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Being Frugal in a High Cost of Living Area

Guest Post by Kelly from My Friend Kelly.

I’ve always found amusement in the personal finance conundrum regarding low versus high cost of living areas (COLA). Hence, “If you’re in a high COLA, move to a lower COLA to pay less on a house, taxes, groceries, etc.” And the contradicting advice, “If you need more income move to a high COLA to find more jobs. Sure you’ll pay more for gas, daycare and insurance but you’ll be making more!”

As a California resident and now home owner, I’ve found there are ways to thrive financially in an expensive region without a sixfigure salary. Here are eight:

1. Ignore the National Averages, they’ll just depress you.

Yes, gas is higher in California than probably 46 other states. The first time this occurred to me was when a friend visited from South Carolina and kept taking pictures of our gas stations. And when gas prices were nearly $5 a gallon, all the news seemed to cover was how cheap it was everywhere else.

So while it may be cheaper to gas up in Nebraska, comparing the two regions is an exercise in frustration. Instead, focus on what you can control, finding the best deal in your city. This doesn’t mean you need a 75-page price book for every item available at Wal-Mart, just focus on the few things you’ll buy over and over again. Use the internet and price-matching sites to get the best idea of merchants that consistently offer the best deal.

You can do this with gas stations, hotels, oil changes, restaurants, pretty much any product or service where you want to cut costs. This chart shows the average cost for living and housing in all 50 states and if you’d like to see how your expenses measure up regionally check out this site.

2. Work. Really, really hard.

It’s very tempting for me to leave this out of the discussion but for the last year and a half I’ve worked 2 or more jobs simultaneously. At times, that means 80-hour work weeks and 2 days off each month. If it is feasible to pick up a second job, even short term, you will likely find more opportunities in a high COLA. It is not unusual for professionals to have more than one job and as long as you don’t violate company policy, and performance standards are met, employers should understand as well.

High COLA economies typically have more job opportunities because commuters spend more time away from home and tend to rely more on convenience shopping and services. Business and industrial areas have hotels and a variety of restaurants that are supported by business traffic.

3. Hard work goes beyond reporting for duty at a workplace.

If your utility rates are high you’ll want to make your home more energy efficient and monitor your usage. If you are willing to do the work you will enjoy lower costs even in an expensive area. My home is a half-plex and the reduced square footage and shared wall help keep my costs low.

Many of my friends have young children and have made the choice to forgo a career short- or long-term. These moms and dads work very hard themselves. They’re often utilizing “free” time to seek out the best values for their family, helping relatives and friends as needed and focusing an incredible amount of time on raising amazing kids. If you consider the cost of such services if provided elsewhere, you can quickly see how a parent’s hard work for their family will bring about significant savings as well as non-monetary benefits.

4. Control major costs.

Living in a high COLA doesn’t mean giving in to sky-high expenses without thinking. Sometimes when everyone else resigns to paying a premium, smart shopping can reveal lower cost options. Housing, for example, is almost universally more expensive in high cost of living areas and can make a major dent in the most frugal budget.

The cost of my first home was nearly half the median housing cost for my state. Don’t get me wrong, it’s not a mansion and I don’t work in real estate. There are disadvantages to owning a half-plex, but the smaller mortgage is not one of them. When the standard encourages excess, look for reasonable prices and modesty. This might mean a 6-year-old car that was traded in for a new model but has plenty of miles left or a house without all the amenities we’ve come to expect.

When you’re considering your monthly budget don’t just look at where you can save with coupons. Take your top three expenses — usually housing, transportation and healthcare — and examine your options. If you trim even just 5% off major costs the impact will be significant.

5. Embrace your locale.

California is a cornucopia of agriculture. So much is produced here that locals can and should take advantage of it. There are fruit stands in many counties and the grocery stores carry local fresh produce nearly year round. Take some time to identify what your state or county produces in abundance.

In New York City, its affordable entertainment — there are restaurants, live theater and museums for every budget. On Hawaii, it’s fresh air, beautiful beaches and affordable swim accessories. Resident discounts are sometimes available and allow locals to take advantage of parks, recreation, and attractions during the slower off-season.

Check out your city website for festivals, tours, local interests and major industries. Enjoy the perks your community has to offer whether its hiking, music festivals, golf courses, boating, gardening or earning side income from the tourist trade.

6. Know What’s Cheaper

Public transportation is more readily available in densely-populated areas and more employers are increasingly likely to subsidize costs. Zipcars, trains, extensive bus route and bike trails enable thousands to get around without buying, licensing, insuring and fueling a car. Find out the options in your own area and even if you cannot forgo a car, substitute for other transportation when it is feasible.

Communities with a local university system or community college provide opportunities for low cost continuing education not to mention bring apprentices into your community. Beauty schools often give great haircuts at a reduced price so students can practice. My local community college allowed residents to drop off broken appliances for students to practice repairs. This saved a trip to the dump and provided hands-on experience. And $30 in tuition paid for a summer semester of pool access where students can swim laps for college credit.

Campuses also have a thriving used book market, lots of free boxes the week after the semester starts and a variety of clubs and facilities which may be open to non-students.  In my current town the university runs a mobile vaccination clinic staffed with vet students that travels each weekend providing low cost shots and medication under the direction of an experienced veterinarian.

High COLA economies also have an abundance of choice, whether it’s four car dealerships on one block or a page of Mexican restaurants in one zip code. This competition drives down prices. This is a little harder in a rural area when the only shop in town knows you’ll have to drive an hour to gain any significant savings.

It may not be worth your time to find the cheapest taco for date night once a month but if you’re hosting a party or buying a car, the savings could be substantial. Get several quotes for infrequent expenses like landscaping, professional cleaners, painters or large purchases like cars, appliances and computers.

My friend, Andrea, for example, recently purchased a newer car and “basically pitted 2 dealerships against each other and it worked!” She reports the car was “$3500 less than MSRP and $1000 below invoice.” For more tips check out this highly recommended site to successfully negotiate bank fees, salaries, cable costs and credit card interest rates.

7. Adjust Inflated Expectations

Cost of living is most easily described as the monetary cost of basic necessities: food, shelter, clothing. The measurement also tracks the consumer price index which includes non-essentials.  It may be more expensive to get a massage, see a movie and eat out in my city but that doesn’t mean I’m obligated to frequent those businesses.

It may be more expensive to go to the movies in your town but you can compensate by going less frequently, finding coupons, seeing movies when you visit another town, or substituting with rented movies at home.

When it comes to durable goods the internet is the great equalizer on price. Before the popularization of sites such as eBay and Amazon you were limited to the prices set by local merchants.  Now we can search to compare apples to apples and given a few days shipping time have the lowest price available. Whether that’s finding the best price on toilet paper or trucks, the internet is in many ways the best marketplace.

8. Try Something New

There will be times, no matter how hard you try or how much you save otherwise, that you cannot cut your basic living expenses. We cannot negotiate with utility providers or get lower insurance rates without risking essential coverage. You may read tips on this site and lament the fact your major grocery chain isn’t featured very often or you don’t have a local CVS.

In those times it will help to get creative and try something new.  It may result in a new grocery shopping experiment, giving up paper, or downsizing your home.  Living in a high cost of living area can be challenging and it can be rewarding. But don’t be afraid try something new.

Kelly is a 25 year old single homeowner living in Northern California. Despite a high cost of living and tough job market, Kelly has created a cozy home without acquiring debt. Now just $3,000 away from eliminating student loans (the last of consumer debt), Kelly just took her first trip abroad, decorates from the thrift store, and enjoys teaching financial awareness. Kelly blogs at My Friend Kelly.

photo credit: meironke; Ed Yourdon

31 Days to a Better Grocery Budget: Play the Drugstore Game

Missed the first posts in this series? Read them here.

Once you have your coupons all organized and you’re starting to feel comfortable using them at your grocery stores, it’s time to step it up a notch and learn how to play what I call the “Drugstore Game.”

What is the Drugstore Game?

In a nutshell, the Drugstore Game is taking advantage of the rebate programs at CVS, Rite Aid and Walgreens to get household and beauty products for pennies on the dollar — or even more than free!

How I Got Started Playing the Drugstore Game

A few years ago, my husband was in law school, we had one child, and we were living in a little basement apartment on a beans-and-rice budget. I had some extra time one day and I was online researching ways to save money.

In my searching, I landed upon a forum of people discussing this store called CVS. As I read more on this forum about people getting hundreds of dollars worth of products for free, you can bet I was a bit intrigued.

I’d never heard of CVS in my life, but I discovered that a nearby drugstore was in the process of being converted to a CVS. I read and researched everything I could find about shopping at CVS (which wasn’t a lot back then since there weren’t any blogs who had it all mapped out for you!) and then timidly walked into this in-the-process-of-being-converted-to-CVS drugstore and tried my hand at a simple scenario.

To my surprise, the deal worked! I paid a few dollars out of pocket and got those same dollars plus a few more back in Extra Care Bucks! I practically floated out of that store like I’d just struck gold.

I went home, did more research, clipped some more coupons, mapped out another scenario, and went back the next day. Once again, the deal was successful — and I used the Extra Care Bucks I’d earned on my transaction the day before to purchase my order. So this time, I spent less than $1 out of pocket and, after my coupons and Extra Care Bucks, I got back around $8.

In the Beginning, I Went a Little Overboard

It so happened that the month I discovered CVS was the October when CVS was pushing their Extra Care program really hard. And, during that month they had no limits on the Extra Care deals. Yes, seriously. Plus, some of them were good for the entire month. Since we only had one child, the CVS store was close to our house, I had lots of time on my hands and we had practically no money, I went a little overboard on the CVS deals.

In fact, in about three weeks, we’d gotten around $800 worth of groceries, household products and health and beauty products — and spent less than $20 out of pocket! Plus, I had around $120 in Extra Care Bucks to roll. It was a bit insane!

I’ve Learned That Balance is Key

Over time, I’ve learned that balance is key. You don’t have to do all the deals. But if you’re willing to put forth 30 minutes of planning and 30 minutes of shopping at at least one drug store every week, you can stock up on almost all the household and health and beauty products your family needs for almost nothing.

A One-Hour Investment Per Week Can Mean Free Health and Beauty Products for Life!

And think about it, if you got all of your toothpaste, razors, deodorant, shampoo, body wash, over-the-counter medicines and all the other health and beauty products you routinely buy for FREE, wouldn’t that significantly lower your grocery budget?

Stay tuned next Wednesday when I’ll walk you step-by-step through how to get started playing the Drugstore Game — and how to maximize your time and effort for the best return on your investment of time and money.

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Did you get your toilet paper from Staples?

I’ve been hearing conflicting reports from various people who ordered the Marcal toilet paper from Staples on Saturday. Some of you said you have gotten your order and some of you commented or emailed to say your order had been canceled. There doesn’t seem to be a whole lot of rhyme or reason as to which orders they are canceling and which they are shipping out.

However, if your order was canceled, you might consider calling customer service regarding it. Sarah called customer service and was given a $50 store credit! Here’s what she said:

I ordered Saturday the toilet paper from Staples and received confirmation on the order. Sunday, Staples sent me an e-mail saying they ran out of toilet paper and I would not receive the order or be charged. I called customer service because I received an order confirmation and they are giving me $50 store credit. I’m not sure how many people this has happened to but it seems that customer service sees the error and is correcting it if you take the take to make the phone call. -Sarah

Playing catch-up today: Expect a deluge of posts!

We’re finally back home after a whirlwind two-and-a-half days of traveling/enjoying time with extended family for my husband’s grandma’s birthday. Traveling with three young children is not necessarily synonymous with “vacation”, but it was good to be away nonetheless!

We’re jumping back into the swing of things today (after a good night’s rest!) and I’ll be playing catch-up with laundry and blogging. So expect to be bombarded with posts — since my inbox is currently stuffed with great deals, freebies and coupons to share.

Q&A Tuesday: Habitual Non-Frugal Splurges

You mention things here or there on your blog like how you’re a Pampers snob or how much you like the Pepperidge Farm cookies (which I also adore!) so I’d love to have you do a post on your habitual splurges (i.e. un-frugal habits). I think it’d be fun to hear! – Chelsea

From the comments and emails I get, I sometimes think people get the impression I’m such a tightwad, I don’t ever splurge on anything.

Quite the contrary! My husband and I save money in many areas so that we can splurge in a few areas.

In fact, we actually budget for splurges. We’ve found it’s so much more enjoyable to splurge on something when you have planned to do so and have the money allotted in your budget.

{And yes, I know that for some people, the concept of “splurging” means you throw all caution to the wind and budgets out the window. Well, we just can’t enjoy spending money unless we know we can afford something. Call us weird, but we’ve found the boundaries of a budget actually give us a lot more freedom!}

So, in addition to being a Pampers “snob” and loving Pepperidge Farm cookies (my husband buys them for me for almost every birthday and Mother’s Day since I can’t bear to pay the price tag on them as a matter of course!), I have another regular non-frugal splurge.

You might want to make sure you’re sitting down when you read this, because it’s going to seem very anti-Money Saving Mom®. In fact, I wondered if my readers would lose all faith in me if they found this vice out.

However, if you promise you won’t hold it against me, I’ll tell you about my very non-frugal habit: I get my hair highlighted and cut at a nice salon.

There, I confessed.

I know that getting my hair done is as polar opposite to frugality as it comes. I’m sure you’d expect me to cut my own hair with a hair-cutting kit I purchased at the thrift store.

For years, I actually did cut my own hair. It was free and it worked – sort of.

However, since I didn’t really know how to cut hair and wasn’t all that good at it, I spent a lot of time fussing with it as a result. I have very thick, straw-straight hair and I felt like I was constantly fighting it.

But I refused to pay the prices that salons wanted to charge because I felt like I was saving so much money doing it at home. Well, yes, I was saving a lot of money, but I was also spending a LOT of time trying to tame my mop of hair.

When Jesse was almost finished with law school, we scraped together some money and I went and got my hair done at a nicer salon. It was the first time I’d ever done something like this in my entire life and I struggled with a lot of guilt over it – even though we had budgeted for it.

When I got home, though, I had an epiphany: there are some things which are worth paying a higher price tag for, if you can afford it in your budget.

All these years I’d fought with my hair, trying to will it into submission and spending countless fruitless hours doing so. After one trip to a salon, my hair seemed like it took on a whole new personality.

It actually started working with me – not against me. All of a sudden, it was a breeze to fix and take care of. And I saved so much time: I could wash and blow dry my hair twice a week and that was pretty much it.

So from then on, we’ve made room in our budget for me to get my hair done. Yes, it’s not cheap, but it’s worth it to us. After all, fewer bad hair days means a much happier mama. And that’s worth quite a bit, isn’t it?!  🙂

What about you? What’s your regular non-frugal splurge?

How Stay-At-Home Moms Can Help Save for Retirement

Guest post by Michelle, writer for DaveRamsey.com covering topics in the Endorsed Local Provider program.

You’ve got to admit that at-home moms have special challenges when it comes to saving for retirement. Most moms who work outside the home can sign up for a 401(k), get the match and contributions are made automatically.

At-home moms must be much more deliberate. Even if your spouse participates in a workplace retirement plan, whatever you can add to the pot will make retirement that much sweeter.

But how to find the extra cash? I’m with ya, sister! Any new expense is a big deal for already tight budgets. So, let’s back up just a minute.

For your retirement savings plan to be successful, you need to be out of debt and have a solid emergency fund. That way, you have a secure foundation to build wealth that will last. And, you’ll be able to funnel more of your income into your retirement without busting the budget!

Once you’re debt-free and have that rainy day fund, you’ll have no trouble finding $100 a month for retirement. If you do that for 20 years and your investment grows at 12%, you’ll have added nearly $100,000 to your retirement fund. But, I bet you can do better than $100 a month.

Why 12%? Good question. Dave Ramsey, money-management expert—I’m a fan who’s blessed enough to work for him—uses a 12% rate of return because it is the actual, historical growth rate of the S&P 500, a commonly used indicator of stock performance. You can try different amounts and rates of return using his investing calculator.

Suggestions To Make Some Extra Cash

Obviously, couponing is a great way to save some serious money, and Money Saving Mom® can teach you everything you need to know. Track your savings and direct that money to your retirement fund.

More ways to save:

  • Adjust your spouse’s withholding – The average tax refund this year will be about $2,800 according to the IRS. That’s $233 that isn’t coming home in your spouse’s paycheck. Adjust the withholding and send the savings straight into your Roth.
  • Insurance – Insurance is necessary, but it doesn’t have to be as expensive as you think. Shop around, raise your deductibles, and combine policies to get the best deal.
  • Utilities – Energy-saving solutions are often money-saving solutions. Use a smart power strip that stops drawing electricity when appliances are turned off, raise or lower your thermostat by one degree to lower your power bill by 5%, and run the dishwasher and wash clothes only when you have a full load.
  • Phone, Internet and TV – Bundle services for a better deal, drop premium cable channels, and get rid of costly extras like internet service on your cell phone, or just negotiate a lower rate.

Part-time work is another option. As a spin on the traditional work-from-home suggestions, my list includes services that, as a work-outside-the-home mom, I would totally pay for if I had the money. I’m guessing other moms would, too.

  • Tutoring – The hairy, scary stuff—algebra, chemistry, calculus—Stop! I feel dizzy.
  • Gift packaging – Some people have the gift of making gifts look good. Wrap birthday and Christmas presents, assemble gift baskets—who knows where this could go?
  • Party planning – Got an eye for detail and a nose for bargains? Of course! You’re a mom! Party on!
  • House cleaning – I know—as if you didn’t get enough of this at home. But it is a viable way to get some extra money if you’ve got the drive to do it.

More good ideas you don’t need me for:

  • Home-based customer service agent – There are several options here. Just search online for home-based customer service companies.
  • Freelance – It’s not just for writing or graphic design. If you have skills in foreign language, software development or administrative support, you can freelance. Again, a quick internet search will turn up lots of job opportunities.
  • Sell stuff – Dave recommends this all the time for paying off debt, but it works just as well to raise extra money for your retirement fund. You can sell online or with your local consignment shop.
  • Blog – It might take some time to see any real money from blogging, but it’s certainly a viable way to bring in an extra $5,000 a year. Successful bloggers are happy to share their secrets, so there’s no shortage of guidance or inspiration.
  • Consult – If—in your life before kids—you gained some valuable and marketable skills, you can earn a significant income as a consultant. Start by checking out consultant job listings on any job listing service to see what companies are looking for.
  • Nurse on call – Licensed nurses can make great money providing phone-based triage and medical information for pharmaceutical companies, insurance companies or other medical organizations.

I can’t stress enough the importance of watching out for scams as you pursue your work-from-home career. You should not have to pay to get a job, and the hiring process should be similar to the process for a work-outside-the-home job. Be careful!

Here’s What To Do With Your Extra Money

The best way to invest for retirement is with mutual funds in a Roth IRA (or a Spousal IRA), because when you retire, you get to withdraw from it tax-free. Even income from a 401(k) is taxable when you retire, so a Roth gives you a lot more bang for your buck.

If you and your spouse file a joint tax return, you can contribute $5,000 to your own Roth IRA—even if you don’t earn an income. That $5,000 a year, earning 12%, will grow to more than $400,000 in 20 years. Keep it going for another seven years, and you’ll have $1 million—as a stay-at-home mom!

Another equally crucial component of a successful retirement plan is your dedication to continuing your savings for the long term. Retirement is for retirement, not for emergencies. That’s why you built up your emergency fund before you started investing.

It’s also important to work with a professional when you open your Roth and select your mutual funds.

The best advice I can offer is to tell you to tackle this issue with the same intensity that you’ve used to attack other financial issues for your family. One thing I know, Mom can get it done!

If you would like to learn more about retirement saving and planning, Dave Ramsey has a free service that can help you find a trustworthy investment advisor in your area. Find out more here.