“At year’s end he was 100 percent over his $18,000 budget, having spent $36,000. How had he spent $36,000? Like others who try to live by a budget, Fitzgerald discovered that a lot of money had definitely been spent but didn’t fall into any category that budgets provide—there is “leakage.” Of course, in his case, there was more leakage than is customary. Fitzgerald and Zelda prepared what they thought was a complete record of what they had spent running the household—it came to $1,600 a month. Then they added what they had spent on pleasure, trips to New York, the theater, and so on; that came to $400 a month. Together that totaled $2,000, but Fitzgerald knew he’d spent $3,000. Fitzgerald asked, “You don’t mean to say that every month we lose $1,000?” It was impossible. “People don’t lose $12,000 in a year, it’s just missing.” Somehow a “mysterious third of our income had vanished into thin air.”

Hat tip to TaxDetective blog

She blogs on money-saving tips at squawkfox.com and has recently authored a book on being frugal. Entitled 397 Ways to Save Money, it’s already received a lot of coverage in the blogosphere at spots like the Wealthy Boomer blog and WhereDoesMyMoneyGo.com (who links to other reviews).

Frugality is normally associated with looking inward and seeing where expenses can be cut out of one’s personal life. But what about looking outward and seeing what can be changed in one’s environment to reduce costs?

Like the spending the government does on our behalf. It’s perhaps ironic but as frugality comes into vogue at the grassroots level these days, our governments are rushing to step up their spending, expanding their fiscal deficits at an alarming clip because they think it’s bad for citizens to reduce consumption in response to job uncertainties and lower asset values.

Taxes are our biggest and fastest growing expense (which huge deficits will surely make even more of a burden). As can be seen from the chart below (taken from a Fraser Institute study) the amount of money the average Canadian family pays in taxes has grown more rapidly on a percentage basis from 1961 to 2008 than family income, rate of inflation and basic necessities such as food, shelter and clothing. So much so that taxes are now a family’s single largest expense (nearly 43% of income for the average family).

Much of what we fork over to the government goes for good stuff but I’m willing to wager a very large chunk of it is wasted or is needless – as described in a previous post. Frugalites, in my opinion, should also look outward and get proactive about bringing some sanity to government spending and taxation, as well.

Just my two cents worth … after taxes, of course.

Stingy Investor has a tradition of running a piece or two every Christmas on Mr. Scrooge that paints him in a more favorable light. Here are some links to them.

Scrooge Defended
In Defense of Scrooge
In Defense of the Grinch & Scrooge
The Case for Ebeneezer
What I Like About Scrooge
So, Scrooge was right after all

The personal-finance book begins with the central character, Jamie Morelli, already married, indebted, and about to have twins. What if Jamie had decided to make financial independence a priority while still single? He might have been able to reach his goal much easier and sooner.

If one delays marriage and/or kids for a few years, they can live modestly and save 50% to 80% of their income by living in inexpensive accommodations, taking the bus/riding the bike, and enjoying simple pleasures like reading and hiking. Of course, this extreme frugality will not be everyone’s cup of tea. It’s more for individuals who really don’t want to be chained to a job all their life.

If one does get married early in life, it helps to find out beforehand if their spouse is on the same page. I’ve touched on this before too: if one spouse is parsimonious and the other is not, the sailing could be rough — like it was for Jamie and his wife.

If already married with children, the options are fewer. It will be a longer and less certain haul to financial freedom. But perhaps one can discuss things with their spouse and obtain agreement for some lifestyle changes that result in a much higher rate of saving.