When seeking to improve our financial situation, we often focus on the question of how to earn more money. This is good, but simply earning money is not enough; to build wealth, we need to prioritize wise spending and investing.
Now, there are many intelligent uses for money that we can discuss, but today let’s hone in and talk specifically about optimizing our financial life through the ever-important practice called frugality.
First things first, let’s clarify what frugality is. Frugality is not being a cheap, penny pincher. All right?
Being frugal just means being intentional about how and when you spend your money. Doing this helps you to make the most of the resources you have and create a more sustainable and fulfilling financial life.
Author Chris Farrell said it best when he said: “Thrift or frugality is shorthand for an approach grounded in matching our money with our values.” So the point is to save and spend wisely now so you can spend on the things you value most later. It means seeking quality over quantity.
While there’s not necessarily a one-size-fits-all approach to being frugal, there are common principles or habits that frugal people practice on a regular basis.
Now there’s a lot of content out there talking about frugal tips. For this article, we did some heavy lifting and sifted through loads of these articles and videos and distilled all the tips and advice into a list of 9 principles of frugality. Let’s go over these 9 principles now.
1. Focus on your needs
It’s important to talk about this first and foremost because the rest of the frugal principles you’ll hear will rely on this thinking. Wise spenders primarily focus on buying needs and hesitate when buying wants.
Doing this may require putting your ego aside, keeping your emotions in check, and avoiding the toxic “Keeping up with the Joneses” syndrome. Don’t compare yourself to others and their lifestyles. Live within your means and focus on your own financial goals. As Dave Ramsey puts it, oftentimes we fall into the trap of “Buying things we don’t need with money we don’t have to impress people we don’t like.”
Now you don’t need to limit yourself to only buying what you need. Part of working hard to earn a living is so you can buy things to help make life more enjoyable and oftentimes that comes in the form of non-essentials. Just don’t fall into the trap of habitually buying things that don’t contribute to your overall well-being.
It’s especially important to ask yourself if something is a need with larger purchases. In these times, it’s often a good idea to give it an extra day or two to think about whether you really need something before buying it. Time often helps you realize what things are important to you and what can and can’t live without.
It’s also wise advice to avoid what’s called “lifestyle creep.” Lifestyle creep is when your spending increases on non-essential items as your standard of living improves. In other words, try not to spend more on “wants” every time you get some sort of raise.
One other thing to note here is that it’s not only important to think about needs when buying new things, but also take into consideration the things that you currently do have. Are there things that you don’t need that you can sell to get a little bit of extra income?
2. Think long-term
This may sound counterintuitive, but being frugal can actually mean spending more occasionally. People who are frugal often spend with a long-term mindset. They prioritize buying things they need now and things they know they’ll need in the future.
For example, if your favorite chair broke, what would be the more frugal choice if you needed a replacement? The $100 chair that lasts five years, or the high-quality, handmade chair for $300 that lasts 40 years?
In comparing the cost of the chairs in the long run, the more cost-effective choice would be the higher-quality option that’s more expensive. Said another way, if you went with the first chair and kept choosing the $100 option over the 40 years, you would have spent $500 on chairs as opposed to just the initial $300 on the quality chair.
But what if you can’t afford the more expensive option right now? Well, if it’s not a need, then don’t buy it yet. In this case, I’m sure you can live without the chair until you have the money to buy it. And who knows, you may actually find you didn’t need the chair in the first place.
Be careful not to mistake a higher price to always mean higher quality though. This is not always the case. Be sure to read reviews before making a purchase if they’re available.
Another important concept in thinking long-term is that savvy spenders think incrementally. In other words, they realize the long-term value in lots of small savings.
For example, if instead of purchasing a $3 drink for lunch each day you decided to grab a free cup of water, what would the savings be? After 30 years that totals over $20,000 of extra cash, just from one simple action consistently applied over a long period of time.
Now let’s go further and say each day you took that money you didn’t spend on a soda and invested it in a long-term investment account. What would happen? Well, if your average return on the account was at an annual rate of 10% you would have roughly an extra $210,000 after 30 years! Pretty crazy what could happen with just a couple of small changes in your habits.
One important thing to call out with this though — you should never jeopardize the short-term just for the sake of long-term savings. If you’re unsure whether a purchase may impact your ability to make ends meet, consider a different approach like buying it used.
3. Know your prices
When walking down a familiar aisle at the grocery store, what is the first thing your eyes focus on? The products on the shelves or the prices next to them? Becoming price-centered means doing the latter and learning to focus more on the prices of products.
Being a savvy shopper requires you to know prices like the back of your hand. Take the time to learn and memorize the prices of eggs, milk, bread, gas, and all the other common things you buy. Doing this will help you know you’re getting the best prices.
(It’s worth noting that it’s wise to get in the habit of knowing the prices of all the items you’re going to be purchasing before checking out at the cash register. You’ll be surprised how many times the price that rings up is different than what was listed on the shelf.)
4. Get a good deal
This next principle is to make it a priority to buy things at a discounted rate. This could be waiting for a promotional period or when an item goes on clearance.
It could also mean consistently using things like coupons or rebates whenever possible. While nobody enjoys holding up a line at the grocery store to pull out a coupon or making this a habit will put so much cash back into your pocket.
One study showed that the average U.S. household could lower their household costs by 6.4% if they were to regularly use coupons when purchasing food, household items, entertainment, clothing, and more. That equates to an average of $1,465 of savings every year just by taking a minute or two to find and use coupons.
Couponing doesn’t always take the form of paper coupons at the cash register. There are loads of couponing apps and websites out there that can save you money through coupons and rebates.
Another very important way to capitalize on discounts is closing to buy used. One of the main obstacles for most people is to become comfortable with having used items as opposed to always needing things that are new.
Now only buy used when it makes sense. There are certain items you most definitely want to buy new. Also, buying used is not always the best way to ensure you’re getting the best price. Experienced deal-shoppers can readily attest that by keeping principles 3 & 6 in mind, that is knowing your prices find better deals, you can find better prices on certain new items.
Another way to better find discounts is through others. Finding deals takes time and requires a bit of research. However, if you want to speed up the process, one great way to do this is through the many social savings groups and others in your network.
There are hundreds of hard-core couponers and deal shoppers out there and many of them actively contribute to these groups and do all the heavy lifting for you. There are also groups for most of the main store chains as well if you’re looking for deals at a particular store.
You can often go to online marketplaces and ask the group what you’re searching for. No matter what it is, there seems to always be someone who’s selling the exact thing you’re looking for. Again, you just have to accept the fact that it’s okay to buy used.
5. Stick to a budget
Budgets are boring. I know. But as boring as it may be, budgeting is an incredibly important principle of frugal spending. There’s a reason why a budget is so widely recommended. When diligently followed they really can help you excel in your finances. When it comes to smart spending, just the fact that you have a set dollar amount for different categories may help you think more creatively about how and what to purchase. If you’re new to budgeting, there are lots of useful websites and resources to help you get going.
Think you don’t have time to keep a budget? Well, first of all, you should make time for it. Second of all, we live in the 21st century where so many things have been made easier. There are loads of apps and websites out there that help simplify and automate the process. Mint.com is one example of a really great online budgeting website/app. You can connect your financial accounts securely to Mint and as you make purchases those transactions will automatically be categorized for you.
A good budgeting tool will also keep track of all of your transactions and how you’re using your money. This will help you identify opportunities where you can trim your expenses up a bit. This could be seeing how much you’re spending on subscriptions, for example.
Making and keeping a proper budget also provides peace of mind. Life can throw a lot of challenges at you and your bank account but if you’ve set up your budget properly and consistently stick to it you can rest assured that your finances will be covered no matter what happens.
It’s important to have a balance with budgeting. Allow for some flexibility with it. Budgets are great servants but bad masters. Don’t be too strict with your budget that it restricts you from being able to follow any of the other principles listed here.
6. Be wise with credit
The thing that separates those with credit card debt from those without, is their mindset toward credit cards. Those who never have credit card debt habitually use credit cards like debit cards. Or in other words, they only use credit card cards when they have the money! This might be a paradigm shift for some. After all, isn’t the main appeal to using credit cards being able to buy things now, when you don’t yet have the money? This thinking is a slippery slope and it’s one of the reasons nearly half of Americans have credit card debt.
The real key to using a credit card correctly is to treat it exactly like it’s a debit card and only buy when you have the money in your bank account.
There’s also an additional benefit you get if can train your mind to develop this into a habit — free rewards. Most credit cards have rewards that come with every single purchase. If you had a credit card that received 1% cash back you’re basically giving yourself 1% back on everything you would already be purchasing.
Please don’t let the fact that you’re earning points encourage you to purchase more though. You should never buy stuff just because you get cash or points. One reason financial advisors recommend not using credit cards is that people tend to buy more when using a card and less when using actual cash.
An important word of caution: If you have a bad habit with credit cards and don’t think you can change your habits, it might be good for you to cut up those credit cards to make sure you’re only spending when you have the money.
7. Maximize your resources
The next step towards smarter spending is knowing that sometimes you don’t need to spend at all. Frugal people recognize that there are some things that you should spend money on and other things you shouldn’t.
What you should and shouldn’t be purchasing is totally dependent on you and your own situation but there are still loads of things you can do today to better reuse and repurpose your resources.
For example, this could be:
- Turning old clothes or linens into rags, handkerchiefs, tote bags, or even pet beds.
- Using empty tissue boxes to store plastic bags or as a mini trash can for your car.
- Repurpose glass jars as storage containers for food, small items, or vases for flowers.
- Transform cardboard boxes into storage bins, and organizers, or create custom drawer dividers.
- Use egg cartons as seed starters for your garden.
- Turn old furniture into new by sanding, repainting, and reupholstering.
And the list goes on and on.
You should strive to develop the habit of extending the life of all the resources you currently own. This could be regularly flipping and rotating your mattress, better caring for your car, etc.
Those that are frugal also tend not to waste much. For example, instead of throwing out the food that nobody ate at dinner time go ahead and package it up and use it for leftovers.
8. Do it yourself
Nowadays you can learn to do just about anything yourself with online videos as well as useful AI tools. Doing this will not only help you save money but will put a few other useful skills in your belt. Now, this doesn’t mean taking on any and every project that comes up. There are certain things you absolutely should outsource to a professional. But even so, it’s wise to push yourself here as the savings will really start to add up.
As a general guideline, projects that involve specialized skills or could be dangerous if done incorrectly, such as electrical or plumbing work, are best left to professionals. Projects that are less complicated and require minimal skills, such as painting or basic home repairs, can often be done yourself with the right tools and resources.
“Doing it yourself” also means doing things yourself instead of buying pre-made. For example, chopping up your own vegetables instead of buying them pre-chopped. Most things that are pre-made for you will cost you extra because you’re essentially paying for the price of convenience. Often times though, it really doesn’t take that much longer to just do it yourself.
9. Practice, practice, practice
While some of these principles allow for immediate savings, an important thing to remember is that frugality, like most things, is a skill and the better you get at it the more you’ll be able to save.
As you practice all of these principles you’ll start to notice opportunities to be frisk that you didn’t see before. This could be finding ways to better handle meal planning, using more energy-efficient appliances, bike riding or carpooling to work, negotiating a better mobile phone deal, free TV with an antenna, packing a lunch instead of eating out, unplugging electronics only run full loads of laundry, etc.
Practicing these principles will take some deliberate effort on your part and may be difficult at times, but the long-term rewards and peace of c you gain are well worth the sacrifice.
Conclusion
In conclusion, by optimizing the ways you spend money on a daily, weekly, and monthly basis, you can really start taking control of your finances. Remember, the goal of frugality is not simply to accumulate money for the sake of having more money. By establishing good habits and making smarter financial choices today, you will almost certainly be able to build a brighter tomorrow for yourself and those you love.
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