What does being frugal mean to you? Maybe you view it as endless budgeting, counting every penny, and not ever doing anything fun. Or perhaps you have a vision of becoming one of those crazy couponers that spends all his or her spare time scouring ads for the best deals.
Fortunately, being frugal doesn’t have to be complicated or extreme. Following are several simple methods you can follow to help you become a little more frugal and end up with more money back in your pocket as a result.
1. Differentiate between wants and needs
Advertisers are experts at making consumers believe wants are actually needs. The enticing way they present products often help us rationalize that we actually can’t live without various items. In reality, however, these products—no matter how innovative or intriguing–are all just things, many of which we can easily do without. The key is to find a good balance in our purchasing habits. While it’s okay to splurge every once in awhile on a “want” that will benefit you in a meaningful way, doing so every time you hit the store isn’t a healthy habit for your wallet. Instead, before you make a purchase, ask yourself whether you’re investing in a want, or a need (nourishing food, secure shelter, good healthcare, etc.). Being more conscious about what you’re spending money on will hopefully help you develop healthier habits.
2. Avoid debt at all costs
Easier said that done, right? Especially if a certain situation arises, such as a costly medical bill, car repair, or job loss. Sometimes debt may be unavoidable, but oftentimes you can easily withstand the temptation. Before swiping that card, think about the payments in interest you could be throwing out the window each month. Trust me: once you get deep into debt, it’s extremely difficult to get out. Those credit card payments will eat away at your budget each month until you’re barely scraping by.
3. Strive for quality over price
Sometimes being frugal means investing in a costlier item if it means it will last longer. For example, if you purchase the cheapest tires available for your car, you may save a few hundred bucks, but you’ll probably have to replace them a lot faster than if you had purchased a better quality product. Of course, there’s always a balance to this point as well. Many times the most expensive option isn’t necessarily the best quality. Do your research by reading reviews of products before you make a purchase, and hopefully your choice will reflect the best value for your money.
4. Live below your means
I’m sure you’ve been told to try and not live above your means, but within your means. But have you considered the benefits of actually living below your means? The extra funds you’ll generate each month will create more opportunities for saving and investing, which in turn can build sustainable, long-term wealth. Make a commitment to run a surplus the majority of the time by either cutting expenses or finding ways to grow your income. It’s the perfect way to get ahead of the game.
5. Analyze your finance situation
The first step to becoming frugal is becoming completely aware of exactly how much you earn, spend, and where each dollar goes. Create categories for each area of your monthly spending, from recreational activities and restaurants, to groceries, utilities and gas. Set goals for how much you would like to spend in each category, then save and invest whatever is leftover. Being in tune to your money situation will make it much more likely for you to succeed at establishing a monthly budget and savings plan.
By whatever means necessary, become ridiculously well-acquainted with how much you earn, how much you spend, and where every dollar goes. It's the foundation of frugal living. Without this baseline knowledge, successful budgeting and saving will always be out of reach.
The bottom line: if you consider the above concepts less about being frugal and more about having a basic sense of financial literacy, perhaps they’ll become a little easier to follow. Hopefully you understand now these concepts are not an extreme way of living, but rather a smart approach to managing and succeeding in your financial life.