Tips for surviving the downturn or how to live (well) like a grad student
Posted by shannonclark on October 12, 2008
I quit a very well paying job to start my first company in the early winter of 2000 just a month of two before the first (i.e. Web 1.0) bubble burst. Initially I was able to pay myself a reasonable (if lower than I had been earning previously) salary, but having not raised further rounds I cut then nearly eliminated my own salary. While I have earned money in the years since, it has not be large sums. Instead I have adapted a range of techniques to keep my cost of living quite low – and thus allow my resources to be mostly focused on developing my businesses. Many, perhaps all, of these suggestions may help you during the coming downturn.
Basic suggestions for living (well) like a grad student
- Eliminate as many regular monthly expenses as possible, especially those that also create stress. In my case the biggest monthly net gain came when in 2004 I sold my car and did not replace it. Immediately I dropped from my monthly budget nearly $1000 in monthly costs (car payment, cost of a monthly parking space, gas back when it was still <$2/gallon, oil changes, occasional parking tickets, car repairs, new tires etc). I reduced stress by avoiding having to find parking spaces, dealing with rush hour traffic etc. To make this work I did have the advantage of choosing an office (when I had one) which was in walking distance of my home. I also added to my monthly budget a monthly public transit pass, took taxis as needed and occasionally rented a car or used a carshare service. When I moved to San Francisco a few years ago, I did not move my TV, which meant that I also do not have a monthly cable or satellite bill. Again, instead I buy the occasional series via iTunes, watch other series online (with minimal ads), or occasionaly rent a DVD (Netflix might be another option)
- Do use services which save you considerable time for a reasonable price. Two main services I would not give up are a business mailbox which is a few blocks from my home and which means I never have to be home to pick up packages (giving me flexibility and security, for $100/year it is money very well spent). And the second is I let the cleaners across the street from me do my laundry – for $1/lb they wash, sort and fold my laundry and I can pick it up usually the next day. The cost is not much more than it would be for me to use a laundromat (which since my apartment does not have a laundry machine would be my only option). Even if I did have a laundry machine, this way all my laundry gets done at once – instead of me having to waste many, many hours on sorting, loads one after the other, drying and then folding, not to mention the energy costs plus the costs of the laundry machine itself.
- Cook at home. I am a serious cook and foodie, so I do like to eat out (a bit more on how I make that work on a budget below) but I also cook an increasing number of my meals at home. One very valuable thing I suggest it make sure you always have enough food options at home that in a pinch you could feed yourself for at least a week, ideally a few weeks, without needing to do much if any shopping. A few boxes of instant oatmeal, pasta, sauces, tortillas and beans etc all mean you have the comfort of knowing you have, in a pinch, food to eat (and then either drink water or make tea). But most weeks I shop for fresh foods, usually from local farmers markets.So how do I make that work on a budget?First, I shop for quality over quantity and focus on a few, highly seasonal items. What is most seasonal is usually also what is in the greatest abundance (and thus usually even at a higher end farmers market reasonably priced).
Second, I look for bargains and usually shop without a specific menu in mind. At the Ferry Building here in San Francisco, for example, one of the amazing local, organic, free range butchers often has some specials. Recently I bought nearly 2lbs of amazing free range steaks, each vacuum sealed, for <$10, more than enough for two great meals. When I get to the farmers market towards closing the farmers often offer deep discounts to sell produce that would otherwise go unused, if I expect to be able to cook it, I try to take them up on the offers.
Third, something I don’t do much currently but could let you get even better deals (and more on this point below) is to shop with others and share your purchases. Frog Hollow Farms is a phenomenal local organic orchard, all of their fruit is usually $4/lb (so pricey but very tasty), however they will sell a 10+lb case for a flat rate that is much lower (I think $25/case) if you can share that case with even one or two friends, it is a great bargain. Many local farms also have CSA (Community Supported Agriculture) which offers a wide selection of seasonal produce, often delivered right to your door (i.e. to your mailbox where someone will sign for it for you) every week or every other week. For a single person however this can be a bit much, but shared with a few others it could be a great deal.
But the key is to be flexible in what you eat and cook as well as to emphasize vegetables and relatively limited amounts of protein. I’m an omnivore but I try to eat a diet rich in vegetables and fruits, in turn this is both cheaper and healthier.
A final food tip, splurge on spices and oils, great spices and olive oils will make a huge difference in the quality of your food and the cost of amazing spices is actually not much more than the random and poor spices found in most stores. I buy nearly all of my spices from The Spice House which delivers anywhere in the country.
- Share. Living with others will be cheaper per person than living alone (I live alone, having a girlfriend who shared my space would cut my costs by a lot). Instead of every unit in your apartment building having a wifi connnection, consider pooling resources with your neighbors, buying a single very fast connection and splitting the costs (assuming the wifi will reach everyone). Of course this has some risk – you have to trust your neighbors won’t abuse the network. Go in with some friends on getting a CostCo (or Sams Club if you prefer, though I think CostCo is the supperior company) and then take advantage of bulk purchases of staples – split amongst your friends. Better still, avoid as much as you can the purchase of new non-perishables (electronics, furniture, even clothing) and instead by from resale shops, local merchants, off Craigslist etc. But you will need toilet paper and why not buy it in bulk, take only one car trip, and share the time & expenses with others.
- Do not cut corners on the tools you need for your job or what you truly need for your own sanity. For me this means that I have a serious laptop and decent desktop computer and an iPhone – without both I would be severely restricting my ability to do my job (and if you have been reading my blog for long, or my twitter feeds, even having spent a lot of money on my laptop doesn’t mean it is ideal for the job, I anticipate replacing it in the next year). For my own sanity I do indulge my interest in books. I have and buy a lot of books – mostly used, but new books from authors I really like (or as is more often the case these days also know personally). For me reading (and reading widely) keeps me sane and focused. For others this indulgance might be your favorite music (though think seriously about a nearly “all you can eat” plan such as Rhapsody in that case) and/or live concerts. For others it might be your gym membership etc. Don’t go overboard, do look for bargains when you can find them (and when taking them doesn’t negate your values). For me, though I do like to save money when I can, I don’t mind paying nearly full price for books from my favorite bookstore by the authors I really love and support. However I do buy many other books from used bookstores (and do buy used copies from my favorite bookstore when they have one of a book I’m looking for) when I care more about the content of the book than supporting that author (i.e. business books not by friends of mine).
Underlying all of my suggestions is an assumption that you have a good general grasp of everything which you spend money on each year, each month, and most weeks. People may disagree with my final suggestion and there are certainly valid arguments against it, for example if you are in the rare category of people who take good advantage of credit card points programs, but I suggest living a mostly cash based life. To do this I withdraw cash from an ATM only a few times each month and then use that cash for almost all of my costs of living (other than rent, phone, etc). My food, transportation, personal purchases, cleaning, entertainment etc all for the most part come out of the cash I withdraw. This allows me to have a lot of personal flexibility but also emphasizes relatively low cost but high impact rewards to myself – great coffee or a good book – but makes me slower to spend lots on a meal or larger purchases. Lots of small credit card purchases can very rapidly add up, incur interest charges, but more critically inure you from the full impact of your choices by delaying that impact until the next billing cycle.
A mostly cash lifestyle, in contrast, gives you simple measures of how rapidly you are spending money. Your wallet shrinks and you find yourself seeking out your bank’s ATMs with greater frequency.
I always use my own bank’s ATM. Not just because I hate on principle the idea of paying any fees to get my own money but because by forcing myself to make that extra effort I raise the pain threshold for getting out cash. I also generally always withdraw the same amount of money with each visit, this allows me to have a rough gauge of how much I am spending in a month by thinking back to how often I went to ATMs or looking at the receipts in my wallet. I try to visit the ATM fewer times a month than there are weeks in that month, the weeks when I have to visit the ATM once during the week and again over the weekend are generally times I am spending more money than I really should be spending.
I hope these tips help you, please add other suggestions in the comments.