The 'Frugalista' Guide To Balancing Budgets

With the economy still in a slump, many people are resolving to start 2012 by getting their budgets in order. To break down the basics, host Michel Martin speaks with Natalie McNeal, author of The Frugalista Files. McNeal dug herself out of a $20 thousand debt in just two years.

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MICHEL MARTIN, HOST:

We're turning back to the economy now. Now to matters of personal finance. It's a new year and that's a time when many people make resolutions and lay out goals, but with the economy still struggling, a lot of people are struggling to keep their budgets in order.

Here to help us out is Natalie McNeal. She is the author of the book, "The Frugalista Files," that chronicles her journey from spending money on all kinds of stuff to setting a strict budget and getting out of $20,000 in debt in just two years.

Welcome to the program and Happy New Year to you.

NATALIE MCNEAL: Happy New Year. Thanks for having me, Michel.

MARTIN: And, Natalie, you're very focused, both in your blog and in your book, on single divas like yourself.

MCNEAL: Yeah.

MARTIN: We're going to talk to parents later about setting limits with their kids, so I just want to emphasize, this is not your particular thing. So when somebody says, I need to get my finances together, that's the kind of thing many people say to themselves. It can sound like such a big task. Do you have a good tip for getting started, kind of breaking it down into something smaller and doable?

MCNEAL: Absolutely. Because people get overwhelmed with budgets and think they have to do a lot of spreadsheets. All you have to do at the beginning of the year - add up all of your debts, your credit card debts, student loans, even if they're forbearance or deferred. Add up all of your debts. You know, your credit card balances, interest and then also add up all your expenses in terms of rent, mortgage, dry cleaning bills. And then add up your after-tax income and if you find out that you have more expenses and debts than you have money coming in, then you really have to make some serious changes with your budget and look at places to cut back, as well as ways you can earn more money to give your bank account a rest.

MARTIN: Now, you would say that - you said that you got out of $20,000 in debt in just two years. A lot of people might say, look, my hours have been cut at work. I just can't do that.

MCNEAL: Oh, absolutely. But you have to look at it. If your hours have been cut, that means you have more time to look for freelance work or other opportunities or to pursue things that you really enjoy or invest in yourself. The frugalista plan is to cut back expenses, earn more cash, invest in yourself and take a risk.

So if that means that you have to take some classes that'll make you more invaluable to your employer or other employers, then use that time to do that right now. So just because they're cutting back your hours doesn't have to mean it's a bad thing. It's a way for you to actually be able to earn more money because you have more free time.

MARTIN: You know, you talk about the need to pamper your finances just the way you pamper anything else that you care about in life. And you say that you should be spending at least an hour a week and preferably three on pampering your finances. What do you mean by that?

MCNEAL: Absolutely. Because it's a lifestyle. You know, when you think about personal finance as highly personal, you can't get to a great retirement and great investments if you're spending all your money getting your hair done, getting your mani-pedis done and you don't have enough income to support that lifestyle. So while you're going out taking care of yourself, you have to take care of your bank account because it will take care of you in the long term.

So it's all interconnected and I always say that. So if that means that you don't have a stressed out account, that you're - you know, being a promiscuous spender and always taking out money and you have a nice, fat, cushy banking account, that's just as good as, you know, getting a massage at the parlor. Massage everything.

MARTIN: You know, one of the things - that's right. Massage it all. One of the things you did when you were getting your finances in order was to institute a no-buy month and I will note that this is one of the things that I think a number of religious institutions have instituted for their congregants at different points of year. They'll say things like, go on a financial fast instead of a food fast or along with a food fast.

What did you do and how did you go about doing it?

MCNEAL: I mean, I did the no-buy month. It's how I became a frugalista. It changed my life. I do it in February every year and I go a month without getting my hair done, nails done. I don't dine out. I don't do any discretionary spending, including I don't pay to go to the movies. You know, I don't go to vending machines, even 25 cents for some gum at a gumball machine is not acceptable.

I pay my bills. You know, if I have, like, a car issue because I need transportation for my job, of course, I'll get that handled, but nothing discretionary. But, during that time, you learn to look at your bank account and everyone's like, oh, I'm paycheck to paycheck. A lot of people are like that. You realize that your bank account stabilizes and that's why I say pamper your finances. Learn what it's like to have a bank account that's not always dwindling.

And after doing that, it's like a light bulb goes up and your survivor instincts kick in and when you're always saying, oh, I don't have any clothes to wear, you find clothes in your closet. You get really creative. Or when you're always telling yourself, oh, I can't do my hair, you'll find a new style and even if it means you wear your hair back in a bun and everyone at work is like, oh, wow. You look really nice. I see your eyes. You just try different things, so all these things that happened to me when I did no-buy month.

And you have to have fun and, you know, "The Frugalista Plan" is also living fabulous, the frugal side of fabulous. So find some free concerts in town. You know, rent a DVD from the library. You know, not even renting. You know, borrow a DVD from the library. Find some things that you can do that are low cost - I mean, no cost - during that month and, you know, you'll see that - OK. If I can do this for, you know, 28, 29 days in February, what else can I conquer for the rest of the year?

MARTIN: Natalie, you know, it did not go without notice that you picked the shortest month in the year. OK?

MCNEAL: It's close to January, too. That's why. That's what I tell people. Yeah. I mean - yeah. I mean, in the beginning, it's fun because, you know, we blog about it; it's a real community. You know, get online and do it so you don't have to be alone and you can share tips, but - yeah. Toward the 28th, 29th day, it's a little bit tough, but it's doable. I still have all my fingers and toes and I've done it, like, over three times.

MARTIN: Now, do you find that telling people you're doing this helps you to keep...

MCNEAL: Oh, absolutely.

MARTIN: ...to keep at it?

MCNEAL: Oh, absolutely. I blog about all of this stuff because it's community building. You reinforce each other and...

MARTIN: But that's actually why you started doing it, isn't it? Isn't that why you started blogging? Because you wanted...

MCNEAL: Yeah, absolutely.

MARTIN: ...to be held accountable by people who...

MCNEAL: Exactly. I had all this stuff that I was doing in my head.

MARTIN: ...would dog you out.

MCNEAL: No plan to get rid of it and so, if I told everyone and everybody was watching me do this challenge - and some people actually joined in - then I knew that I didn't want to let everyone down. Because, other times, I tried to get my budget in order and it just didn't work out, so I had to take it public.

And, you know, I loved the results. And right now, you know - that was, like, in 2008 when I started. Now, everybody's into personal finance. It's really sexy right now, so I have people on Twitter and, you know, tweeted back and forth with. I have, like, a whole crew starting to do a no-buy month in February. And, you know, if the worse thing someone tells you to do is just, like, take care of your money and find other ways to have fun, I think that's a good thing.

MARTIN: When you say - one of the things you say in your top 10 frugalista tips is, coupons are sexy.

MCNEAL: Absolutely.

MARTIN: Coupons are - OK. But single diva. Now, if a guy took you out on a date with a coupon, I'm sorry. I have to wonder...

MCNEAL: I have rules.

MARTIN: ...whether there would be date number two.

MCNEAL: We talked about this on the blog because I have a frugalista who posts for me and he's a big couponer. I say the first three dates, I prefer, no. Then, afterward, that's great. You know, I like to be a little bit wined and dined. Or you could find creative things to do, like I'm OK with going to a jog or a walk in a park. We don't have to have an expensive date, but I don't want to be Groupon, you know, daily-dealed attendant about going out for a social life. You know what I mean? Like, let's not bring the outside world into what we're trying to create. So I prefer the first three dates. But a lot of women, especially the younger generation, the college kids - they're like, you know, food tastes just the same whether or not it's with the daily deal or not, so...

MARTIN: Bring the coupons.

MCNEAL: ...to each their own. Yeah, bring it.

MARTIN: All right. All right. Bring the coupons. So - OK. Well, we'll check back with you later in the year to see how the frugalista is making it in the spring when, you know, spring is in the air. How about that?

MCNEAL: Absolutely. Thanks for having me.

MARTIN: Natalie McNeal is a blogger and author of the book, "The Frugalista Files," and she was kind enough to join us from member station WLRN in Miami. Happy New Year, Natalie.

MCNEAL: Happy New Year.

(SOUNDBITE OF MUSIC)

MARTIN: Just ahead, a pair of basketball shoes caused a frenzy this holiday season.

UNIDENTIFIED WOMAN #1: Eleven concords, exclusive.

UNIDENTIFIED WOMAN #2: (Unintelligible) in 11 years.

MARTIN: Those shoppers are talking about the new Nike Air Jordan sneakers that retail for $180 a pair and can go for even more online. So what do you do when your child wants a pair? Our panel of parents on when they cave on the brand names and when they draw the line.

And we'll hear from a marketing professor about why we care so much about labels to begin with. That conversation is just ahead on TELL ME MORE from NPR News. I'm Michel Martin.

(SOUNDBITE OF MUSIC)

MARTIN: If you were fortunate enough to get a shiny new smartphone over the holidays and you've been busy downloading countless apps and uploading all your context, beware. That smartphone could be spying on you. We'll find out what personal information is being collected and what you can do to stop it so that you can go back to playing Fruit Ninja. That's next time on TELL ME MORE.

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