In today’s society, frugality is an elusive virtue. However, it’s not impossible to become frugal. It’s all in the mind. If you starting thinking frugally, you will start to act like a frugal person.
What makes a person frugal? A frugal person is thrifty and economical. A frugal person is not wasteful, but resourceful. A frugal lifestyle is someone who is happy with less and lives within their means.
Imagine the peace of mind that comes with not having any debt payments to make next month? Or the feeling of security that you get from having a small emergency fund available?
Here are some small, but important, ways to create frugal habits that can lead to a healthy financial life.
1. Create a Budget
It’s important to have a record of all your income and expenses. This is what a budget is. You need to track everything, because sometimes, you don’t know what’s going in and out if you don’t write it down on paper. It’s best to learn how to use Excel or a similar software to record this information on your computer. This is the first way to take control of your finances.
2. Live Below your Means
You must spend less than what you make. If you keep spending more than what you make, you will never have. As Dave Ramsey would say, “act your wage.” This means that the total of all your expenses must be below your income. If you are above your income, then you need to make some budget cuts. The way to approach this, is to know what expenses are a priority, and which ones are not. In other words, put needs at the top of your priority list, and wants at the bottom.
3. Build an Emergency Fund
Once you have a budget and know where your money is going. It’s important to build an emergency fund. According to Dave Ramsey if you have debts, the key is to build a $1,000 emergency fund first. Once you have your debts paid off, then build a 3-6 months emergency fund. You never know what life will bring. There could be unexpected health, house or car bills—so you have to be ready. The emergency fund is only for genuine emergencies.
4. Stay Debt-Free
Debt is the biggest killer of financial health. In fact, it’s a poison that seeps into other parts of our lives. If you have debt, eliminate it and do it as fast as you can. One of the keys to becoming financially strong, is to live a debt-free lifestyle. Once you have the initial $1,000 emergency fund, stop saving, and start throwing all your money into paying off debt. Once you pay off all debts, then commence saving again.
5. Buy Discount and Second-Hand
People can look down on this sometimes, however to succeed in personal finances you need to be thrifty. This is where you would look for discount grocery and second-hand furniture stores. You can also buy a large portion of your clothes in thrift stores like Goodwill, or off-price retailers like Marshalls. Don’t be afraid, there are surprisingly a lot of good things there.
6. Limit Outside Entertainment
Outside entertainment is anything between going to the movies, eating out or going to the amusement park. They are big drainers of money and when you are building stability in your finances, it’s not the best idea to blow it on these things. It’s important to have fun, but again, you can be thrifty about it. You can put a limit on it, like going out once or every two months, or watching a movie online.
7. Have a Financial Plan
Once you’ve saved your 3-6 months emergency fund, it’s time to start investing in your future. It’s time to think about how you can make your money, make money for you. Everybody’s direction is different, and there are many different options out there. Some of the most stable ones include, starting a business, owning real-estate and retirement investment accounts.
Have fun becoming the boss of your life!