How to Live Happily on Less

As creative economizers are discovering, cutting back doesn’t have to mean giving up the good life.

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In August, Mike and Sabrina Jaffe took their two children on a five-day vacation to Cape Cod. They lounged on the beach, ate lobster at a popular restaurant, played miniature golf, and explored the tourist towns. But rather than retire each evening to a rented home as they did on their last trip there, the Jaffes slept in a tent. At $40 a day for the campsite, and with most meals cooked around the campfire, they saved over $1,000, Mike estimates, while drawing closer to nature and to one another. "We'd worried that, without a TV and computers, the kids might get bored," he says. "But they really enjoyed watching the moon rise, helping prepare the cookouts, and slowing down enough to toss a ball around." The enhanced family time was especially meaningful for Mike, a motivational coach and speaker in New York City and Great Barrington, Mass., whose World Trade Center office was hit by the first plane on Sept. 11, 2001, before he'd arrived.

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Nearly four years after the start of a recession that feels suspiciously like it's still dragging on, and faced with an uncertain economic future, Americans are increasingly looking for ways to slash their expenses. Incomes are stagnant: Median weekly earnings for full-time U.S. employees in the second quarter of this year rose only 2 percent from a year earlier, while prices of everyday goods jumped 3.4 percent. And, of course, millions of Americans are still collecting no wages at all. A new Census Bureau report shows that, in real terms, household income is now below where it was in 1999. It seems clear, moreover, that healthcare costs and many other expenses are only headed up—even as pensions and job security evaporate. Little wonder that Americans are socking away more of what they earn. Personal savings as a percentage of disposable income rose to 5.4 percent in June, up from below zero in 2000 (though that is still markedly lower than the 10-plus percent of the early 1970s).

[See 12 Ways to Stop America's Decline.]

As creative economizers are discovering, though, cutting back needn't mean giving up the good life. "You don't have to deny your pleasures. In fact, you can lower spending while raising your quality of life," asserts John Robbins, author of the 2010 manifesto The New Good Life: Living Better Than Ever in an Age of Less. He knows whereof he speaks, having lived on a shoestring twice in his life: after college, when, rebelling against materialism and entitlement, he refused his father's Baskin-Robbins ice cream fortune, and more recently, after entrusting his entire self-made wealth to Bernie Madoff. Robbins's book recounts how he has happily grown his own food, lived in a tiny house, and driven a 15-year-old car, content that it had been paid for years earlier.

In some areas, a few small changes yield big savings. In others, low-budget experiences offer outsize pleasure. And always, experts say, contemplating the true value of an acquisition is likely to prevent wasteful impulse buys. The shift to more thoughtful consumerism itself can be surprisingly enjoyable. "The pleasure in being frugal comes from no longer feeling like I'm wasting my money. Frankly, it's become a boost to my ego," says Leah Ingram, a freelance writer in New Hope, Pa., who began cutting back in 2007 after she and her husband had to sell their house because their mortgage and home equity loan payments had become unmanageable. She documents her newfound passion in the book Suddenly Frugal and on a blog by the same name.

Psychology research supports the notion that having and spending money isn't closely related to life satisfaction. "Unless you're near the poverty line, the effect of money on happiness is very weak," says British psychologist Robert Holden, author of the books Be Happy and Authentic Success. In fact, he says, only 10 percent of happiness is determined by life circumstances such as one's wealth. The rest comes mostly from personal choices, such as how people decide to view a situation, and genetics. Here are some ways to tighten your belt without sacrificing joy: