Frugal: is being thrifty, prudent or economical in the consumption of consumable resources such as food, time or money and avoiding waste, lavishness or extravagance.
The way society may perceive frugal is a person on the low economic scale who obsesses over the last few cents between budget tinned baked beans and watties. But with each extra cent that person saves from having less luxury in day to day life, the more they can see their bank account go up. The word frugal has a negative stigma and this needs to change.
Why is being smart with your money seen as such a bad thing? Compared to a person driving round in a flashy car on hire purchase seen as successful? To get your finances in check and to save, you have to be frugal. Not all of us are millionaire babies and have some kind of talent where they juggle knives while riding a bicycle. Us average billy bob’s need to save where we can; I’m not saying don’t leave the house or just eat bread and water. But just be a little bit smarter and figure out a plan that fits you.
Step One: Track your money
To understand our money habits you must track your financial situation and understand the truth about your spending nature. Create a spread sheet on excel of your expenses and income for the month; it doesn’t have to be detailed. Include dates and income less expense to see where your money is going. This will give you a reality check of where you money is actually going and that you need to make some changes to become wary of wastefulness.
Step Two: Treat yourself
By treating yourself, I am not saying a new pair of shoes or vanilla panna cotta. I am describing how you treat yourself, by paying yourself. What you receive from your pay cheque, slaving at a desk or looking after children covered in glue. Change your perspective of savings that your 10-15% of your pay is going directly to you. When you think about it, that’s not that much for yourself. The rest is going on expenses just to live and so called disposable income is going on dinner and a movie.
Step Three: Insurance
Don’t be mindless, insure your car. I know some people who live by rules that if you are a good driver you won’t have an accident. But if you hit a $100,000 BMW you will be paying this off until you die and forget about planning to buy a house, your deposit has gone on Mrs Jones bumper. Don’t diminish your financial opportunities by making foolish decisions. Look after your assets and protect your wealth. Also look into other affordable insurances such as health, you need to be proactive and protect the savings you do have. Otherwise your penny squeezing has been for nothing.
Step Four: Never stop learning
Knowledge is one of the biggest financial influences; you can create so many more opportunities for yourself. Stepping on the frugal path you can easily educate yourself online; Visit MIT website where you can find course readers, lectures and text books. Also read, go to your public library and expand yourself. Knowledge is something that will enrich you and your financial decisions. You can also do online Excel and Microsoft office free online courses, something to add to your CV and get your career more on the move.
Step Five: Priorities
A common line that we like to spill out to each other is ‘get your priorities sorted.’ But if you are going to be thrifty and not go out to dinner three times a week with your friends, you need some reasons to keep yourself motivated on your frugal journey. Whether it be having an emergency fund or buying a house; goals are important. Also figure out what is most important to you; you will be able to see this by your financial tracker; really think how these things make you feel and the opportunity cost.
Step Six: Why did I buy this?
Write a list of some purchase you have brought over the last month and write how they improved your life or how it made you feel. Then you can start to understand why you are spending money on certain things. Being frugal is about understanding your spending habits and making changes; looking at unnecessary things you buy and could be savings. For example I spent $43 on a breakfast that I barely ate in Hamilton after a night out; I will be adding this ridiculous non frugal dining experience #buyersregret. Something as small as buying vodka and breakfast can help you figure out your financial limits. Frugalness doesn’t have to be extreme and stop you from living life, just be smarter with your money and learn from you previous bad purchasing mistakes.
Disclaimer: The above information is general in nature and not intended to be financial advice. You should consider seeking professional advice before following any suggestions in this blog/website.