2016's frugal living challenge budget here is, once again, £4,000 for the year. This is a comfortable amount and allows for every other available penny to be saved, spent or invested elsewhere. How it is done is no mystery and nobody ever died from saving too much, nor from sharing such knowledge freely, did they? So let's go...

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When it comes to budgeting, there are easier options than becoming a frugal living expert.

  • You could bury your head in the sand and just spend blindly, while worrying yourself sick about how to afford A, B or C.
  • You could make yourself ill trying to work all the hours you can, just to make ends meet.
  • You could torture yourself working in a sole-destroying job that you hate, just to pay bills and take 4 weeks off a year worrying about going back to work again.
  • You could take the even easier option of living on the wings of a prayer (while skint) while hoping that you win the lottery. It is a possibility if you afford yourself the luxury of buying a ticket, but then anything is possible. So grasp every opportunity that you can if it's absolutely free.

I use "searchlotto" to get free entries every week and this is my gratuitous referral link, in the hope of getting another free entry when a fellow frugal living expert signs up and does likewise. 

Some people spend many hours clicking, searching, doing surveys and filling up their blogs with paid advertising... this blog post is a little bit like that. It's what happens when costs need to be met but it seldom works out that way. So, please excuse the banners and links, but they are here for a reason. Do feel free to sign up and start sharing them on your own blogs, as it's basically free advertising for the companies they represent, combined with the opportunity for some freebies for us.

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Another easy option while trying to get out of debt - and one I am all too familiar with, but let's not go there - is outright gambling. (Yes, I know buying scratch cards and lottery tickets is similar, but some people don't recognise that fact.) Living in hope of the dream 100/1 shot romping home with a tonne of your money on its nose. But let's face it, how many people do you know who earn their money from racetracks who aren't actually in the employment of the track, trainers, owners or bookies? This is just another gratuitous link, but if you want to follow free tips for the fun of it, just to practise your number-crunching skills, then this is an ideal place. Other than that, just follow my horses galore blog, which helps pay to keep Frugaldom and the frugal forums, blogs and chat room operational.

National Minimum Wage in UK for an adult over 25 years of age is approximately £13,100 per year. After tax and insurance, it's a net income of about £12,000 per year, or £1,000 per month. This equates to almost £230 per week, which is a huge amount, compared to the £4,000 that I budget for annually.

Now we hear that the UK Living Wage is coming into force in April this year - a whopping great £7.20 per hour. That's £270 gross per week for each adult over the age of 25 who works a 37.5 hour week. As a trainee nurse in the 80's, I didn't even earn this in a month and back then, I thought I was on a phenomenal salary as a trainee! So you see, wealth and frugal living are not just about numbers and amounts, they are also about perception and priorities.

Please note that I do not earn National Minimum Wage - this is for budgeting examples only.

I appreciate that living in rural Scotland is about as far removed from living in the big city as it gets, but it's all relevant. If you're earning £40,000 a year while paying £25,000 a year on rent, plus work associated costs and general household bills, then your disposable income can turn out to be a fraction of your earnings - if there's anything left at all! In saying that, you can still buy a house in parts of the UK for less than £50k, so it's all about location and lifestyle. Personally, I prefer quite a simple life that's affordable and fairly stress free. Put it this way - if my household costs only £4,000 to run for 2 of us and we're happy with our chosen way of life, then the reality of it is that we need only work about 6 paid hours each per week, doing minimum wage work, to cover all our costs. Now you can see that working 75 hours between two, even on the living wage, leaves 63 hours worth of income free to do with as we please.

Yes, I am in a very fortunate situation in that I have zero debts and the house is bought and paid for, but that's why all those years of scrimping and saving were implemented. They paid off! It took hard work, a single-mindedness that many found far too extreme and complete and utter dedication to the job I decided to do - live a frugal life in pursuit of financial freedom.

Looking at the 'real' cost of living, the following are the absolute essentials, rounded to the nearest £100:

Groceries - £700
Cleaning & Toiletries - £100
Heat and light - £1,000
Essential insurance - £200
Council tax - £1,000

Food is fairly cheap in the grand scale of things - it's waste that costs the most.

The food and drink budget here averages just under £1 per person per day for everything and we don't exactly starve, as my less than perfect body mass will testify!

Based on the above, it shows how easily we could 'live' on £3,000 a year. It more than adequately shows me that it's the roof over our heads that costs us most of our working lives, once we get past the false belief that we 'need' anything else in this very materialistic world of ours. Staying warm, dry, fed, watered and healthy are our top priorities - you would think!

Many people have rent or mortgages to pay so these costs must always be factored into the equation. Interest rates can divide and conquer even the best budget, as they fluctuate over the years. Right now, they are at an all time low, which is no good whatsoever for savers looking to gain interest on their cash, but for mortgage holders the opportunity to pay off lump sums has never been better. In my time as a house-owner, I have witnessed base rates ranging from the current low of 0.5% to as high as 15%

In my opinion, you should always, always, always make hay while the sun shines.

Money is an absolute necessity no matter what way we look at it, so there are no illusions or delusions here about wanting to go down the cashless route - it simply cannot work. Self sustainability has to embrace sustaining yourself financially as well as physically, mentally and spiritually, in whichever way you believe is right for you, while also contributing to society, as a whole.

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Personally, I would love to be able to offer every single one of you regulars who read my frugal blog, participate in the frugal forums and join us in the chat room the opportunity to come and experience Frugaldom for yourselves, at no cost to you, but that remains part of the dream, as only a massive windfall would afford me that luxury. I do still enter a few free competitions now and again.

Now to get the non-essential spending prioritised... this is the pet monster of each household that feeds on disposable income. For those of you who have jobs to attend (we are fortunate in that we work from home) then the cost of having those jobs can be eye-watering, so think carefully about how much you are prepared to spend on doing the 'right' job.

And finally, for this section of our series about how to become a frugal living expert, time really is money - the less time you spend working at running the household you really want, the more money it's going to cost you to compensate for any short-comings. This is a serious lifestyle choice - it isn't simply a 'get out of debt free' card where personal solvency suddenly ends the game.

In part 3, I'll look at priorities within the non-essentials list, as society is trying to dictate that several of these 'wants' have become 'needs' when they, in fact, haven't.

NB: I have chosen only advertisers who offer free options - nothing on this page should cost anyone anything, other than myself, of course, who gets charged for commercial web services.

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