Enjoying the 'Good Life' on a Budget

In You're So Money, TheStreet.com reporter Farnoosh Torabi preaches the art of living large, even on young professionals' tight budgets. Instead of forgoing nice shoes or Caribbean vacations, she recommends prioritizing those goals to make them a reality. A five-day getaway might mean skipping pricey restaurants for a few months, for example. U.S. News spoke with Torabi about scrimping on what doesn't matter so you can splurge on what does. Excerpts:

'You're So Money' author, Farnoosh Torabi

(Dorothy Shi)

How did you think of the idea behind You're So Money?
I was 26, living in Manhattan, and working as a financial journalist. I had figured out a way to pay down debt, spend within my means, but also live a bit beyond my means, with [things like] dinners out, expensive shoes, and a Bahamas vacation. After all, it was my job, more or less, to learn and understand financial matters. I was comfortable facing money and viewed money as a vehicle to achieving my goals, rather than as a setback because I had student loans and some credit card debt once upon a time.

Meantime, my friends, largely, didn't have as much of a grip on debt and spending. I knew I wasn't any smarter than my friends. I just had exposure to money matters, unlike the average 20-something. I felt I was in a good position to give my friends advice—but also knew this book couldn't be like anything else out there. It had to be fun, engaging, and relevant. It couldn't talk down or make readers feel guilty or embarrassed about their financial issues, be it their thousands of dollars of credit card debt or wanting to spend $100 on a haircut.

Do you think it is really possible to live it up on entry-level salaries?
I do. Don't get me wrong—having more money means you can spend money on more things. But the "good life" should not be about quantity. Rather, it's about spending your time and money on the very things and events that make you feel happiest and most fulfilled.

I use the example of a young 20-something who was making very little money as a budding artist in New York City. She was sharing an apartment in Brooklyn, living very simply. Her good life meant having the opportunity to travel. By paring back on day-to-day expenditures, like meals out and cab rides, she was able to utilize her money toward a greater joy, which was taking weekend trips. In her mind, she was "living it up."

You recommend defining a "hierarchy" of needs and wants—what does that mean?
The hierarchy is all about discovering what's important to you—and what you can't live without.

Saving and paying down debt should be at the top of everyone's hierarchy of needs. After that, it's all about you and your definition of the "good life." What are your values? Where do you see yourself in the next five years or so? Questions to consider include: Do I want to go back to school? Do I want to move? Do I want to travel more? Do I want to start a business? Do I want to buy a house? Then figure out what in your immediate spending world is or is not contributing to those goals. That's how you can then develop this hierarchy—and begin spending and saving in a more self-tailored way.

What are examples of easily overlooked items that people might want to consider cutting from their budget so the money can instead go to something more meaningful to them?
It's easier to give advice once you know each person's "good life." But there are some general things to consider:

Gym memberships. The average person visits the gym just four times a month. The average gym membership is about $60 a month. You can do the math. If you can't remember the last time you hit the gym, consider canceling or getting on an a la carte system where you pay as you go.

ATM fees. I live by my debit card. I opt to use it in stores wherever I can in order to avoid the ATM, which charges me on average $2 a withdrawal. In some cases $3! If you hit the ATM once a week, that's at least $100 a year in fees. In 10 years, at a 3 percent interest rate, that $100 a year becomes close to $1,200! Or if you want, it's $100 toward last month's Visa bill...or if you're debt free—a one-hour facial at a fancy spa.

Purchased books and DVDs. The library is becoming more popular with the under-30 crowd these days. No joke! If you're a bookworm, get a free library membership and instead of spending $20 to $30 a month on a couple of books, get them free from the library. Same goes for DVDs.