How to Start Living Frugally
Analyze your current monthly purchases., Create a personal budget., Spend less than your earn., Invest money for savings and emergencies., Set up automatic payments., Avoid impulse buys., Keep your interest rates down.
Step-by-Step Guide
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Step 1: Analyze your current monthly purchases.
Print out all your bank and credit card account statements, and give them a hard look.
Record how much you earn and how much you spend.
Use different colors of highlighters to mark essential, recurring, and non-essential expenses to help you identify where you spend your money.Essential expenses include things like housing and food.
Recurring expenses include things like insurance and service charges.
Non-essential expenses include luxuries and entertainment.
Once you’ve characterized each expense, you can see where you’re spending your money and where you could potentially create the most savings.
Non-essentials are the most obvious category in which to make cuts.
However, if you’re spending half of your monthly earnings on rent, it might be time to think about how you could cut down your housing costs by moving or taking on a roommate.
Make marks next the expenses you think you can lessen or eliminate. -
Step 2: Create a personal budget.
The best way to manage your money is to plan ahead by predetermining your overall personal expenditure for each month and trying to stick to it.
Use your analysis of your monthly financial statements to create a list of all your projected costs by category.
Identify your financial obligations and set limits on unfixed expenses.For instance, your budget categories may include housing, utilities, transportation, supplies, pets, food, clothing, and entertainment.
Be sure to set reasonable but finite limits on categories where costs aren’t predetermined, like food or entertainment.
Setting a budget will make you aware of how much you’re spending on a given thing.
Monitor your spending throughout the month to ensure you stay on budget.
You could do this tracking your purchases on a spreadsheet that you update each week or by using a financial app or software.
Banking companies often offer customers budgeting apps to help you monitor your expenses.
There are also unaffiliated apps like PocketGuard and Spendee that can help you track finances. , Living frugally generally means living below your means so that you can save and plan ahead for large expenses or emergencies.
When you budget, be sure to set aside some money for savings.The more you can set aside, the better.
However, you can start small, with as little as $50-100 per month.
Once you can comfortably save that much, try increasing the amount over time. , One of the main points of frugality is to help secure your financial future.
And, even the best-laid budgets sometimes fall through.
It’s important to incorporate the future and potential crises into your financial planning.
Populate an emergency fund in a high interest money market or at least in a savings account with your current bank.
Then forget about it.
If you have already done that, then jumpstart your 401(k)/403(b) for retirement.
If you are already maxing that out, then drop it into an index fund (that is, a low-overhead, lower risk investment in all the securities associated with a particular stock index, such as the S&P 500).
Anything is fine, except parking it in your checking account and having access to it through your debit card.
If you get a windfall or raise, consider saving or investing it instead of immediately spending it. , Setting up automatic payments can help you track recurring expenses and avoid late fees.
They’re especially useful for rents, utilities, and monthly service charges.
It might be frightening to have so much money taken out of your account immediately each month, but it is far better to scrape by until you adjust than to miss a payment here and/or there and have your credit report take a hit from late or non-payment.
Automatic payments will also help you immediately judge how much you have left over for variable expenses in your monthly your budget.
Most companies have automatic payment options that you can enroll in online or over the phone.
Your bank should also allow you to set up automatic payments through their online banking app. , Purchasing things on a whim, like a fancy dinner or state-of-the-art juicing machine, can suck up a lot of income.
Practice patience with your spending; exercising will power in the short term can help build long-term financial solvency and gain.
Wait to buy things until they fit in your budget.Often times you’ll find if you sit on a non-essential purchase, you’re not as keen on it as you were at first anyway.
Wait to see if something is really worth purchasing. , Accrued interest on your debts can seriously add up.
If at all possible, pay off loans as quickly as possible to avoid paying exorbitant interest charges over time.Avoid using credit cards with high, variable interest rates.
If your credit card has more than 15% APR, shop around for a better deal.
Avoid putting purchases on credit cards if you know that you will not be able to pay them off within your monthly payment period.
If you need to spend more than you can pay, consider transferring the balance to a new credit card with an introductory rate of 0%APR for 12-18 months and free balance transfers for 6 or more months.
Then, pay off the balance as soon as you can before the interest kicks in.
If you have a mortgage or other sizable loan, try to overpay a bit each month.
Even a monthly overpayment of $100 can save you tens of thousands of dollars in the long run. -
Step 3: Spend less than your earn.
-
Step 4: Invest money for savings and emergencies.
-
Step 5: Set up automatic payments.
-
Step 6: Avoid impulse buys.
-
Step 7: Keep your interest rates down.
Detailed Guide
Print out all your bank and credit card account statements, and give them a hard look.
Record how much you earn and how much you spend.
Use different colors of highlighters to mark essential, recurring, and non-essential expenses to help you identify where you spend your money.Essential expenses include things like housing and food.
Recurring expenses include things like insurance and service charges.
Non-essential expenses include luxuries and entertainment.
Once you’ve characterized each expense, you can see where you’re spending your money and where you could potentially create the most savings.
Non-essentials are the most obvious category in which to make cuts.
However, if you’re spending half of your monthly earnings on rent, it might be time to think about how you could cut down your housing costs by moving or taking on a roommate.
Make marks next the expenses you think you can lessen or eliminate.
The best way to manage your money is to plan ahead by predetermining your overall personal expenditure for each month and trying to stick to it.
Use your analysis of your monthly financial statements to create a list of all your projected costs by category.
Identify your financial obligations and set limits on unfixed expenses.For instance, your budget categories may include housing, utilities, transportation, supplies, pets, food, clothing, and entertainment.
Be sure to set reasonable but finite limits on categories where costs aren’t predetermined, like food or entertainment.
Setting a budget will make you aware of how much you’re spending on a given thing.
Monitor your spending throughout the month to ensure you stay on budget.
You could do this tracking your purchases on a spreadsheet that you update each week or by using a financial app or software.
Banking companies often offer customers budgeting apps to help you monitor your expenses.
There are also unaffiliated apps like PocketGuard and Spendee that can help you track finances. , Living frugally generally means living below your means so that you can save and plan ahead for large expenses or emergencies.
When you budget, be sure to set aside some money for savings.The more you can set aside, the better.
However, you can start small, with as little as $50-100 per month.
Once you can comfortably save that much, try increasing the amount over time. , One of the main points of frugality is to help secure your financial future.
And, even the best-laid budgets sometimes fall through.
It’s important to incorporate the future and potential crises into your financial planning.
Populate an emergency fund in a high interest money market or at least in a savings account with your current bank.
Then forget about it.
If you have already done that, then jumpstart your 401(k)/403(b) for retirement.
If you are already maxing that out, then drop it into an index fund (that is, a low-overhead, lower risk investment in all the securities associated with a particular stock index, such as the S&P 500).
Anything is fine, except parking it in your checking account and having access to it through your debit card.
If you get a windfall or raise, consider saving or investing it instead of immediately spending it. , Setting up automatic payments can help you track recurring expenses and avoid late fees.
They’re especially useful for rents, utilities, and monthly service charges.
It might be frightening to have so much money taken out of your account immediately each month, but it is far better to scrape by until you adjust than to miss a payment here and/or there and have your credit report take a hit from late or non-payment.
Automatic payments will also help you immediately judge how much you have left over for variable expenses in your monthly your budget.
Most companies have automatic payment options that you can enroll in online or over the phone.
Your bank should also allow you to set up automatic payments through their online banking app. , Purchasing things on a whim, like a fancy dinner or state-of-the-art juicing machine, can suck up a lot of income.
Practice patience with your spending; exercising will power in the short term can help build long-term financial solvency and gain.
Wait to buy things until they fit in your budget.Often times you’ll find if you sit on a non-essential purchase, you’re not as keen on it as you were at first anyway.
Wait to see if something is really worth purchasing. , Accrued interest on your debts can seriously add up.
If at all possible, pay off loans as quickly as possible to avoid paying exorbitant interest charges over time.Avoid using credit cards with high, variable interest rates.
If your credit card has more than 15% APR, shop around for a better deal.
Avoid putting purchases on credit cards if you know that you will not be able to pay them off within your monthly payment period.
If you need to spend more than you can pay, consider transferring the balance to a new credit card with an introductory rate of 0%APR for 12-18 months and free balance transfers for 6 or more months.
Then, pay off the balance as soon as you can before the interest kicks in.
If you have a mortgage or other sizable loan, try to overpay a bit each month.
Even a monthly overpayment of $100 can save you tens of thousands of dollars in the long run.
About the Author
Larry Ellis
Brings years of experience writing about home improvement and related subjects.
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