My year of living frugally

I'm approaching my one-year anniversary of living frugally. It's hard to believe it has been a year.

I changed jobs, relocated to an area with a lower cost of living and downsized from a single-family home to a one-bedroom apartment -- mainly because I was paying two housing bills, the mortgage on the unsold house plus rent on an apartment.

I was optimistic that my house in Florida would sell quickly -- yeah right. It took about 10 months to sell, and I walked away with very little in proceeds, but felt lucky to walk away at all given the plummeting housing market.

Downsized lifestyle
When I made the decision to move before selling the house, I knew I would have to downsize -- big time. I had a three-bedroom house with a two-car garage filled with boxes and stuff I had accumulated over the years. No place to park a car in there, for sure. What I didn't sell or give away, I put on the curb and someone drove by and picked it up (usually within a few hours).  I had nearly 20 years worth of newspaper clippings (everything I had ever written as a journalist) in boxes in the garage. Most of that was chucked. I was a reformed pack rat and determined not to relapse.

No cable, no problem
I explained to my teenaged daughter that we were cutting back on spending until we had sold the Florida house. That meant saving. A frequent refrain over the past year: "Turn off the lights." Also uttered often: "Don't take such long showers. That's our money going down the drain." "How much is that cereal?" "Did you look at the price before you picked it up?"

No need for a land telephone line when a cell phone would do. I can count on one hand the number of first-run movies we've gone to this past year. I got a library card soon after we moved to our new apartment and we checked out DVDs -- for free -- once a week. The hardest sacrifice was not having Internet access at home, but we went to the library, which had wireless and wired access.

I took advantage of free concerts and, since we're both outdoor types, we spent a lot of time hiking on trails at public parks in the area. When school let out for the summer, I researched some of the summer camp programs and knew right away I wouldn't spend that kind of money; some of the camps didn't even cover a full day. I flew my daughter out to my parents' house for "Grandma Camp" featuring free tuition and meals.

Really poor?
I have probably gone overboard on a few things. I think my daughter thinks we're really poor now -- but that may not be a bad thing. She says she was teased by classmates at school because she didn't wear the latest style tennis shoes or clothes from Abercrombie & Fitch.

I don't buy designer anything. If I have those items among my possessions, it's because I acquired them as gifts. My daughter's feet were growing so fast that I was glad I wasn't paying an arm and a leg for shoes that she would outgrow in a month or two.

We kept up with a Friday night dinner out tradition. And I cooked at home and ate leftovers as much as I could -- a huge savings. I know people who don't like to eat leftovers, but I don't mind at all, especially if it saves me money.

I didn't live off of credit cards and tried to keep my balance below $1,500 on my primary low-interest credit card. Once, when I needed to replace some broken roof tiles on my Florida house, I used one of those convenience checks to pay the contractor. Yes, I know very BAD, but it was a cash flow issue. It was zero percent interest for three months, but with a 3 percent fee tacked on for using the check. I paid it off within two months. It had been an unused account with a zero balance, so I didn't have to worry about the payment allocation issue: credit card issuers putting payments toward balances with lower interest first so that higher-interest balances can continue to rack up interest charges.

The payoff
Now, I have enough for a decent down payment on a modest new home and an emergency fund -- just in case. My daughter and I have been going out together looking at potential homes. Without fail, she always makes her way to whatever room in the house seems the best fit and declares: "This is my room." I have been reminding her that a new house is our payoff for sacrifices we had made over the previous year.

About a week ago, we were eating dinner at a favorite local eatery and talking about the past year.

"People can't believe we don't have cable," she says. Friends at school often ask if she has seen this or that program on the Disney channel or another cable channel. "See, you can live without cable," I tell her, echoing a phrase I've repeated over the past year. "You're still alive and living without cable."

She nods, admitting that often when we have opportunities to watch cable (at friends' or relatives' homes), we don't -- a sure sign that we've kicked the cable habit.

Needs and wants
I recalled smiling and nodding during a retirement seminar I attended at a journalism convention in Chicago in July. CNBC personal finance commentator and author Sharon Epperson told the group: "You don't need premium cable to live." Her point: Cut back where necessary and assess what you truly need.

To use an old saying, we've been living as if we had one foot in the 'po' house (that's poor house, for those who don't know). Nothing lavish. Just the basics. A lot of 'Do we really need that?' questions before buying.

I was happy that my daughter had gotten the lesson. As we sat and talked over dinner, I started into my spiel and how it's important to know the difference between needs and wants. To my happy surprise, my 13-year-old finished the thought for me: "Yeah, you may want those designer sun glasses, but you need eyeglasses to see."

My future frugalista is born!

Economic downturn
Now, with the country on the brink of what could be the worst economic slowdown since the Depression, I'm rethinking things. Should I buy a new house or wait things out and continue to rent?

What will Congress do with President Bush's $700 billion bailout plan and will that truly jump-start the economy as Treasury Secretary Hank Paulson asserts?

Surely, my year of living frugally has prepared me for making the sacrifices that may be necessary if the worst happens.

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Note: This blog was featured in the Sept. 29 Carnival of Personal finance hosted by DebtKid. Check out the carnival for the latest on credit, debt management and personal finance issues.