Adopting thrifty habits can help you spend less, save more, and achieve your financial goals faster. But what does frugal living actually mean? How do you do that? And above all, where should you start?
If you asked 8 people what it means to live frugally, you’d probably get 8 different answers, ranging from never buying anything to being a coupon freak. The word “frugal” means using money and other resources economically. So, frugal living means being wise in managing money, time, and other resources — which may look different for everyone.
How to Live Frugally
There are many ways to implement a frugal lifestyle. Consider which frugal habits work for you and your financial goals.
1. Choose Quality over Quantity
Living a thrifty lifestyle means approaching your spending a little differently. And one of the most impactful changes is to focus on the quality of your possessions rather than their quantity. Purchasing high-quality clothing, furniture, housewares, and so on often means those items will last longer. And replacing things less frequently means spending less money and saving money in the long run.
So, rather than owning a bunch of fast-fashion clothes that only last one season, buying quality clothes that can be worn across multiple seasons and last for years can be more cost-effective. Buying higher quality items may cost more up front than cheaper quality items, but you will save more in the end. Buy less; buy better.
2. Use Your Credit Wisely
Frugality is about living below your means. So if you use credit, use it for convenience rather than to buy things you can’t afford and rack up huge debts.
Be strategic in your use of credit cards. If you practice healthy habits — like watching your credit usage, making purchases you’ve budgeted for, and paying off your balance every month — you can take advantage of credit cards to save you money. For example, choose a credit card that doesn’t charge an annual fee and automatically offers cash back on every purchase. Getting money back on your everyday purchases (including utility bills) is a smart way to maximize your budget and reduce your bottom line.
3. Know the Difference Between Wants and Needs
It’s easy to get caught up in consumption. However, if you adopt a frugal lifestyle, it is important to understand the difference between your needs and wants. For example, buying a nice winter coat is a need, but buying a famous designer coat is a desire.
Living frugally doesn’t mean you can never splurge. It’s more about recognizing your needs and wants and making conscious decisions about your spending.
4. Use a Budget to Guide Your Spending
Being frugal is about using your resources wisely and living within your means. One of the best ways to ensure you spend your money consciously is to create a budget and set boundaries for each category.
If you tend to associate budgeting with limitations, change your perception by thinking of a budget as a plan for your money. Budgeting is about making deliberate spending choices. Plus, there are many different types of budgets, so it’s easy to find one that suits your personality and preferences.
5. Create Boundaries for Yourself
If you’re implementing frugal habits for the first time, you’ll need to establish strategies, rules, and boundaries to help you succeed. For example, if you tend to give in to impulse shopping, you can set a rule to always let your online shopping cart sit overnight. You can also unsubscribe from the emails that tempt you the most, or give yourself a certain waiting period before making a certain amount of purchase.
The idea is to provide a realistic path to living a frugal lifestyle and achieving your financial goals — to achieve financial independence.
6. Audit Your Spending and Bills Annually
“Set it and forget it” is a strategy that sometimes works — like automating your savings — but if you organize your household bills and other routine expenses without reviewing them regularly, you could end up overpaying or spending money on services you no longer use.
It’s helpful to assess your recurring bills annually. Review each expense to see what you can eliminate, cut back on or compromise on.
• Eliminate: You might be paying for services you don’t use (e.g. gym memberships, online memberships and streaming services). Consider canceling if you haven’t used it in the last several months.
• Reduce: For bills and services you can’t afford to eliminate, see if you can reduce the amount you pay. For example, you can delete premium features you don’t use. Or if mortgage interest rates are lower than they were when you bought your home, refinancing your home loan could reduce your payments over the life of the loan.
• Compromise: For expenses you can’t eliminate or reduce, look at what you can compromise on. Maybe you can ask your cell phone provider to meet a competitor’s rates.
