Spending less than you earn is a core component of good money management, and a vital part of any wealth building strategy. This guide is intended to provide readers with ideas, how-to’s, and resources on frugal living and expense reduction. It will explore aspects of frugality and provides practical ideas on how to save money and reduce your expenses.
What Is Frugal Living?
Being frugal is not the same as being cheap. And frugal living doesn’t condemn you to a life of deprivation and sacrifice — if it does, then something is wrong. Frugal living means that you are smart about how you spend your money — i.e., you know how to get more value for less money.
There are many ways you can approach frugality. There’s no right or wrong way, and you can adopt any number of strategies.
Addressing Your Needs Before Wants
I think Maslow’s Theory of Needs defines wants versus needs perfectly. Fundamentally, you are putting money toward food (for sustenance), shelter, clothing (functional not fashion), and health before you spend it on other things. Here are some more articles that talks about wants versus needs:
- Needs Versus Wants
- Comfort Versus Security (Or Wants Versus Needs)
- Taking a Deeper Look at Wants Versus Needs
Smart Money Decisions Based On Value
Being frugal doesn’t mean buying the most inexpensive thing you can find. It’s about getting the most value for what you buy, and saving money on what you have to spend. Sometimes this involve sacrificing the bells and whistles, and focusing on buying what you really need. Here are some examples:
- Buying a Timex instead of a Rolex
- Using the basic cell phone that comes free with the plan instead of spending money on an iPhone
- Buying a used car instead of a new car
As a society, we throw out a lot of stuff that could be reused, repaired, or repurposed. Here are some great articles to help you get started:
- The Imagination Factory
- 15 Creative Ways to Reuse Small Boxes
- Creative Reuse
- Creative Ways to Reuse “Disposable” Items
- 13 Creative Ways to Re-Use Old CD Cases
Minimizing waste also means not spending money unnecessarily when you have a lower cost alternative — this usually means giving up some of the convenient factors. For example, walking another block to use in-network ATM machine, finding street parking instead of heading straight for the parking lot, etc.
Leading a truly frugal lifestyle is not for everyone; however, reducing expenses should be within everyone’s reach; and cutting costs is a great thing to do during periods of poor economy. Here are some fun and creative ways to reduce your expenses:
You can create a graph like the one above easily, by loading your information into free software like Mint.com.
Instead of going crazy categorizing everything, another easy way to reduce expenses is to just sit down, brainstorm, and figure out the easiest ways to cut costs — this is called Quick Wins. You can even make this a family game where the winner figures out the most ways to save money, or save most money. Be sure to turn your ideas into actions!
If you want to be technical, here’s a chart that rate easy versus outcome.
For example, anything that requires a low effort to implement is a quick win (read the full article).
The third and last geeky way you can cut your expenses is through the use of a Scattergram. This is a little more complicated, but it does give you more control than the other two methods. Here’s what a scattergram looks like (read the full article).
Other Ways To Save Money
Here are some more money saving ideas for you to work with:
- 1,001 Money Saving Ideas and Tips
- 34 Ways To Save Money On Car Expenses
- Financial Checklist of 25 Important Tasks To Do Each Year
- 40 Ways You Can Save Money And Our Planet
- I Just Saved A Bunch Of Money On My Insurance
- Money Saving Tips for Online Shopping
A Caution About Frugality
In parting, I’d like to caution that there’s only so much you can do to save money. Frugality has its limitation — it’s called deprivation. Therefore, being frugal is a good thing for your financial health, but in the long-term, effort put into developing income streams to earn extra money is what you should be doing.
Pinyo Bhulipongsanon is the owner of Moolanomy Personal Finance and a Realtor® licensed in Virginia and Maryland. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, financial literacy author, and Realtor®.