Going Gift Free...and not hating it

When my husband first suggested going (largely) gift free last December*, I was horrified. I adore presents; choosing them, wrapping them, giving them, getting them, unwrapping them... the whole shebang.

But after a long year, the thought of trying to pick out non-bankrupting presents that weren't largely meaningless additions to clutter and/or consumerism was overwhelming.

I agreed to try it.

We persuaded most of our immediate family to do the same.

Somewhat to my surprise, I didn't hate it.

Now WHY would you cut these delightful things out of your life?
Photo credit: JD Hancock (CC-BY 2.0)

Why Replace Gifts?

Why do we give gifts? Sometimes we do it in order to satisfy social convention, but in the best case scenario we genuinely desire to show love and appreciation for another person by giving them something that they will enjoy, and something which they wouldn't necessarily have gotten for themselves.

Now ask yourself: does my gift giving always actually end up doing this? And if so, is it the best way to do it?

Often, it seems to me, we spend a huge amount of time and a scary amount of money trying (sometimes unsuccessfully) to express our love. The stress of malls and shopping centres in the run up to Christmas can consume our attention for weeks ahead of "the big day", and being in that environment often increases our dissatisfaction with the gifts we've chosen and the lifestyle we live: being exposed to all that consumerism and advertising definitely has an impact. It's all very well to be strong willed, but companies spend millions of rand trying to make their product irresistible to people just like you and me.

And then, too often, the gift you settle on isn't quite right. You end up buying something for the sake of having something to give, but it isn't quite what the person needs or wants, and you end up feeling even more dissatisfied. 

(This isn't to say that when you find that perfect gift you shouldn't buy it. But don't buy it because you have to. Buy it "just because". We did that once. Three years on, the gift in question is still being used daily. This is a win.)

But when you are buying bulk gifts for everyone, it's unlikely that you'll hit the giver's jackpot for everyone. You'll probably have to settle in some cases, and end up back where we started. Dissatisfied.

Or they'll get you a bigger/better gift, and you feel guilty.

Or they'll get you a smaller/worse gift and you feel grumpy. And guilty for being grumpy.

Either way, you lose. Money. Time. Peace of mind. Even relationship value.

Wouldn't it be better to take that time, and a small portion of that money, and spend it with the person you love?

The gift of time?
Photo credit: Moyan Brenn (CC-BY 2.0)

Time and Effort

I am a firm believer in this principle: if you want to cut something out of your life, replace it with something better. Otherwise the gap will either hurt like the blazes, or get filled by something worse.

We replaced Christmas presents with two things: time and effort. Or, as we phrased it amongst ourselves, acts of service and family activities.

Basically, we got together and made two lists. One was of things that we would like to have done for us, or that we needed help with. My requested act of service was making a headboard for our bed. My dad wanted help painting his puppet theatre. My mom needed help with organising her digital music collection, and so on. Then we made (and diarised!) times  to do these acts of service for - and more importantly, with - each other.

Mostly, the acts of service weren't necessities - of course we would help each other with urgent and essential things at any time during the year. They were just those little niggly things that you want done. In that way, they mimicked an important quality of gifts: no-one wants nothing but socks and toothpaste for Christmas! You want things that you just want.

The second list was of family activities. Climbing Table Mountain, going to the Planetarium, having a mini carol service and baking gingerbread were some of our chosen activities. Some activities involved a smaller subset of the gifting community, others were much wider. We made a conscious effort to spend large chunks of time doing things that we wanted to do, rather than letting the whole "festive season" take over and leave us exhausted but without having actually spent quality time together.

Family outings aren't limited to the human race!
Photo credit: Boris Kasimov (CC-BY 2.0)

Saving Money vs Financial Freedom

You will notice that I haven't spoken much about saving money. That's because although that was a side-effect of our Gift Free campaign, it wasn't the main purpose. In fact, some of our acts of service and family outings actually cost some money. Gasp!

But although it wasn't about saving money as such, it was definitely about financial freedom.

Because financial freedom isn't only about being free to quit work if we want to. It is also about having our happiness independent from money. It's about satisfaction getting disconnected from consumerism and reconnected to relationship.

From this point of view, and in fact from many points of view, I am more than happy to repeat the Gift Free strategy this year, without feeling the least bit sad about those glittery packages.

What would you do to replace gifts in  your life? If you're not ready to replace them altogether, how could you reduce the impact of stress and consumerism on your gifting decisions?

To freedom!
jjdaydream




*If you're wondering why I'm talking about December/Christmas in September it is because we have had to start planning travel arrangements and family events already... so it is at the forefront of my mind. 2015 is almost over, people!

Why Budgeting can be Dangerous

Over this weekend, we went down a Youtube rabbit hole: The One Rand Family. This was a Sanlam initiative (advertisement) during the month of July which was National Savings Month. The original version was The One Rand Man, which ran during July 2014. 

The big idea was that the participants got their whole salaries for the month in the form of one rand coins, and locked away their plastic money for the duration. This not only gave them a very visual sense of what was going on with their money (stacking up piles of coin-filled plastic containers makes you aware of the size of your car repayments on a very visceral level) but also made them think twice before spending. When you've actually got to dole out your last few piles of one rands, it makes you think more carefully about whether you really need whatever it is. And when you've only got a couple of hundred rands and 9 days left in the month... well, then you really start changing your spending behaviour, at least temporarily.

Watching all of their episodes, as well as some other interviews with the participants, it seems that the biggest challenge for them was not making use of overdraft/credit card facilities when the cash flow got tight at the end of the month. 

Even for those of us who aren't quite as extreme as the One Rand Tribe, using credit as an escape route when our money has vanished is a very bad idea, short of a once off emergency. Because unless we have saved a lot already, this means that we are spending next month's money this month, with no particularly wonderful prospect of making up for it next month. Borrowing for lifestyle expenses means that a month's salary is not enough for a month's lifestyle; and it definitely won't be enough for a month's lifestyle plus debt repayments. Ask yourself: what will be different next month? The sad truth is that next month we'll have the exact same problem except probably worse: after all, your salary won't be any bigger; it still won't be enough to pay for your lifestyle. 

If you aren't careful, you'll end up getting further and further behind, unable to pay the full credit card bill every month and therefore creeping further and further into debt.  As soon as you start paying the minimum payments rather than the full balance it is scarily easy to end up in a situation where you are constantly a month or more behind: and then half your income is going to disappear into repayments that hardly even touch the capital of your debt but instead scrabble around in the foothills of a massive interest rate. 

A truly alarming number of South Africans seem to be in this predicament.

The beast of the night called DEBT makes a guest appearance...
Photo credit: GotCredit at  www.gotcredit.com (CC-BY 2.0)

This got me thinking about BUDGETING: the process of trying to fit your lifestyle into your monthly income.

Here is the usual idea behind budgeting, one to which I have unfortunately subscribed for many years: 

1. List all the expenses you can't avoid, such as rent and utilities, tax, medical insurance and so on. These are usually the ones that bounce straight out of your bank account as soon as your salary arrives. You should know what they are. You probably can't do anything much about them. The exceptions to this are debt repayments, which also come off at this stage, and which you can definitely do something about (pay them off quicker!).
2. See how much money you have left. This is usually a lot less than any of us would like. Now allocate as much as  you think you will need for other essentials like food, petrol and school fees.
3. Whatever is left is for spending however you like. This is where you "budget" for eating out, clothing, movies and holidays: all the things you'd actually like to spend your money on.
4. If by exerting colossal effort you have managed to ensure that there is some money left at the end of the month, save it.

Now, budgeting like this is definitely better than not budgeting. At least you know where your money is going, and you have a reasonable expectation of not going into credit for the essentials of life. Depending on your self-control on step 3, this process will even prevent you from going into credit on the non-essentials: yay!

BUT

BUT 

BUT

Why Budgeting is Dangerous:

Step 1 shouldn't have any debt in it whatsoever. Making debt repayment come off like a normal expense makes it feel like it's okay. It is not okay to be in debt. Half of the reason South Africans are in such a debt hole is because of the perception that debt is like an awkward uncle: not ideal to have around, but everyone has one, so it's fine. If you have a debt, then budgeting should involve Step 1, Step 2 and NOTHING ELSE until the debt is paid.

Step 2 is open to (mis)interpretation. It is too easy to make yourself believe that something is essential, when it is actually a discretionary item. Here is an example: for the first three years after we got married, we had yoghurt with our breakfast muesli every morning. Once in a while we would look at the price and wince - because yoghurt is a lot more expensive than milk - but we convinced ourselves that it was good for us, and therefore necessary. In fact, once you look at the sugar involved in most yoghurt, the "good for us" premise is unlikely. And unless you have a very specific medical situation no-one would say that the yoghurt cultures (or whatever they are) are necessary for health. The main thing healthwise for ordinary people is the calcium: and that is available much more cheaply in milk. It takes a huge amount of self-control to be totally honest with yourself about the true essentials of life, particularly when it comes to food. A similar process often happens with petrol - we use too much of it, because we drive too much. "Allowing" this expense in our budgeting can make us feel like this is an acceptable situation.

Step 3 is a disaster waiting to happen. We all know that the "I want" section is where budgets fall apart. When I was a student I budgeted to buy one soft drink per week, on my way to tutoring. This was my discretionary spend. But guess what? When I walked past the shop on other days, sometimes I brought myself a soft drink anyway, because what's one extra soft drink? Yet if I did this once per week, my discretionary spend would have doubled. Yes, this is a silly example, and probably made no difference to my financial health. But when you're earning more than a student pittance, the tendency is to repeat this pattern in an increasingly unhealthy volume. R400 becomes R600, because I've worked hard and deserve it. R300 becomes R450 because it was a special deal and worth every cent. R200 becomes R370 because I don't want to look stingy in front of my friends. Making it okay to spend some unnecessary money often opens the door to making it kind of okay to overspend - and even to use credit to fund your lavish lifestyle. 

Putting discretionary spend before savings is a major catastrophe: but it is a catastrophe that too many of us overlook in our monthly budgets. If your budgeting process looks like the one I outlined above, you are treading water. And yes, that is better than drowning. But at the very best, you are probably making a small contribution to your pension fund as required by your employer, and perhaps perhaps saving something at the end of the month. But over all, you are (hopefully) breaking even, and making little to no provision for the future. Yet you probably feel as if you are doing quite well. But if a wave comes along... you could too easily go under. News flash: your financial position may not be as awful as other people's. That doesn't mean you're in a good place.

Budgeting is the process of fitting lifestyle into cash flow, not the other way round!
Photo Credit: Tax Credits at taxcredits.net (CC-BY 2.0)

What does healthy budgeting look like?

Don't get me wrong, budgeting is a really important and helpful part of living a frugal lifestyle, fueling the independence engine and (hopefully) reaching financial independence. But we need to budget in a productive way. Here are some ideas for healthy budgeting:

1. Budget descriptively, not prescriptively. Budgeting should be a process of observing your own spending habits. This means that you can plan cash flow effectively, and work out if and when you will be able to afford those unavoidable large expenses. It also means that you can safely save your maximum without being afraid of accidentally running out of grocery money.
2. Save first. I've said this time and time again, but looking towards the future cannot be an afterthought to your month. Use your descriptive budgeting to work out how much it is possible to save, and get that amount out of your bank account ASAP, before you accidentally spend it.
3. Budget with a critical eye. When you look at your spending for last month, look out for danger areas. Perhaps when you look back you notice a gradual creep in expenditure on clothing. This enables you to cut back in those areas next month.
4. Don't budget for wants. If a "want" spending opportunity comes up, either do it or don't do it, based on careful consideration of that situation. Don't have a general rule like "up to R200 is okay for discretionary items", because the truth is that sometimes it is and sometimes it isn't. Make each choice deliberately, not automatically. (Imagine paying for it in one rand coins if you think it will help!)
5. Budget long term. Create a spreadsheet or plan for the next ten years. Where would you like to be? This helps you to keep an eye on the bigger picture, without getting too bogged down in month to month expenses.
6. Whatever you do, don't create a series of ineffectual and unrealistic budgets which you know you'll never be able to follow. This will just make you feel bad about yourself OR make you feel unhelpfully good about yourself while making no actual change to your financial health.

Overall, your budget should be a means of you (and your spouse/family) planning financial choices sensibly. It isn't a magic spell which will make all your financial problems go away. As with all financial tools, if a budget is used badly, it will have a negative impact on your financial situation. But used with caution, it can be enormously powerful.

Postscript/PostInvasion from Mr Cent(ri)frugal Force:

You may find some of these tools helpful for putting together a healthy budget:

Picking the right tool can make all the difference.
Photo Credit: Lachlan Donald (CC-BY 2.0)

• Google Sheets - an online spreadsheet tool. I like to keep my descriptive budget in the cloud so that I have access to it anytime and anywhere - it's also easy to share it with others (once I've made a more user-friendly version of my spreadsheet I'll share it on the blog).
• 22Seven - this really cool company (now owned by Old Mutual) has an app (and a web version) that pulls in all your account balances from all your online accounts that you choose to link to your 22Seven account. You'll need to do your own research and choose how comfortable you are putting your passwords into their service, but their security appears to be pretty solid. Their software tracks your spending and categorises it for you - this is a very good way to see exactly where your money is going. Personally, I prefer to micromanage things so I like my spreadsheets and accounting software (see below). But I've been making use of 22Seven as well (mainly to decide if I'd like to recommend it on the blog) and I've been pretty impressed with them. They also have a blog which is pretty good - you should go check it out. One word of caution - the service is free, but they're probably hoping that you'll make use of them to save in a Tax Free Savings Account. The signup process looks ridiculously easy and the fees are not too bad (0,68%). But you can definitely find lower fees elsewhere - this 0,68% is a fee over and above the fees paid on whatever unit trusts you'll be investing in. Fees really matter so you'll want to do your research on this one. I'll try to do a blog post about fees soon.
• You could also make use of some accounting software. Back in the day I used to make use of Microsoft Money, but I found the "category approach" for income and expenses not as helpful or powerful as a proper "account approach" that one would use in accounting. This is when I switched to gnuCash which is free and cross-platform. You can even turn off words like "debit" and "credit" and make them display something like "money in" and "money out" if that helps you ;-)
• Other than the above I haven't dabbled in any other budgeting tools, apps or services. If you have had a particularly good experience with other apps let us know in the comments!

Happy budgeting!

jjdaydream & Mr Cent(ri)frugal Force

Frugal Shopping: Grocery Edition

Grocery shopping anti-love...
Photo credit: Les Chatfield (CC-BY 2.0)

Grocery shopping: along with the dishes and the laundry, one of those depressing chores that is half necessary again by the time you've finished packing it away... and worse than the aforementioned, it requires the regular expenditure of fairly large sums of money!

Lots of us have experienced grocery shopping on a tight budget, especially near the end of the month. Lots of us have also experienced this curious phenomenon: when money is really tight, suddenly it is possible to spend so much less money at the grocery store than we previously thought possible. I thought I was buying only the bare minimum: but now it appears there is another minimum below my previous minimum - and I'm still perfectly well nourished. Magic!

Don't mess with my food supply!
Photo credit: Sodanie Chea (CC-BY 2.0)

But when frugality is a choice rather than a necessity, groceries and food are some of the most difficult and emotional things to save on. Why? Food is one of the essentials of life, so cutting down or changing diet (or even just brand) choices can feel like a drastic lifestyle change, even if the shift is relatively small. Fair enough: we have strong cave-man/cave-woman instincts to protect our source of nutrition! In addition, we often feel defensive of our food and grocery choices, because they are some of the most intimate choices that we make on a day to day basis.

However, just because our reluctance to make changes in this area is understandable does not mean we shouldn't make those changes: we need all the fuel we can get for the independence engine! We were already living fairly frugally, but in the six months after going postal on the Financial Independence Quest, we cut down our average monthly grocery bill by about R400. This may not sound like much, but remember: if we were to save that R400 per month, that is R4 800 extra to save every year. Assuming that this is sensibly invested and gains a quite achievable 7% above inflation for ten years, this could accumulate into R66 300! Maths evidence? Courtesy of the annuity formula (for regular savings invested in something that earns compound interest):

Okay, I hope you're convinced that it is worth trying to shave down your grocery bill, even by a couple of hundred rand. Here are some of the ways in which we managed to gradually improve our spending. Everyone is different, and so your strategies will be different to ours. But these might give you some ideas.

Regular Shopping Strategies

Go to the grocery store as seldom as possible. This saves petrol and time, but also means that you have to plan your purchases carefully to last till next time, and cuts down on the chances for impulse buying (mmm, that freshly baked bread smells amazing, let's just... sound familiar?).

Make a list, and stick to it. As mentioned above, impulse buying is the budget enemy. We are busy developing and trialing a Wunderlist shopping-list system, but pen and paper will do the same job.

Make a list. Stick to it. Even if there is a chocolate aisle.
Photo credit: hobvias sudoneighm (CC-BY 2.0)

Visit only the aisles necessary for your planned purchases. Although I do love wandering aimlessly through the aisles, this wastes time and increases the likelihood that I will spot something that I immediately need... but don't actually need. Like Ultramel custard on special. Stay away!

Use the reward cards... the free ones, obviously. But don't get suckered into buying things you otherwise wouldn't have. Redeem the points frequently: money saved this month is better than the same money saved next month. The money that stays in your bank account will earn interest :-)

Bulk Buying Strategies

Buy in bulk, but only when the cost per unit is genuinely better, and the increased bulk won't result in waste. Waste can be a result of increased usage (I have a huge block of cheese so I cut off a fatter slice for my sandwich) or expiration.

Buying in bulk can backfire...
Photo credit: Shlomi Fish (CC-BY 2.0)

Specials are brilliant but also dangerous. Make use of them only if you would have been buying the item anyway, and if the product won't go to waste (see above!). But do make use of them: buy lots!

Go to Makro. Yes, it's a mission, but once we've taken increased petrol consumption into account (our local Makro is further away than our local PnP) we usually save about 13%. We don't do this every five minutes, but stocking up on non-perishables and slightly-perishables once every few months is well worth it. Don't forget to follow the bulk buying guidelines though: we have been known to go a little Makro-mad and over-bulk (not a real word, but work with me here!).

Choice Strategies

Choose food that has a good cost per calorie, or, even better, cost per nutrient ratio. How much does each calorie of lentil cost, compared to each calorie of lettuce? Hint: much less. Mr Cent(ri)frugal has a spreadsheet (which he'll share with you in a future post), because he is a keen bean that way. It makes interesting reading. For example, although sunflower seeds are expensive per kilogram, they are excellent value per calorie, because you only need a few to get full. In fact, my school lunch of about 160 g of seeds, nuts and raisins, is both cheaper and more nutritious than a sandwich, though it obviously requires supplementation with vegetables and so on in the evenings. The basic principle seems obvious: choose items that are cheap, but rich in nutrients over expensive, nutritionally empty items. The detail, when you really work it out, is often surprising, and probably deserves a post of its own.

Don't be snooty. Pick and Pay or Checkers are acceptably close in quality to Woolworths for most items. The in-store brand is often indistinguishable from more well known brands. If you feel there is a real difference, actually work out exactly how much more you are paying for an equivalent product: in most cases it isn't worth it. (That being said sometimes the generic just doesn't cut it - but you first need to have really tested it before you cut it from your list.)

Keep your eyes on the goal: is the better coffee, the out-of-season fruit or the imported luxury item more important than financial freedom? Is it more important than being able to quit your job (or go part time) and spend time with your kids? Nope, I didn't think so.

Even if some previous shots have gone astray... keep your eye on the target!
Photo credit: Pete (CC-BY 2.0)

If you'd like to read more about this interesting topic, here's what Mr. [sic] Money Mustache [sic] has to say: shopping with your middle finger, and killing your $1000 grocery bill. He is the original, and always good value. (He also talks about cost per calorie if you can't wait until we get to it!)

May the grocery-force be with you!
jjdaydream