Personal Finance

5 Money Saving Lessons from America’s Cheapest Family

Recently, MattMoneyMan (MMM) had the pleasure of talking to Steve Economides (SE), the head of the Economides family, which is well-known for its budgeting and money saving tips. The Economides have been teaching Americans and people all around the world their brand of frugality for more than a decade. They’ve appeared on widely watched shows like Good Morning America, 20/20, The Today Show, and many more. They’ve been featured on magazines like Good Housekeeping, Real Simple and People.  They’re the authors of 3 bestselling books on personal finance.  Their website www.moneysmartfamily.com is a wealth of money saving tips and advice. Nowadays, they’ve renamed themselves “Money Smart Family.”  Personally, I prefer “America’s Cheapest Family”; being cheap to them was a badge of honor.

To preview, here are the five lessons Steve offered:

  1. Come up with a budget and stick to it; don’t overspend

  2. Plan your meals around sale items; shop at smaller markets; get WalMart to price match

  3. Be persistent in bargain hunting

  4. Stop paying interest; pay off your mortgage and credit cards as soon as possible

  5. Help you kids be responsible for their own spending by creating a system.

Below is a summary of our conversation:

MMM: So how did your family get its start in the frugal lifestyle?  Were you both frugal prior to getting married or it started as a necessity as you tried to raise a family?

SE: Annette and I were married in 1982. I was 25 years old and a college graduate, Annette was 20 and had never lived away from home. I was earning $6.50/hr and we were trying to live on one income. Annette wanted to stay home to raise the family and I went ahead being the breadwinner, so to speak. Even though we had limited funds, we were able to save $2k within two or three months by creating a money management system that we use to this day.  Within three years we had saved enough to put 15% down on a four bedroom, bank repo home.

We came up with this envelope system whereby we allotted certain amounts for different expenses (groceries, transportation, etc). If we had budgeted $100 for groceries for a month, that’s all we would spend and no more. This envelope system prevented us from overspending. We bought our first house for $53k and paid it off in 9 years. We sold it and bought another one for $220 k and paid that off in 15 years. During that whole time, my average annual income was only $40k. We only spent money that we had allocated in specific budget categories and didn’t use credit cards. Because we soon had so much cash in our house, the envelopes eventually turned into the America’s Cheapest Family budget system. We put the money in the bank and tracked it on individual account sheets – it takes about 2 hours twice a month to manage our money.

MMM: For you, this lifestyle is a family effort. There’s that great video on your website of you and wife team tagging in the grocery store with the walkie talkies.  For a single parent with a full time job and daddy/mommy duties, how can they adopt some of your advice without going 24/7 on money saving work?

SE: I don’t think it’s much harder for a single person to execute our money saving methods. In some ways, it’s easier for a single parent because there is one less person to feed and deal with. The key is to plan ahead. Just spend 20 minutes each week to plan a meal menu based on what’s on sale. We only spend $350/month to feed a family of seven. The average American spends $200/month per person on groceries.  And we aren’t eating rice and beans every day. We have simple meals, but we also have lasagna, lamb, and pork chops. We are just smart at getting these foods at a good price.

Think of going to ethnic stores (e.g. Hispanic) where produce tends to be cheaper because they purchase grade b instead of grade a produce. Using the Hispanic store ads and others in our area we make a list of all of the lowest prices and then go to Walmart and get them to price match, which it’s happy to do.  We’ve gotten great deals this way, including six avocados for only $1 recently.

We love eating home cooked meals, as a result, we don’t eat out at restaurants often at all, maybe once or twice each month.

MMM: A lot of your website focuses on food shopping, prepping, and saving on household expenses.  What 3 things can a person do to make the most impact on saving money?

SE:  Here are my 3 best tips:

  1. Be patient. Impulsiveness sinks the ship, which advertisers love. You can wait a few months to buy iPhone 6 and find a sale, or wait until the next generation comes out and get the “old” version at a HUGE discount.
  2. Learn to research. Comparison shopping is marketers’ biggest nightmare. Knowledge means you have negotiating power.
  3. Be Persistent.  Don’t just walk into an Apple store and buy the latest gadget; keep looking on eBay or Craigslist. This applies to everything.  Recently we bought a van with only 20k miles for $8k.  There’s always someone desperate to get rid of what you are looking for.

MMM:  Budgeting is only one aspect of personal finance and “getting ahead.”  Your family has the less spend niche.  Do you have advice for investing?  Entrepreneurship?  The fact that you’ve published books and have a website means you’re entrepreneurial and taking frugal living to the masses. It is of course an alternative income stream for you.

SE:  Invest in what you know.  We invest in mutual funds in our IRA.  One of the most underrated “investment” where you can earn 3-18% guaranteed is paying off your mortgage and any other debt that you have. We saved $70k in interest on our first house and $200k on the second house. Likewise, pay off those credit cards with 18% interest before investing in the stock market where you’ll likely earn 7-8% / year at best. Stop paying interest. It’s a guaranteed return and it’s no risk.  It’s something people need to get used to doing. Our kids went to college without incurring debt.

Related: Learn how others are cutting debt and retiring early:  http://www.tools4retirement-blog.com/

We have our website MoneySmartFamily.com, but have some other projects including creating a video series targeting bloggers and writers; a video series for low and mid income families that teach them how to buy a house and how to get out of debt; and also partnering with a university to do some seminars, and student loan crisis. We also have more than 90 money-saving videos on YouTube. Our channel has more than 1.5 million views.  Check out our Youtube channel below:

 

MMM:  What advice have you given to your kids on this lifestyle?

SE:  Growing up, our kids bought their own clothes at thrift and consignment stores with money they earned from us. They had to learn to use their allowance or earnings wisely. Having a limit taught them the important lesson of prioritizing and learning to make choices. If they bought more clothes, they couldn’t go to a movie. They learned to budget at a young age. One of my daughters has become a connoisseur of fashion but gets them at good prices.  One of our kids recently bought a Toyota Takoma truck for $11,500, drove it for three years and then sold it for $12,000! The lessons they learned as kids have served them well.

MMM:  You talked about raising a family and living well on an annual budget of $30k or so.  Would you be willing to share the budget (breakdown of costs)?  It almost seems too good to be true. I’m sure people would love to learn from you and see how you do it.

SE:  Instead of going line by line, I’ll give you more examples of how we save money. We save in advance for everything, including vacation. On one vacation to Washington D.C., we stayed at a hotel that included breakfast. We got one of those Entertainment books that have 2 for 1 meals and we’d find a restaurant that offered those deals for lunch. For dinner, we did something special. When we first arrived, we picked up a used crock pot from a thrift store. Before we leave the hotel for the day, we’d put some soup or stew and they would be piping hot when we returned, which we’d have for dinner. By doing that, we don’t pay extra for breakfast. We got a good discount for lunch.  Then we had a nice warm dinner at a very low price.  And in DC, all the museums and attractions are free.

MMM:  Thanks Steve for all your advice.  Again, there’s a wealth of advice at www.moneysmartfamily.com.

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