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Being good about saving money does not come naturally. Saving money seems to go against the natural flow of things; considering we are in a society that highly encourages buying the latest, newest, shiniest product.
Taking control of your finances means completely changing the way you think about money. This post is dedicated to helping you start being more cautious about where your money is going.
Living frugally won’t just happen overnight. If you’re willing to build healthy money habits these tips for frugal living will help you start on the right path.
Make sure you snag my FREE budget template for google sheets!
Table of Contents
Lifestyle Inflation
My number one tip for frugal living!!
It seems like whenever people get a raise, that means they can get a life upgrade.
I got a raise = I can buy a new car or move into a bigger apartment.
I got a raise = Let’s go shopping, drinks are on me!
FALSE!!!
Oftentimes when budgeting you come to a point where the only thing you can do to save more money is make more money. This is an unfortunate reality but there are only so many things you can cut spending on.
Getting a raise should be seen as a fantastic opportunity to SAVE MORE.
If your goal is to retire early, travel more or not stress about the future, increasing your expenses when getting a raise should be seen as unnecessary spending.
Exception: If you live in a bad neighborhood and want to change locations or you don’t have a car and it would facilitate your life a lot, obviously you should look into upgrades for those things. But the general rule of thumb is: if your income changes, your expenses don’t.
It’s a common misconception that having a fancier car or living in a cool, hip apartment is going to increase your quality of life and therefore make you happier. You know what would probably make you happier? Retiring early and doing whatever you want..
This concept is called the Hedonic Treadmill. It is the idea that a raise or higher pay does not result in greater happiness. If you’re interested in reading more, here is a great post by Investopedia!
Related Post: My Budgeting Philosophy
Treat yo’self? Match it to savings!
As much as we want to save more, spend less it can be hard sometimes. (I’m human too guys!) There will inevitably be things we want to spend money on and honestly, that’s ok! Budgeting shouldn’t feel like you’re sacrificing living to stay on budget. So yes, every once in a while it’s ok to treat yourself.
However, if whatever item or experience you’re thinking about purchasing is a significant chunk of change, consider matching that same amount to savings!
For example, let’s say you really really want a new Gucci purse that costs $1,000. You could spend that on the purse and also contribute $1,000 to your savings as well. The key is to wait until you can match the amount to savings to actually make the purchase.
This hurts me to type out! I’ve never been into clothing or brands so I don’t quite understand that desire. However, everyone has different interests and of course I have my own purchases that could seem questionable to someone else.
For me, this purchase was laser hair removal for my armpits.
Yes, that might seem super random but that’s what I wanted to treat myself with. So I paid $1,194 for the laser hair removal and $1,194 straight into my investment account on the same day.
That amount seems huge, could I have gone without making this purchase? Of course! However, if I was going to make a huge purchase, at least I got some additional savings as well.
Note: The match amount should be in addition to any regular monthly savings amount you already have! No cheating!
Related Post: How to Saving Money on ANY Purchase
Unexpected income should go straight into savings.
So you got some additional cash money? You weren’t expecting it, which means you don’t need it for necessary expenses. Transfer it immediately! The temptation is real if you leave it in your checking account, so be proactive and get it outta there.
What is unexpected income? Anything that is not your specific job or way of making money on a regular basis.
Examples of unexpected income:
- Tax refund
- Bonuses
- Stimulus checks (I know we won’t get anymore, but it’s still a good example!)
- Babysitting
- Gifts
For me, these unexpected payments happen a few times a year, so make sure to take advantage of them when they do happen!
Pay yourself first.
What does “pay yourself first” mean? Two words here. Auto-transfer.
Paying yourself first means prioritizing your savings.
Auto-transfer is the holy grail of saving money. I auto-transfer into my Roth, my trading account, my sinking fund savings accounts and to my down payment savings account every month.
That seems like a lot so let’s break it down. How do you pay yourself first?
What are you saving for? How much do you want to save?
If you’re reading this you have a financial goal in mind. Whether that be retirement, a down payment, paying off student loans or other debt, you have a money goal in mind so let’s use that!
Anything that you want to save for should have an auto-transfer scheduled for after your paycheck is received. If you have not done so already, I would suggest making a budget or figuring out how much money you want to save so you know exactly how much to auto-transfer without risking overdraft.
Tips for paying yourself first successfully:
- Create separate bank accounts. I have an entire post dedicated to the four savings account types everyone should have. Having separate accounts will help you better organize your different financial goals. Click here to read that post.
- Don’t transfer too much, learn how much to transfer. One of the biggest mistakes is being too aggressive and then possibly over-drafting your account. Over-drafting will result in fees so you want to make sure to avoid this.
- Track your expenses. It sounds like a pain but tracking your expenses will tell you how much you actually spend and how much you can afford to save.
- Learn which expenses you can cut to save more. If you did number 3, now you know exactly how much you spent, so let’s go one step further. Look at what you spent and learn about your habits. What did you purchase that was unnecessary? Why did you make that purchase. Get to know your own spending habits and cut down on unnecessary purchases.
The 48 Hour Rule.
It’s very easy to get sucked into making a purchase. However, oftentimes we don’t need, or even really want, the item; we’re just excited about making the purchase.
The 48 Hour Rule is very simple and helps mitigate this excitement. If you want to purchase something, put it in your cart and hold off on clicking “check-out” for at least 48 hours. Then, if you come back after 48 hours and truly still want to make the purchase then go ahead.
I often get very excited to make a purchase, almost giddy. Then I’ll wait for it to arrive, open it, use it once, then never look at it again. These sorts of purchases can be avoided by applying the 48 hour rule.
How much did you work to pay for it?
The last budget tip I’ll share today. When you’re going to make a purchase, calculate how much time it took to pay for it.
For example, when I was in college, my minimum wage job paid me $10.50 an hour. If I wanted a Starbucks drink that would cost me 3 to 4 dollars. Which means, every time I purchased a Starbucks drink, that was 20 minutes of work I did to pay for it.
Once I started calculating how much time it took me to pay for things, I immediately cut my spending. I realized a 10 dollar salad from Sweet Greens was not worth an hour of my time, so I went to the grocery store instead.
Doing this simple calculation will help you see what is more valuable to you and hopefully help decrease your spending!
Final Thoughts
If you begin implementing all these different strategies and tips for frugal living, I guarantee you’ll slowly start changing your money mindset and build healthy financial habits.
You will become more aware of what you’re purchasing and what is a need vs a want. The goal is to become more intentional with your money. Spend money on the things that will actually bring you joy while still preparing for your future.
Which of these have you tried out?
Let me know what you think! Leave a comment below or send me an email!
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