Frugal Living: Complete Overview Fro Beginners

Frugality is a way of life.  It’s a mindset that once you adopt becomes a part of who you are.  You may think about being frugal as either a virtue or a drag, but the reality is that living a frugal life opens you up to the ability to enjoy so much more. 

Managing your money can be difficult and stressful.  Thinking you’ve been smart about money only to reach the end of the month and find yourself in the red is a stressful place to be; but when you employ only a few simple tips for frugal living, you can find yourself easily spending within your limits and even saving money at the same time. 

What does it mean to be frugal?

Frugality is all about spending less than you earn.  If your income consistently exceeds your expenses, you have the ability to use this extra money however you see fit.  Far from hindering you from enjoying life’s little treasures, frugal living allows you the freedom to enjoy life more than if you were constantly struggling to keep up. 

If you can make being frugal with your money an automatic reflex, it becomes that much easier to reign in spending without feeling as though you’re constantly denying yourself.  The more you practice being frugal, the easier it becomes until you find the urge to overspend isn’t present to begin with.  If you’re looking to become a more frugal person, here is a great place to start:

Creating a budget

There’s much more to creating a budget than just figuring out what you’re going to spend your money on each month.  A budget is going to be your blueprint for your new frugal life, so carefully building and refining it is the key to successful saving. 

The first thing you need to do when creating a budget is to figure out what your basic expenses are.  Whatever constitutes the bare minimum you need to spend your money on each month in order to get by- rent, utility bills, groceries, etc.- will be the baseline of your budget.  If you like, you can include whatever money you want to put towards savings and/or investments in this category.  It may be helpful to think of these as mandatory expenses each month to ensure you reach your savings goal.

After you’ve added up your basic expenses, now you’ll want to look at whatever discretionary expenses you have each month.  These are any things that aren’t absolutely vital- going out to eat, entertainment, etc.- and will be the things you chip away at in order to reduce your spending.  When looking for places to make cuts, look over your bank statements from the last two months and see what you’ve spent your money on.  You may find you have subscriptions that you don’t need or things that you’ve spent more money on than you realized.  The painful part of budgeting is getting rid of the excess, but it opens up more money to spend on the things you truly want.

One tip for budgeting successfully is to be sure you’re looking at your net pay rather than your gross pay.  Making the mistake of creating a budget based around the amount you earn before taxes are taken out leaves you short come tax season, especially if you earn money doing freelance work.  If you aren’t sure how much you’ll end up owing, overestimate it.  You don’t want to spend the entire year thinking you’re saving money only for the IRS to take it all in April.

Building a savings account

A savings account is a place where you can securely store money for quick and easy access, earing you a small amount of interest with very little risk.  The money you put in a savings account is slightly less accessible than the money in your checking account, with federal law limiting you to six transfers or withdrawals a month. 

Savings accounts are typically used to store three to six months of living expenses for you to use in case of emergency.  Having the money separate from your checking account creates distance between your everyday spending money and the money you reserve for later use.  While you earn a small amount of interest from the money you keep in a savings account, anything over six months of living expenses would be better put into an investment where it would make substantially more interest.

When choosing where to open a savings account, online banks typically offer the highest yield for your money.  There are plenty of online banks that charge no monthly maintenance fees and don’t require a minimum balance, so find one that has a high yield and slowly begin building your savings.  Automatic transfers to your savings account are a great way to commit to building your emergency fund, and your newly created budget will help you figure out how much to begin putting in.

Investing your money

Any money that you’ve built up beyond your savings account can be invested.  Investments let your money make you money, and the earlier you start the more your money will grow.  Investments can help you build a retirement fund that will provide for you when you no longer have a regular income.  If you’re a beginner investor, there are several places you can start.

A 401(k) is by far one of the best places to invest your money.  A 401(k) is a retirement savings plan sponsored by your employer, allowing you to invest a part of your paycheck before taxes are taken out.  You control how your money is invested in a 401(k) and your employer will match the amount that you put in up to a certain limit.  Your employer’s contribution to your retirement fund is what makes a 401(k) such a great investment, so building up to the highest amount offered by your company lets you take advantage of what is essentially free money.

If your workplace doesn’t offer a 401(k), another way you can begin investing is through the use of an investing app such as Acorns.  Acorns has you link your debit or credit card and then rounds up all of your purchases, automatically investing the change in a portfolio of exchange-traded funds (ETFs).  Using any number of investment apps is a great way for people who don’t know anything about investing to start putting their money to good use.

Tips for frugal living

Creating a budget, building a savings account, and investing your money are all the framework for a frugal life.  But the real work comes from making frugal choices in your daily life in order to reduce your spending.  You can only receive the benefits of saving money if you spend less than you earn, so living frugally is the crucial element to achieving your financial goals.  Here are a few simple tips to help you live frugally:

  • Plan ahead. Always plan out what you’re going to buy before you go to the store.  If you make a list of the things you need, then you’re less likely to buy things you forgot you already have or splurge on things you don’t need.  Create a meal plan for the week to help reduce food waste and avoid the temptation to stop at the drive through on the way home from work.
  • Compare prices.  While it can be convenient to do all of your shopping in one store, comparing prices between different supermarkets will help you find the best deals and save the most money.  Be sure to check online as well, as Amazon and other online delivery websites may offer better deals than you’ll find in store.  If you find the best prices ahead of time, you can consolidate your shopping to one or two trips in order to buy everything you need in one go.
  • Be on the lookout for sales.  You never want to buy anything that you don’t need, but you always want to take full advantage of anytime something you buy regularly is on sale.  If it’s non perishable, stock up on about three months worth as stores usually cycle sales around that frequency.  If it is perishable, see if you can buy in bulk and freeze it.  If you can’t freeze it, then only buy the amount you’ll be able to go through before it goes bad.
  • Clip coupons.  Coupon clipping might seem like a thing of the past, but coupons are still an excellent way to save money.  Instead of tossing those coupon magazines you get in the mail, read them over and see if there’s anything you can use.  When shopping online, you can download a coupon extension such as Honey to search for coupons for you.  Or, you can use an app like Groupon to search for goods and services you can purchase at a discounted rate.
  • Eliminate dining out.  Eating out is one of the biggest wastes of money there is.  It’s almost always cheaper to cook at home than it is to order from a restaurant.  If you take the time to buy and cook your meals instead of ordering takeout, you’ll become more and more comfortable in the kitchen and save on the inflate price of food prepared by someone else.  While you shouldn’t ban going out to eat entirely, it should be treated as a special occasion reserved for celebrations and other social occasions.
  • Prioritize your splurges.  Splurging is a part of life; being frugal doesn’t mean abstaining entirely from pleasure.  If you consciously decide what you wish to spend more on, you can make those splurges guilt-free.  Throwing money at things with reckless abandon makes you second-guess every single expense, but choosing what you want to save on versus what you wish to spend more on is a healthy way of balancing your life.
  • Go minimal.  The bigger your house or apartment, the more you pay in mortgage or rent.  Most people don’t need that much living space, so choosing a smaller home will save you an incredible amount of money that you would have spent on unused space.  Living in a smaller home will also reduce your ability to store junk, helping you avoid the temptation to spend money on things you don’t need and won’t use.
  • Choose friends with cheaper interests.  Spending time with friends shouldn’t always be an expense, but it can be if your friends don’t have the same financial concerns that you do.  Instead of going out for costly dinners or expensive outings, find friends that share similar interests as you.  Joining a social group centered around an inexpensive hobby like hiking will allow you to connect with other people without having to spend a ton of money.
  • Reevaluate your expenses.  Even after creating your budget, go back once every few months and see if there’s anything that you can now get rid of.  Perhaps you find there’s something you aren’t using that you thought you needed, or there’s an expense that you can cut down on.  Being frugal in your use of energy and heat can help lower your monthly utility bills and reduce the amount you waste.

Why it pays to be frugal

Frugal living doesn’t have to be devoid of fun and recreation.  In fact, some of the most frugal people get more enjoyment out of life than anyone else.  Carefully choosing what to spend your money on allows you to truly enjoy and appreciate the things in life that you do choose to splurge on.  If you don’t waste money on daily expenses, you can afford to do things like travel and put a down payment on a home. 

Living frugally protects your future self from the fear of financial insecurity.  It relieves the day-to-day worries and stresses about money that plague most people and keep them from being in the present moment.  Frugal simple living is the key to a financially successful life, and it’s never too late to start.