Reality Check #3: Should You be A Recessionista?

If you haven't heard, rich in today's context is no longer the millionaire whose assets are valued at $1 million. A growing phenomenon of hectomillionaires (net worth of hundred and more millions), and billionaires (net worth of one or more billions) in the past decade has made millionaires or multimillionaires (net worth of a few millions) just middle-class millionaires. So how can people who are not even millionaires stay even with the high rollers of the fashion ladder?

The reality is: It may never be possible for most middle class to upper middle class citizens to stay even with the high rollers of the fashion ladder without being in financial debt or sacrificing some of the other nicer things in life. Unfortunately, the economic principle of opportunity cost holds true in almost every context.

So if it never crossed your minds to become a Recessionista, think again. Unless you are a trust fund baby, or a multi-millionaire who has an endless supply of money that can last a lifetime, there isn't any reason why you can't shop smarter to get the biggest bang for your buck. Agree?

If you still don't know the definition of Recessionista, a Recessionista is someone who develops a distinctive and unique style using low-cost but still fashionable items. This involves rethinking fashion, and coming up with new ways to dress stylishly. It may seem tough at first for many of you Fashionistas out there, but it gets better and fun at the same time after awhile. I am doing exactly that now; which is why I Am Recessionista! If you don't know where to start, ask me. I will be glad to help!

Reality Check #2: Are you a Shopaholic or a Frugal person?

Pondering if you are a Shopaholic Miss Bloomwood?

Maybe you are exactly like a Rebecca Bloomwood in Confessions of a Shopaholic or maybe you are a total opposite. Have you ever wondered if you are more of a shopaholic or a frugal person, you can find out by asking yourself the questions I complied in this blog entry. After I blogged about Confessions of a Shopaholic in my previous blog entry, I did this test on myself with 2 other friends. When you think about Shopaholism or Frugalilty, there are so many definitions out there. So hopefully this checklist helps you determine that. I also created these 2 boxes inserting the word shopaholic and frugality in 7 different languages for fun.

Check this list to see how many shopaholic characteristics you possess.

You are a Shopaholic if you:

1. Shop frequently (not just window-shopping);
2. Shop compulsively (buying without 2nd thought);
3. Spend beyond your means (no savings);
4. Shop as a result of confused emotions;
5. Lie to cover up your purchases;
6. Cannot resist not having the newest or latest item;
7. Cannot resist a bargain (buying 'cos it's cheap).

I never thought I had that much of a shopaholic gene in me till I did this reality check test. I had characteristics 1,2,6,7. L had characteristics 1,2,3,6,7. Pat had characteristics 7 and a little of 6.

Check how many of these frugality characteristics you possess.

You are a frugal person if you:

1. Shop in a restrained manner (needs not wants);
2. Seek to find the best deal that meets desired value;
3. Use something you already owned resourcefully;
4. Never spend beyond your means (less debt);
5. Seldom splurge on things with no long-term value;
6. Never shop with emotion but with logic;
7. Have long-term goals and savings.

I had characteristics 3,4,6,7 and a little of 2. L had characteristics 2, 3, and a little of 6. Pat had characteristics 1,2,4,5,6, and a little of 7.

Now, review each of the characteristics that you checked and see if you primarily a shopaholic or a frugal person. I had half shopaholic and a little more than half frugality characteristics in me so I am somewhere between a 50/50 and a 40/60. Or you could be a 70/30 like my most shopaholic friend L (she doesn't want her name revealed), or 20/80 like my most frugal friend Pat. Irregardless, frugality is still the ultimate goal here. Let's all strive to achieve that.

Reality Check #1: Understanding Cash Flow - A First Step to Financial Freedom

I am no financial guru, but I try to be more knowledgeable by reading up on financial news sites and blogs. I stumbled upon this blog post called Illustrated Cash Flow For Dummies from this site called Money, Matter, and More Musings posted back in 07 but still proved true to this very day. This might be important advice for all shopaholics out there.

The figures on the top row illustrates the different levels of frugality where savings are high and spending is low. The figures on the bottom row shows the different levels of excessive spending (a.k.a shopaholism) where spending is high and savings are low The middle figure illustrates financial freedom - where everyone strives to be. The more water in the tank indicates the more savings you have. It is pretty self-explanatory and I am certain every single one of us would fall into one of these categories.

Another interesting fact I discovered is that the scales of frugality are different for rich and poor people. And hence, it might be a bit presumptuous to call someone a spendthrift or frugal based on the things they buy (or the things they pay money for). I am going to explain this in the life of a Fashionista. A rich Fashionista who has loads of savings and investments with zero debt would not be considered a spendthrift if she buys a $2200 Prada handbag and a pair of $1500 Christian Louboutins a month. On the contrary, a working Fashionista who struggles to pay rent would be considered a spendthrift even if she spends $2200 on that Prada handbag; not to mention both items a month. Take myself for example, if what I can afford to buy is a $300 dress for a wedding I'm attending, then buying a couture gown that costs $2000 would make me a spendthrift even if I have that $2000 to spend.

With so much materialism in the world, it is a challenge for most people to lead an extremely frugal life. Possessing excess leverage has become a big problem and life is such where most people want to have nicer things and live better lives. But it is perhaps time to realize that we should count our blessings and be contented for once and think not about what others have and what we don't have, but what others don't have that we have. I used to envy the rich and famous who own numerous Chanel, Hermes and Prada bags. Now, I consider myself lucky to own several Chanel and Prada bags...no Hermes Birkin Bag yet. Most of my expensive fashion "investments" were from the bonuses I got from closing several big deals in my career in the past several years.

In my humble opinion, everything in life is about achieving a balance. At the end of the day, everyone can own something that they like or need. It is a matter of expectations and contentment and knowing what you can and cannot afford. If you have been keeping the habit of saving, then good for you and you should be proud of yourself. If you have never had the habit of saving, then now might be a good time to start. It is never too late till it is too late.