6 saving secrets from 'Frugal Fanny'

By MP Dunleavey

Editor's note: Join columnist MP Dunleavey and a group of women as they seek to strip away the myths around money, liberate themselves from debt and find financial sanity. Follow the ongoing quest of the Women in Red every other Wednesday in Dunleavey's column on MSN Money.

When Anna first joined the Women in Red, she used to joke that her nickname was "Frugal Fanny."

While I believed her, I didn't really appreciate how little she spent -- and how much she saved -- until I wrote about her retirement situation earlier this spring. (See "One earner, two retirements? Yikes!")

Even the financial planner who reviewed Anna's strategy was in awe of her savings prowess -- especially because Anna is supporting her husband and young daughter in the pricey Washington, D.C., area on a single income of about $65,000.

Soon readers were clamoring to know her secrets as well: How does Anna do it?

So I decided to find out.

The secrets of her success

I have an ambivalent relationship with frugality myself. Some days I aspire to a life of financial purity and austerity -- one in which I rise above all my earthly cravings, drive a 20-year-old Volkswagen and die with the words "secret millionaire" carved on my tombstone.

The rest of the time I fantasize about being Paris Hilton -- while forcing myself to be as financially prudent as I can be in the real world.

I suspect this is where most of us live: torn between the spendy little devil who sits on one shoulder and the fiscal angel on the other.

Not Anna. To my surprise, her nonconsuming lifestyle doesn't require an endless internal tug-of-war over what she wants versus what she can afford.

Like a lot of naturally economical people, Anna's financial behavior is guided by a set of internal priorities -- rather than external desires like keeping up with trends or buying what everyone else has. Thus, material whims that don't match her goals never become the itchy sources of temptation many of us struggle with.

Bucking the spending trend

Anna isn't a paragon of financial perfection, let me just say -- and I'll elaborate on that later. But her financial success stems from the fact that her decisions run counter to the way research shows the average American behaves with their money:

• Most people save very little of their disposable income -- especially when it comes to retirement. Anna socks away 15% of her monthly gross for retirement (about $812), and saves another 4% per month (about $200) for irregular expenses.

• A growing number of Americans view debt as a lifestyle choice, according to a Robert Manning, author of "Credit Card Nation," living on as much as 120% of their incomes. Anna has no personal debt besides her mortgage; her committed expenses come to only 73% of her income.

 Where Anna's $5,416 monthly income goes

Category	% of income	Specific expenses	Total monthly cost
Committed	74	Taxes, health co-pay, etc.	$1,191
		Groceries (includes diapers)	$800
		Utilities	$500
		Phones (land, cell)/Internet	$200
		Mortgage	$1,100
		Car insurance	$80
		Gas	$120
Irregular	4	Travel, camping gear, car repairs, etc.	$213
Fun	7	N/A	$400
Retirement	15	N/A	$812
TOTAL MONTHLY EXPENSES	100		$5,416

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