Frugal living is spending less than you earn. It’s knowing how much you spend each month. It’s reducing waste. It’s making educated buying decisions rather than simply going with whatever costs the least. Frugal living allows you to have a lifestyle that might not otherwise be possible. Spending less might mean the ability to work less. Spending less might mean reducing debt and/or increasing savings.
Money is one of the biggest stressors in our modern lives. By simplifying your relationship with money via frugal living, you reduce this stress. You buy what you need with confidence, use what you have more wisely, and worry less about money.
What does frugal living have to do with simple living?
- Fewer worries about money frees up your mental energy for other things (plus it reduces stress!)
- Less buying leads to less stuff to organize, clean, and maintain.
- Having an emergency savings fund is a good feeling (think security and self sufficiency).
- Having no debt (or less debt) is also a good feeling.
- Less waste reduces the burden on our planet.
- Keeping up with the Joneses is just plain exhausting.
- Making more frugal decisions with money can lead to more freedom (early retirement perhaps?)
- You’ll pass a worthwhile legacy on to your children.
Deprivation Is For The Birds
You tell your friends you’re frugal. You constantly deny yourself the finer things in life. And you hate it. You’re not being frugal – you’re just deprived.
Frugal living is not the same as deprivation.
Frugal living should feel good, not bad. It’s just as simple as that.
Speaking of Birds – Cheap Cheap Cheap
You never tip your waitstaff. You eat food that is probably spoiled because you can’t bear to throw it out. You sleep on a mattress you found in a dumpster. You’re cheap, not frugal!
Frugal is not the same as cheap.
The Big Question
In order to spend less than you earn, you’ll need to figure out two things. First thing is your after-tax income (what you bring in). Second is your expenses (what you pay out). I don’t mean to oversimplify, but I know there are plenty of folks out there who have never actually figured this out. Ready for the big question?
Here it is… Does your income exceed your expenses?
No matter your answer – let’s talk about two of your most important tools for frugal living – tracking spending and having a budget.
This Little Penny Went to Market, That Little Penny Stayed Home…
You want to build a budget. Or you’ve already got one, but for some reason – each month you seem to spend more than you predicted on food or clothes. What you need to do is track your spending.
This takes a bit of time and effort, but it’s SO worth it. You can approach this a couple of different ways:
- Save your receipts in a big envelope or with a binder clip.
- Get a little notebook and carry it with you. Make a quick note in it each time you spend money (how much, where, what).
- Get a little accordion file and file your receipts by category as you go (if you use cash, use a small slip of paper to record what you spent and place it in the correct pocket.)
- If you charge everything to a debit or credit card, use the statement at month’s end to record what you spent.
You can use any or all of the methods above. It just depends on your individual style of handling money on a day-to-day basis. Sit down daily/weekly/monthly and write down everything you spent. You can keep this on paper, build yourself a spreadsheet, or use a program specifically designed for this purpose.
Once you see even one month’s worth of spending, you should have a feel for what categories make sense for you.
Some examples are:
- Food (groceries, restaurants, snacks)
- Housing (mortgage or rent payments, HOA dues, insurance, maintenance, repairs)
- Utilities (water, sewer, garbage, electric, gas, cable, phone)
- Cars (loan payments, insurance, maintenance, repairs, gas)
- Work expenses (dry cleaning, bus/subway fares)
- Entertainment (movies, movie rentals, clubs, museum entrance fees)
- Fees (bank fees, service fees, library overdue charges)
These are only examples, spend some time and brainstorm what categories feel right to you. You might choose to keep it very high level or you might choose to break each broad item into more detailed categories.
Bear in mind that you will spend more time entering your spending the more detailed you get. You might find that broader categories are enough to help you create a workable budget.
Robin’s Real-Life Example: Alan and I began doing this quite a while ago. We charge nearly everything each month on a rewards credit card (which we then pay in full at month’s end). We had general categories such as food, entertainment, utilities, mortgage payment. We didn’t save receipts, but thanks to the credit card statement, had a pretty good idea which expenses fell into which categories.
Of course, for stores like Costco and Target, where we bought food, household items, and clothing – we ended up with a generic Costco and Target line item. Not very helpful when it comes to understanding how much you spent on food versus how much you spent on toilet paper and soap.
Then I read Your Money or Your Life by Joe Dominguez and Vicki Robin. I decided to take it to the next level. (The link below is an affiliate link, but this is one amazing book!)
Now I save all of our receipts and I sit down at the end of every month and input every penny we spent into detailed categories. I was more than a little surprised at what exactly the money was going towards. We use this check-up each month to see if our budget is accurate.
We even decided to break down our food budget into super-detailed categories – for instance I have a coffee line item, a meat line item, and a treats line item. We wanted to see if we were spending an inordinate amount in any of these categories (I have a weakness for dessert and lattes, Alan has one for dessert and steak!)
How to Pull a Budget Out of Your Hat
Guess what? Now that you’re armed with what you spent on a monthly basis – a budget is absolutely child’s play to make. Take your spending categories and turn them into budget line items. You might roll up the more detailed ones into less detailed categories or you might leave them exactly as is.
Next, look at what you spent in each category (do the math if you rolled up two categories into one). Write down (or enter on your spreadsheet) what you want to spend (or can afford to spend) on that line item.
Your end goal should be to come up with a grand total (all the categories added up) that is equal to or less than your income. You might need to finesse a few of the categories (add some there, subtract some there) to make this happen. Don’t forget to add in items like savings and debt repayment to your budget.
Now you have a financial guideline…your own budget!
As you continue to track your spending – your budget should be tweaked to reflect the changes in your spending pattern. The longer you track spending and tweak your budget – the better it becomes!
Being aware of how you spend money is the most critical step in learning to embrace frugal living. To spend less, you have to know what you spend now (tracking your spending) and what you can afford (your budget).
Waste Not, Want Not
I said earlier that frugal living is about reducing waste. When you are more conscious of your money, you spend more carefully. You don’t buy unnecessary items that will clutter up your house. You will most likely buy less disposable items and more reusable ones. This reduces both wasteful spending and the amount of trash we contribute to landfills.
Our modern culture is amazingly obsessed with throw-away items. In the dollars and cents game, it simply makes more sense to buy an item that you can use over and over again.
Be a Better Consumer
I’ve heard people say they are frugal because they buy the cheapest of everything they can find. It makes much more sense to buy an item with a longer life if it’s something you intend to keep for a long time. In fact, I’d say you should buy the best quality you can afford. Instead of spending $20 on something that needs replacing every two years, spend $50 on something that will last for ten years.
Frugal living is very practical. Spending $50 instead of $100 to own an item for the same amount of time just makes sense.
Before making big purchases (think appliances, cars, furniture) – do a little research. Use the internet, Consumer Reports, your friends and family. See what others had to say – it just may save you from a costly mistake or steer you in a direction you didn’t know existed. Frugal living is about making better buying choices.