Living frugally can be very beneficial for your financial health. Doing so, however, is not always as easy as it seems, especially if you haven’t done so in the past. To live frugally, you need to change the way you think about money, but this isn’t always easy. Americans like their “things” and generally will pursue them even if it means going into debt to get them.
Many people think being frugal is the same as being cheap, but that couldn’t be further from the truth. Let’s explore some characteristics of living frugally so we can better understand what living the frugal lifestyle means.
What Does a Frugal Lifestyle Mean?
The simplest definition of frugality is making intentional choices with your spending. This is entirely different from being cheap. When someone is cheap, he or she endeavors to spend the least amount of money possible at the cost of everything else. This means that someone who’s cheap might compromise quality for the lowest price. Cheapness can sometimes damage friendships or make for difficult situations.
Frugality, on the other hand, means being smart with your money and not wasting it frivolously. When making a purchase, it means finding the best quality item at the lowest possible cost. It might also mean going without things that aren’t necessary or contributing to your enjoyment in a meaningful way. It’s also about making the money you have go further by spending wisely and making smart choices about purchases. Being frugal doesn’t mean depriving yourself of important or essential things or enjoying life less.
For instance, being frugal might mean buying a home that’s smaller than you can actually afford, because, even though you can afford a larger home, you don’t really need one. Alternatively, it could mean buying a car that’s a year or two old rather than a brand new one off the showroom floor. While these are big purchases that you can save thousands on, there are many day-to-day purchases where you can apply the same principles of frugality.
Two Important Characteristics of Frugal Living
Living the frugal life carries with it some distinct characteristics that, if recognized, can help in changing your spending habits. Consumers who aren’t frugal tend to spend more money than they have, and this can lead to a consistent deficit. While you may think having more than you can afford is making you happy, in reality, you can set yourself up for a difficult existence. Money issues can make for a stressful life, and can lead to other problems such as damaged credit or jeopardized personal relationships. The good news is that while you may not have lived frugally up to this point, change is possible, if done a step at a time. There are two important factors that you should concentrate on to start incorporating a frugal mindset into your daily living.
Factor #1: Financial management
Most Americans know very little about financial management. Unfortunately, this isn’t a subject that’s taught in school as part of the everyday curriculum. Therefore, many consumers are unprepared to manage their money when they start earning it and paying expenses. With the easy availability of credit cards and other forms of credit, it’s easy for many to get into financial trouble.
Managing your finances begins with a budget. This means understanding exactly how much money you’re bringing in every month and exactly how much you’re spending. This will take some time and research but is a necessary first step in putting together your budget. Once you have all the information necessary, you’ll be able to see where your money is going and how you can reduce your expenses down to only those that are necessary. Armed with this information, you can begin to make frugal choices with your money, because an integral part of living frugally means being smart with your purchases.
Getting a handle on your money and knowing exactly where it’s going is probably the single most important step in getting started living the frugal lifestyle. Without budgets and spending plans, you’re flying blind when it comes to your finances. In a world that’s always handing you the unexpected, that is a recipe for disaster.
Factor #2: Debt reduction
Having a large amount of debt usually means you’ve been living above your means or being irresponsible with money. Occasionally, a large debt load is a result of unexpected medical bills or student loans. If you want to live the frugal lifestyle, then you need to get your debt under control.
The high interest paid on debt is unnecessary and can have a very detrimental effect on your finances both short-term and long-term. Eating up cash flow with credit card payments takes away from your ability to be more productive with your money, and it can be damaging to your credit if you miss payments because you can’t afford to make them.
The good news is that while consumer debt is higher than it’s ever been before, there are far fewer delinquencies than when debt hit its previous peak during the Great Recession. This means that many have learned their lesson and are keeping debt at a manageable level. However, carrying unnecessary debt is never a good idea. Many believe that you must carry debt to maintain a good credit score, but this isn’t the case. While proving that you’re a good credit risk by borrowing and paying back debt responsibility is integral to building up your credit score, struggling with debt is not. Never borrow money that you cannot afford to pay back; when you do borrow, pay it back promptly. This is the best way to improve your credit score.
If you’re struggling with debt, you should start to think outside the box on how you can raise cash to get it at least paid down and then eventually paid off. Here are some ideas to get you started.
1. Have a yard sale
This can be a wonderful way to raise cash while de-cluttering your life at the same time. You’ll be surprised how much money you can raise over a weekend just by getting rid of things you no longer want or need. Just be sure you direct whatever proceeds you make to debt and not to more spending.
2. Sell unwanted items on the internet
Online auction sites such as eBay and Poshmark are great ways to sell specific items that are in good condition and desirable by other consumers. Always be specific about the details of your item and be sure to be honest about any wear or flaws the item may have. Your success with selling items online will rely heavily upon the satisfaction of your past customers.
3. Sell items through consignment
Handing items over to a consignment shop is a good way to take the hassle out of selling items you no longer want or need. You’ll pay a commission on the items but you won’t have to do any advertising or negotiating with buyers.
4. Start a side business
Many of us have talents and abilities that go beyond what we do for a living. This means you could possibly make some money by utilizing your skills or through one of your hobbies. Many times, a local farmer’s market is a good place to sell items that are handmade, or you could look to sites such as Etsy to market your wares.
While these are just a few ideas to get you moving in the right direction, there are many more if you put some thought into it. Thinking this way will get you in the frugal mindset and help you to begin living in a way that’ll help you build a better financial picture for yourself now and in the future. Living frugally doesn’t mean you’re cheap; it just means being smarter with your money and making better choices when you spend it.