Frugal Recipe #1

Frugal Recipe #1

Cooking for yourself is an oft discussed path to cost savings. But, shopping and cooking takes time. Lots of it. And as a frugal MBA you are going to have serious demands on every second of your day. That’s the case if you are applying to programs, in school, or changing the world, degree in hand.

Never fear—there’s a way to have satisfying, healthy, economical meals that won’t take a ton of time. The answer is cooking many servings at once and then storing them. So the first step is to purchase some reliable freezer containers that will stand the test of time. I recommend these: http://tinyurl.com/42pewmn.

The guiding principles of these recipes are: 1) delicious; 2) healthy; and 3) inexpensive on a per serving basis. Here’s the first (more to come):

Ingredients

Six potatoes

Four onions

Eight carrots

Eight celery stalks

One bunch swiss chard (or kale)

Four vegetable bullion cubes

One bunch spinach

Eight cloves of garlic (or 3 tbsp of Trader Joe’s chopped garlic)

Three tbsp olive oil

Two tsp cinammon

Three cups lentils (chana dal preferred, not required)

Steps

Dice the carrots, celery, onions, and potatoes.

Heat olive oil in pan.

Add vegetables and cook for 5-7 minutes on high heat.

Add 16 cups of water and four buillion cubes .

Heat until water is simmering.

Add lentils and turn heat to simmer.

Let vegetable/lentils simmer for 30 minutes.

Rinse and chop greens.

Add greens to stew. Cook for another 5 minutes.

You can continue cooking the lentil stew until it reaches your desired consistency.

Add cinnamon.

Stir and serve.

Variations

There are many variations on this recipte. For more of an Indian flavor you can add a few tablespoons of Curry Powder. You can also garnish with yogurt and cilantro. You can also use a hand blender if you like your foods mushy like yours truly. It is definitely a recipe that can be personalized. Make sure to update the posting with your preferred variations.

Frugal Strategy: Don’t Pay Sticker

The total amount you have to pay back after graduation can be minimized by paying less for your receipt (duh). There are lots of ways to do this, including taking on a teaching assistant gig while in school (more on that in a later post). But, after you have been accepted to one or more schools, there is a key opportunity to ask to pay less, otherwise known as getting a scholarship. However, unlike some PhD programs where tuition is often covered, discounts are hard to come by when it comes to MBA programs. How can a prospective frugal MBA avoid paying cover?

Try getting one of your target schools’ peer institutions to give you money. Your target schools likely consider peer institutions to be comparably ranked programs, or anyone they lose fights over accepted candidates to year in and year out. MBA programs won’t be swayed by schools they don’t consider similar—try telling Harvard Business School that your Southwest New Mexico State full ride should get you some Cambridge coin…

Easier said than done you say—I’m just trying to get into one program! Of course, but consider these two insights. First, some of the schools your target program considers peers will have much higher acceptance rates (as an example, among top programs UChicago has an acceptance rate of 23%, nearly twice that of Berkeley’s 13%). If you can be a top student at a peer school apply and see if they sweeten the pie. Then go back to your target schools and see if they’ll match. Even if it is a few thousand dollars, on a per hour basis it may be well worth your while.

Second, do any of your peer schools have scholarships that are targeted a smaller group of people that includes you? I’m a Teach For America alumnus and received funding from several schools for that credential. Are there scholarships that you qualify for at non-target schools? If so, apply for them, get them, and then start negotiating. This strategy took 50% off the sticker price of my MBA (and several years of annoying loan payments)—hopefully it can work similar magic for you.

Start Living Like an MBA (Student)

So, you’ve decided to go to business school. There are months of preparation ahead of you, including taking the GMAT, lining up recommenders, crafting essay responses (four or more per school!), applying for financial aid, etc. And if you’re currently employed you know that the paycheck spigot will be turned off soon (gasp!). The most common reaction: soak up the good life before you start classes and plan to implement Greek-like austerity measures once enrolled.

Think carefully about this approach though—each dollar that you save today is one less that you’ll have to take out at insidious interest rates (6.8% and 7.9% for Stafford and PLUS, respectively at the time of this writing). Indeed, for most folks taking out loans, each dollar spent in business school is actually two dollars they end up repaying later, when interest is considered. So, regardless of where you attend school, start thinking about your purchases today as having a special exchange rate associated with them—everything you buy costs double what the price tag says.

Now that you’re sufficiently gloomy, here’s the good news—reducing your spending now may actually make you more, not less, happy. Social Psychological literature demonstrates that for each dollar additional earned, over time approximately 40% of that which is spent is viewed as base level spending. In other words, the first time you got a raise and had a Starbuck’s coffee instead of office gruel it tasted delicious. But, now, the Starbucks (or Peets) is expected and your enjoyment level per sip has plummeted (see graph).

Clearly there are some costs that can’t be avoided in the near term. If you have a car payment keep on paying it! But, take a hard look at your bank/credit card statements over the past month and think about how your spending has changed since you graduated from college. If you’re considering an MBA program it has likely been 3-7 years since you last threw up your cap—what items would have seemed like luxuries during your first few months on the job? Looking over those items, which of them can go? Today.

Try to cut out/reduce a few and increase each week. Who knows, by the end of Month 1 that (now special latte) may taste even sweeter.

Frugality is for winners

Frugal folks know what they want. Then they buy it when it's cheap as chips.

A few years ago I was living in NYC. Rent was high, and I looked to save whenever I could. Rite Aid had a Raisin Bran Sale (it was all over the papers). So I bought 10 boxes.

I learned about consumption smoothing in undergraduate economics, and while my logic in this case may be fallacious, my understanding of the principle makes me a savvy consumer. Sometimes a short-term cash outlay will pay dividends down the road, as your average cost will drop. So, when a product you'll use is on sale, buy it! Maybe buy a lot of it. Just be aware not to eat / use more than you normally would because the desired product is readily available. I call this the Costco fallacy.

Where do you look for sales? What do you buy in advance or in bulk?

The Difference Between Cheap and Frugal

There are hazards associated with being a frugal MBA. Notably, some peers will at times ask (or imply strongly) if you are being cheap. The following three criteria can help you determine whether you are being cheap or frugal.

Frugal folks recognize quality

Being a frugal MBA does not mean that you have to buy low-quality items. Instead, frugality is about thinking carefully about the full cost of a purchase. For instance, a cheap person may think that eating bean burritos every day is a wise way to spend money because they are inexpensive. Yet, the frugal MBA recognizes that food impacts more than just your wallet—it also affects your health. When all aspects of food are taken into account, higher quality, more expensive food are often the right purchasing decision. Obviously this reasoning can be dangerous—it cannot be used as an excuse to purchase fine cuts of seafood for you tuna salad sandwiches!

Frugal folks place value on their time

Frugal MBAs recognize that their time is a valuable commodity. As a result, they will not spend precious hours to save a paltry sum of money.

Frugal folks do not save by putting costs on others

Frugal individuals assign value to other people’s time and resources. They will not save money at the expense of others. As an example, a friend from the East Coast had a wedding in the groom’s hometown in South Dakota, even though the vast majority of the wedding’s guests would be coming from the East Coast. The bride’s justification that doing so was less expensive does not pass muster under the frugality guidelines. The wedding was actually much more expensive to have in the Black Hills, the costs were just displaced to others.
Hopefully these criteria are a helpful way to determine whether your behavior is frugal or cheap. I am always looking for other guidelines. If you have ideas, be sure to include them in the comment section below!

Frugal First Step-Determining Your Core Values

Frugality can be like going to the gym in January. After ignoring your money (or your body) for a few months, you decide that things are going to change. Your are serious this time! However, frugality often fails for the same reason that gyms clear out in February—it is really hard to stay disciplined. So, how can you make the process of being frugal easy…and I would dare say fun? It all starts with identifying your core values.

I learned how to identify my core values from David Walker. At the time, Walker was the Comptroller General of the United States— the nation’s top accountant. Why was I interacting with an uber accountant? Prior to business school, I was a specialist with the United States Environmental Protection Agency in Washington, DC. Walker came to speak to EPA about the nation’s ballooning deficit and what he thought we should do about it. As fascinating as this speech sounds, the big take-away for me was his message about values. When Walker took over the Government Accountability Office, it was unclear what the agency stood for. As a result, he convened a series of meeting with management and staff to clarify the three values which defined the agency. The result: accountability, integrity and reliability.

At the conclusion of his speech, Walker challenged the audience to state what there three core values were. I thought to myself, “Listen Mr. Accountant, I know exactly what I stand for. I do not need a silly exercise to find that out.” Yet, I struggled tremendously to write down what my core values actally were. Over the ensuing weeks, I thought a great deal about Walker’s question. Over time, I determined that my three values were: fellowship, exploration and stewardship. Fellowship represents the importance of my relationships with family and friends. Exploration is about my desire to explore new places and ideas. Finally, stewardship represents my desire to leave the world a better place than I found it.

What do these values have to do with frugality? Everything! Decisions about how to spend your money are really though. These decisions become even more challenging once you enter an MBA program and are cut off from the wage spigot. Without a compass to guide you, it is really easy to determine that everything is important, and, therefore, deserving of your loan money.
Core values act as a filter to make tough trade-offs throughout school. As I stated in my initial post, frugality does not mean sacrificing your MBA experience, it just means making smart decisions about maximizing your limited resources. A case in point, Haas has a gloriously long winter break—roughly five weeks. Early in the semester I had to decide whether or not to spend money on a trip with friends. Using my core values, I determined that the expense was definitely worthwhile because it would reinforce both exploration and fellowship. In contrast, a few weeks later an opportunity to go to Vegas came up. Now, I like Vegas as much as the next guy, but filtering it through my values helped me realize that there were far more reasonably priced ways to hang with friends.

So, before you do anything else, figure out what your core values are. Like many things, I think three is a sweet spot. Once you have these in your hip pocket, many of your budget decisions will become much easier. Unfortunately, I cannot guarantee that identifying your values will help get you to the gym!

Why be a frugal MBA?

I passionately believe that it is in every MBAs best interest to live frugally while in school. When I have mentioned my blog to fellow Haas MBAs, the most common response I receive is: why watch our money when we are likley to make lots of it after we graduate? Dave, this the time to take advantage of our freedom and live life to the fullest!

I agree that there are many oppportunities that deserve our loan money while in school (e.g. winter break trips, conferences, case competitions). However, I also believe that the "this is the time to live it up" excuse is often applied too generously.

I would argue that frugality opens doors to MBAs, not closes them. Too often I have heard my entrepreneurially and socially minded friends lament school loans as the limiting factor for them to pursue what they are truly passionate about after graduation. By living within (and below) our means in school, we can more quickly start doing what it is that we came to business school to do--whatever that may be (start a business, work for a non-profit, etc.).

Through this blog I want to share some of the lessons I have learned about how to save money during the MBA application process and while in business school. Here is a radical thought--creatively saving money with classmates will enhance your time as an MBA. Anyone can blow $1500 at a club and have a good time (just ask my roommate), but it takes a saavy individual to figure out a way to have the same amount of fun on $5.

I want this site to be interactive and fun. Please share you ideas!

Sincerely,

Dave Bend
MBA Candidate
Class of 2010
Haas School of Business
University of California, Berkeley