbacks. The idea is to stay well away from the financial "kill zone" that risk can represent.


As we sail along on our journey of cheap living, we'll have to prioritize things every now and then. The tighter the budget, the more important prioritization becomes. Here is where we need to look at urgency.

The concept of urgency is often misunderstood and misapplied when prioritizing things. The well known "blue light special" is supposed to give you a sense of urgency to make a purchase, but it really isn't urgent at all.

A deep laceration is indeed urgent. It requires immediate care to prevent infection, additional tissue damage, loss of blood, and possible loss of life. It is way more urgent than the "blue light special".

Let's look at things that should give us a sense of urgency when it comes to spending money:

  • medication
  • nourishment
  • rent and housing payments
  • transportation
  • utilities

The above list is focused on health and well being, shelter and comfort, and transportation for employment. In my book, these rise to the top in terms of urgency as well as importance.

The way to prioritize spending is to combine the concept of return on investment with the concept of urgency. When something is valuable and urgent, then it deserves a high priority on our list of things we should be spending our money on.

You'll notice that clothing isn't on our list of urgent things when it comes to cheap living. Unless you suddenly realize that you're in the middle of a public place without a stitch of clothing, then I would suggest that clothing isn't an urgent need for someone focused on cheap living.

And, if you are able to walk to work and local merchants, then transportation would also be far less urgency for those focused on cheap living. When I first moved to California, my focus was cheap living, and I went without a car for a year, so I know that owning a vehicle isn't necessarily urgent for everyone.

Remember when it comes to urgency, it should be your well considered sense of urgency, not someone else's "blue light special" you are responding to.

Wrapping it Up

The six steps noted above are by no means an exhaustive list of criteria for wise spending decisions. I just think these are the six best concepts to start thinking about when you create your approach to cheap living and efficient use of resources.

The idea here is to understand that you have to weigh the value of things and look at things in many lights and from several perspectives before you can make a good decision.

Confidence in good decision making comes from making decisions and carefully weighing the outcome. The trick is to learn about cheap living and what works best from others, instead of stubbing your toe with your own sad experience.

I learned about sensible financial decision-making from my parents and their parents. They all lived through the Great Depression and hard times of the 1930s and 1940s. Their credo was cheap living because they had to do it in order to survive.

If we all were well practiced in frugal spending, we'd be better prepared for financial turmoil and better positioned to enhance the quality of our lives without over-stretching our financial resources. Cheap living can also be a life of abundance, but you can't expect it to occur all at once.

Put together a life plan, have reasonable goals that support your plan, then make an assessment of your needs in light of those goals. For each spending decision, determine whether it is in alignment with your goals, or whether it points you away from them and more towards debt.

This is done primarily by looking at return on investment and the risks associated with the spending. Then, prioritize your expenditures based on urgency.

Test out this approach to cheap living and efficient use of resources for small things until you get the hang of it. Then try it out on larger purchases and investments. Soon, you'll be implementing criteria for wise spending decisions just like you'd been riding this "bicycle" all your life.

You may have to overcome many bad habits and ill-founded beliefs along the way, but if you are serious about cheap living, there is a way to get there. Frugal living doesn't happen by accident, it is a deliberate way of thinking and acting.

Remember, choices have consequences, and your ability to make good frugal living decisions makes all the difference in the world. Good decision-making will give you "an edge" with respect to cheap living, and it can promote a life of quality and happiness.

Done with Cheap Living, take me back to Paying Off Debt

There certainly is a broad scope of topics here at Frugal Living Freedom. When you think about it, money permeates so very many activities in our lives, therefore, being frugal encompasses a wide range of interests, from being employed to taking a vacation, and just about everything in between. Enjoy the variety, pick up some new ideas, and start making frugality a part of your signature.

I'm a big proponent of being debt-free, and I mean entirely debt-free - no mortgage payment. It's not essential for financial freedom, but you'll love the feeling once you get there. If you didn't have a rent or mortgage payment, how much more could you do for yourself with your current level of income? I suspect plenty.

If you ever hope to see an abundance of wealth, you need to plug the hole in your boat. The wealthy don't necessarily make lots of money, instead, they know how to hang onto what they make, and make it work for them.