Ultimate Cheapskate - can you do it?

Nearly everyone has met the ultimate cheapskate in their life - someone who gets along in life by spending next to nothing for things. They have a decided focus on frugal living and they aren't going to part with a dime unless they have to.

The reality is that no one is the ultimate when it comes to frugality, but we all know someone who could be in the running if a contest were held.

So how can it be done? Could we do much the same thing?

Since many of us wonder how to drastically reduce expenses to build wealth and have disposable income - without debt - I'm going to discuss a hypothetical profile of the ultimate cheapskate to give us ideas about "living on a dime."

What I want to show is there isn't just one pattern of frugality that will cut costs. It's a combination of many things woven into a lifestyle that will help make this happen for you.

The profile of the ultimate cheapskate that I'm going to paint is really a combination of many people I've met in life, and a bit of myself, so you can see a range of elements to pick from if you're trying to fashion a similar sort of life for yourself.

One of the keys to success is to set our expectations high. If we think we can save a dollar, let's set our sights on saving two. If we think we can do something for $5, let's see how we might be able to do it for nothing at all.

Expectations for Expenses

Let's look at several of the large and recurring expenses in life to see how the ultimate cheapskate might address these.

Housing - our cheapskate friend doesn't own a home, he simply shares a rental with two other guys. In doing so, his costs go way down, and he has built-in help and companionship.

He chose wisely and selected a location that is close to work, shopping and public transportation.

Shopping - the basics in life are often in abundance in our homes. Our friend recognizes this, so he doesn't do much in the way of shopping. To him, it's not an indoor sport, but rather something that is done when necessary.

If retail establishments are looking for money from our ultimate cheapskate, they're going to be waiting a long while. Our ultimate cheapskate isn't much on discretionary spending.

Transportation - a bicycle and a good pair of walking shoes is all our friend needs in the form of transportation. He is close enough to work and public transportation that even in extreme weather conditions he is able to get around with a modest investment of time and preparation.

Food - One of the largest daily expenses is food, yet it doesn't have to be that way. Our friend recognizes that high food costs are largely attributable to eating out and eating too much. So, our ultimate cheapskate shops for food at the grocery store and prepares all of his own meals.

He also brings along his own bottle of water or thermos filled with a hot beverage, instead of buying water by the bottle or coffee by the cup.

Entertainment - is one of the discretionary expenses in life, and it's entirely controllable. Our ultimate cheapskate understands that entertainment is largely a diversion of our time and interests, so he simply diverts much of his free time with interest in his side business. In this way, free time is spent creating additional sources of revenue.

Our friend also finds additional sources of entertainment with friends and associates in the community who enjoy playing board games, card games and holding pot luck dinner parties. He also makes use of the parks and open spaces for relaxation and exercise, and uses the library and Internet for additional sources of entertainment.

Insurance - is but a minor expense for our friend. He has a renter's insurance policy that covers his limited possessions, but he has no need for car or life insurance. His source of regular employment provides health insurance coverage, and accident insurance as well.

Taxes - the tax man comes to get all of us, but only the oddballs in life can dodge the tax man effectively. Our ultimate cheapskate friend is an oddball, so he enjoys much of the benefit of taxes, but pays very little in tax.

With no real property to his name, he pays no real estate taxes. Owning no motor vehicle, he pays no annual vehicle registration or fuel taxes. His residence is in a tax free state, so he pays no state income tax. His only tax burdens are sales tax and income tax, and with his side business, much of his income becomes business investments and business expenses, so there isn't much left over to tax.

Attitude About Spending

In addition to having minimal expenses, our ultimate cheapskate has an attitude about spending and saving. Again, it's an expectation, much like expenses.

Our friend believes that the more he saves, the more he should save, and the less he spends, the less he should spend. It's this mantra about spending and saving that allows him to pinch pennies and build up wealth, while carrying on what would appear to be a normal life.

So, what is he saving for? He might not even know, but he knows that one day he'll see a home or a business or some other opportunity for investment, and when he does, he'll have the means to make the investment. Our ultimate cheapskate knows that the future is coming, and he's going to be financially prepared for it.

The consumer motto our friend lives by is to purchase quality products and take good care of them. In this way, a single purchase can last a lifetime. Products that are well designed and created with care from quality materials will likely be products that seldom require replacement.

Fewer replacements means that our friend isn't a consumer providing wealth to others so much as he is an investor in himself and his life. He takes the long view and makes wise purchases that won't need to be repeated.

What about mad money and having some fun? He does that on occasion, but it isn't what he lives for. He's living for his future. He knows it's coming and he wants to be ready when he sees his opportunity.

The Bottom Line

Although this spartan approach to life might not fit your individual interests, it at least provides a plausible approach to "living on a dime" that could work for those of us who have the mental toughness and foresight to stick it out until we formulate something more desirable.

Our friend equates nearly everything to money, so he doesn't have difficulty with frugal living. In fact, he excels in it because he has made it a focal point of his life. He is delaying gratification so he can have something much more worthwhile in the future.

Our ultimate cheapskate friend isn't real. He isn't anyone that I know, but he could be. The big difference between him and others is his attitude and actions - they're all very deliberate in nature.

Could you live such a life, under the tax radar, low on expenses and high on personal investment? Like a friend of mine says, saving money isn't just for the wealthy, it's why they're wealthy!

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