A hearty welcome to “Grandma’s Wealth Wisdom” with your neighborly hosts, Brandon and Amanda Neely. This is the only podcast that helps you take charge of your cash flow and leverage your assets, simply and sustainably, the way Grandma used to.
Amanda: Hey, I’m Amanda, and welcome to our Grandma's Wealth Wisdom, where we help you break through to a smart, stable financial future, with the tried and true wisdom Grandma used.
Brandon: Hey, I’m Brandon, and this is Episode 77, titled, “Grandma + Frugal = A Surprising Perspective on Smart Buys.” Now, we've been asked about this episode or people have been questioning us, wanting us to dive deeper into this, so we finally are doing it. We've got a very special episode for you today that could save you thousands of dollars this year and even more over your lifetime. [01:05.2]
Yes, it's true and it has already done that for us, and you don't have to clip any coupons or skimp on lattes from your favorite local—independent, of course—coffee shop to save some real dough.
Amanda: Yes. I’m especially super excited about this episode. When we think of Grandma, we might think cheap cutting coupons, cooking from scratch, all those kinds of [things], canning her own vegetables or making her own jelly, that kind of thing.
Brandon: Not that there's anything wrong with that.
Amanda: Right, totally not, but we want to provide a different perspective on what frugal can look like. First we're going to talk about the difference between frugal and cheap. Then we'll give some tangible examples of how you could save thousands just like we have, and, finally, we'll share one simple but effective question to ask whenever you're making a major purchase. [01:59.7]
Brandon: So, listen very carefully and, more importantly, remember, and try these tactics to see if they work for you, too. It's not just about listening, but implementation of them when it comes time for you to implement.
Amanda: Yeah, so before we jump into the tactics, we do have to do a little light philosophy on the difference between frugal and cheap.
Brandon: We’d venture to guess that for most of us haggling and being cheap doesn't bring joy, unless you love the back and forth of negotiations or get a major thrill out of spending as little as possible. I mean, really, none of us want to be known as a Scrooge or feel like we are Scrooge ourselves.
Amanda: Yeah, Especially Scrooge McDuck. Just kidding. You can tell we have a three-year-old or an almost-three-year-old. But Brandon does have this really big pet peeve around haggling. He wants business owners to get paid fairly, so he's hesitant to ask for discounts from small businesses. [03:12.3]
Brandon: Instead of haggling, we try some win-win scenarios. One time we saved $50 per month on rent by signing a one-and-a-half-year lease rather than just a one-year lease.
Amanda: Now, Brandon also accuses me of being cheap a lot of the time and, I’ll admit, I’m not very good at spending money. In fact, I don't like shopping very much. A fun fact about Amanda, the first time I went to Costco, I got a migraine because I felt so overwhelmed from the giganticness of that store and how many options there were.
Brandon: And, of course, Amanda is both hard to shop for and hard to get to go shopping with whenever it is time for us to go shopping. What she has taught me is that she's not being cheap, at least most of the time. She has just decided what's important to her and feels fulfilled with what she has. [04:14.2]
Amanda: Now, to me, that's the big difference between being frugal and being cheap. Cheap means you just buy the least expensive option every time or you figure out ways to not even spend money if you can get around it, and there is a place for that sometimes, but frugal means you save money on what's not important, so that you can spend it where it is important and brings you joy. You might buy extra expensive food because it's important for your health-wise and that brings you joy. You feel more alive, right? That sort of thing. Brandon, give me an example of where you're cheap and where you're frugal.
Brandon: I go cheaper on clothing. I like to buy on sale and I keep my wardrobe pretty small and then I buy just a few things that work, right? I mean, I think I look fine, but I don't need designer clothes. That's just not something that's important to me. I don’t need a Gucci bag or anything like that. [05:19.8]
Yet I do spend money on those $5 coffees from those local coffee shops that some financial people say you shouldn't have, but I like it, and on locally-brewed beer. Now, I don't do it every day, of course, but enough to have joy. I like to do it probably once a week or so and enjoy that experience, and that's another thing I like, which is experiences versus stuff.
Amanda: Yeah. An example for our son—for those of you that have kids, you'll get this—we totally bought almost entirely secondhand clothes for him so far. Yet we buy brand new shoes. [06:00.7]
We feel like he doesn't need to look fashionable or have the latest greatest baby gap year or that kind of thing, but he does need to have proper development of things like walking and running, and his feet and spine growing the way they should, so it has been important for me that he has proper footwear to aid in that development.
Brandon: Plus, he's also going to grow out of those clothes in about five minutes anyway, so what's the point in buying those expensive clothes for him if I didn't even buy it for myself and he only wears it twice?
Amanda: Not twice, but pretty much.
Brandon: Grandma's version of frugal is about being smart and knowing what's valuable to you, and cut back or go cheap on everything else and spend more where it really counts for you.
Amanda: Now, we've got some examples of where it can really account to be frugal, to know your priorities so that you save money when making purchases, and these are real-life examples for us. You'll have to try them to see if they work for you. [07:06.3]
Brandon: Let's look at cars. This is one area where we've been cheap by going without a car for 12 years. I did say that, 12 years we've been without a car. Our last car was totaled overnight while parked on the street in Chicago. Literally it was gone in an instant.
We were both taking the bus to work anyway, so we said we'd buy a car when we really needed one and we used a lot of strategies to stay carless. We used a cart for groceries. We were going shopping with our roommates. We did other car-sharing options and that was because we were in the city, and we also were able to have Amanda's mom keep her car from 2008 when she moved in with us, and so we were able to use her car. [08:07.4]
It wasn't until this year that we really needed one, so in the meantime, we saved on not having to buy a car, plus insurance, plus registration, plus license plates, plus the Chicago city stickers, plus maintenance, plus gas or all of that other crazy stuff that goes along with it. We were able to save that.
Amanda: Yeah, and we did, of course, help my mom pay for some of those things for her, but she also got senior discounts and things like that, too, which was awesome. But this year we decided it was time to buy a car and we were frugal in a few ways. We did lots of research. My brother happens to be a car expert.
Amanda: He knows everything about cars, so we had a lot of conversations with him. Here's what we ended up doing. First, we bought used. We didn't want to have the car immediately when we drove off the lot decreased thousands of dollars in value, right? And we would get a better deal, pay less for the car, buying used. [09:10.6]
We ended up finding a car that someone had leased and turned in their lease, and so it had only been that one owner, knew the full history, really great option to get that car for us. We also bought a make and model that has really good reliability and is known to last 10, sometimes even 20 years. There are some people that are still driving this make and model from the 1990s, so over 20 years, a really dependable, reliable car that can last us a long time.
We also didn't get an upgraded model with all the bells and whistles. We test drove one that had a sunroof and GPS and things like that built in, and we were like, These aren't really important for us. We'll take the model that doesn't have those things and it's a few thousand dollars less, too. [09:56.4]
Then, finally, we negotiated the interest rate. I had an offer in advance that we brought to the dealer with us and then we asked the dealer if they could beat it, and they did beat it, only after we caught them trying to slip out a higher rate by us. But I pulled out a handy-dandy interest calculator via my smartphone and I caught their, quote-unquote, “mistake” and got the lower interest rate.
Brandon: Yeah, I’m wondering if we would have just taken it at face value, if we wouldn't have noticed for a while, if you didn't actually do the math. But for those savvy listeners, you might be saying, Wait, why did they take a car loan when they could have paid cash using their whole life insurance policy and the idea of banking on themselves that they talk so much about?
Amanda: That's a really great question, Brandon? Why did we take the car loan when we had the ability to just pay cash for the car? And it was partly because the interest rate was so low. It was partly because the payment fit within our budget, and it was partly because we know we can pay it off anytime we want and yet we have the cash there to do other things if we want to as well. [11:04.8]
We're going to come back to this, too. We did ask the question and try to negotiate a discount if we paid cash and we'll share the results of that later in this episode. But I also want to make sure to let we are going to put a link in the show notes with a YouTube video that we created about when we take policy loans and when we don't. Those that want to do a deep dive into that, I’ve got a resource for you there.
Grandma always said, “Eat your vegetables. Look both ways before crossing the road. And never risk your financial future on elements of the market you can’t control.” That Grandma, always good for some tried-and-true advice. And although some of her wisdom seems to have skipped a generation, you don't have to be left behind.
Download “Grandma's Top Tips for an Independent Financial Future” absolutely free, when you visit Grandma’sWealthWisdom.com. Don't wait. Get Grandma's best tips today.
Brandon: Enough about cars. Let's think about another major purchase a lot of people make. Would you know what that big purchase might be? Probably if you've thought about it for a second, it's a home, right? [12:14.4]
It’s a big purchase, but knowing what's important to you can save you a lot of money. For example, for us having an open-concept living area where the family is together is important to us, but having it be super large wasn’t.
Amanda: In fact, I would totally live in a tiny home if I could and maybe one day I will.
Brandon: That's when I’m gone, away, far, far away. It's not going to happen anytime soon.
Amanda: For now, we have only 1,800 square feet, which by American standards is pretty small for four of us, including office areas where we work day in and day out,, but most importantly, we have this open living area which keeps us all close. [12:59.4]
Brandon: The other thing that made a big difference for us was having the 20% down payment, so that we could avoid PMI. That is private mortgage insurance. PMI can cost families hundreds or more per month.
Amanda: So, having a down payment can really add up. You can imagine if you're saving a hundred bucks per month on your mortgage payment, not having to pay that PMI. That can be a big difference, and remember, the PMI is insurance to protect the bank, giving you the mortgage, not you protect them, not you, but you pay for it.
Brandon: Which is interesting, right? The third thing we’ll share that has saved us a lot was keeping a cushion for home projects that might be needed. This works in two ways. First, we didn't use all our cash on hand for the down payment. We kept some extras for whatever might come up, right? [14:00.0]
Second, we didn't take as big of a mortgage as we were approved for us, so that the monthly payments would leave room for us to save enough for improvements, maintenance, and more things that we want to do outside of work.
Amanda: Yeah, this has already been important because the home has 80-year-old plumbing and we've needed to have work done on the plumbing three times just in the past year since we moved in.
Brandon: The third example we want to share is about paying insurance premiums for homeowners insurance and car insurance. The first thing we tried to do is pay annually. This works really well for our homeowners insurance because we pay less paying annually than monthly. If we were to pay monthly, that company we use has a service of $5 per month, so in one year, we save $60. That's quite a few lattes right there. [15:02.7]
Amanda: It's one per month, if you're spending $5 on a latte like you do. Now, when we purchased a car, I went to the same company as our homeowner's insurance to get that bundle discount. I also asked if I got a discount by paying annually, and sure enough, I would save the same 60 bucks, $5 per month by paying annually.
Then the guy told me that I could actually save $9 per month if I set up a monthly auto-pay from a bank account. I pulled out a handy-dandy calculator. I did some really quick math while I was on the phone with a guy helping me get the auto insurance set up, and I realized that if I paid with a credit card, the credit card company would give me 1.5% cash back. I could still pay annually, save that $5 per month, or I will compare that with the saving $9 per month to see if that was more. The difference, that $4, was more than 1.5% of the bill and it turned out that the $4 extra savings was more than the 1.5% percent that I would get back from my credit card company, so I set up the auto pay from my bank account. [16:12.6]
Then I realized after I did that, that it works for our utilities, too. A bunch of our utilities give us discounts for doing auto pay from our bank, rather than paying on the credit card or sending in a check every month. Because it's doing it automatically, we get that discount.
Brandon: I think one of the things that I find really powerful here is what we tell our clients and individuals is, which is have you ever done the math on that? And what you just did is you've done the math, and so as you're buying purchases, don't just assume the salesperson, any of those people have done the math. Maybe they have done the math for you, but check their math, too, and see if it works for you and always do the math on it yourself. [17:02.8]
Here's another side note. Getting credit card points or cash back often seems like a smart frugal idea. The grocery store is already increasing the cost of groceries enough to cover credit card processing, so you're paying for it anyway, even if you use a debit card or cash, but there are times when paying from a bank account can get you a pretty good discount.
Amanda: Yeah, like what we learned for the auto insurance, what they've been doing for utilities. Basically, this whole section here with these examples is getting creative when you buy stuff, so that you can save money even when you're buying things, just in how you purchase them.
We could tell a story about how we decided. A lot of people, instead of buying a home, they just want to spend their money traveling the world, right, and there are ways to save money doing that. One thing we did before was buy airline tickets six months in advance and we flew out on Christmas day because we could. I mean, it worked for us and that doesn't work for a lot of people, but we paid less because we were willing to fly on a holiday like that rather than the day before Christmas or something, so it's kind of being intentional and thinking about those purchases. [18:21.5]
The third point we want to share is to go along with those examples. It’s the No. 1 question that we ask every time we make a major purchase, and it has saved us a lot of money in 2020 and we plan to keep using it over and over again for the rest of our lives.
Here's the question. Drum roll, please. “What if I paid cash?” Five simple words. What if I paid cash?
Brandon: And we used this question a lot this year, for the plumbing issues and more, and saved a lot over multiple projects. We used this question for the new windows and saved 300 bucks, right? We've used it a couple of times for different things and it has worked. [19:12.6]
Amanda: Yeah, that 300 bucks and for five words, that's about 60 bucks a word. That's a really great sentence there.
Amanda: This is part of why we talked about that cushion before when you're making a home purchase, right? Because we have that cushion, we are able to use those words, “What if I paid cash?” so it’s only going to work if you have a cushion, which means you have to have a bigger than $1,000 emergency fund. It means you can't have all your money tied up in the stock market or a qualified retirement account, like a 401(k). You have to have liquid available cash in amounts big enough to cover major purchases.
Brandon: Now, it doesn’t always work. One plumbing company didn't give a discount, so we used a card and got one and a half cash back from the credit card company, right? The car dealer said it doesn't work like that anymore to offer, to pay cash for a price reduction, so we negotiated for a lower interest rate instead. [20:14.8]
Amanda: Yeah. The moral of the story is it doesn't hurt to ask and it's worth it to look for ways to save on the buy. You don't even have the option to say, What if I pay cash? if you don't have any cash available.
Brandon: Yeah, right, exactly. So, there you have it. How Grandma, aka us, does frugal. Focus on what's important and it brings you joy. Think about all those major purchases and how the cost savings there might have a bigger impact for you than skipping that latte from the local coffee shop, not the other places.
Amanda: The independent, yeah.
Brandon: Yeah, and keep enough cash that you have the ability to ask for a cash discount.
Amanda: What else would you add? Those are some of our ideas. We'd love to hear yours. Send us an email at Hello@GrandmasWealthWisdom.com. Send us your gold tips and tricks. Who knows, we might share them in a future episode. [21:14.6]
Be sure to subscribe so that you're ready for our next episode, where we'll chat about how to never be poor. We've got some clever ways to make sure you never have to worry about living in poverty, and if you're in business for yourself, these tactics will work even better.
Brandon: Until next time, keep building your wealth simply and sustainably, so you can break through to a smart, stable, financial future. The topics presented in this podcast are for general information only and not for the purpose of providing legal, accounting or investment advice. On such matters, please consult a professional who knows your specific situation. [21:52.0]
Amanda: Oh, and bonus tip for everybody that listened to the end here. We talked about saving money on your insurance based on how you pay annually, auto-draft, that kind of thing. A great way to also save on your insurance is to make sure you've got the right coverage that you have the right amounts in terms of your protection and, if anything, if you've got that liquid cash available, you could even increase your deductible, which will bring down your payment as well. Little bonus tip. Thanks so much for listening to the end. [22:23.0]
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