There is More to Frugality than Clipping Coupons
Making a commitment to frugal living involves more than simply clipping coupons and going without fun stuff. If you want to live a truly frugal lifestyle you have to understand your money—where it comes from, where it’s going, etc. It’s just as much about proper money management as it is about denying yourself that Saturday afternoon trip to the movies.
Start with a Budget
Before you can truly commit to frugality you have to know what the ratio of money coming into your life is to the money going out. The best way to come up with that figure is to create a budget. Creating a budget is easier than it seems—you can use any one of the millions of budgeting tools and checklists that are available. Simply fill in the blanks and viola! Done!
Some families create a more detailed budget—this, instead of simply listing category expenses like “credit card bills,” “food,” etc–itemizes each payment that gets made. It lists each individual credit card bill, separates line items for money spent in grocery stores as opposed to money spent in restaurants, etc. These incredibly detailed budgets are helpful because they can double as a checklist for each bill or payment that you need to make. Nothing falls through the cracks because of forgetfulness.
Paying Down Your Debt
Being frugal doesn’t mean making only the minimum payments on your debts. This actually flies in the face of frugality because it makes it harder for you to pay your debts off completely and adds to the amount of money you pay.
Still, you might not have enough money coming in to feel comfortable devoting huge chunks of your income to your debt payments. What you need to do is come up with new minimum payments for yourself.
Here is how you do that:
1. Find out what the minimum payment is on each bill.
2. Figure out what your monthly interest and fee charges are each billing period.
3. Add these two numbers together.
4. Add twenty dollars to that sum.
There’s your new minimum monthly payment. This way you are actively paying down your debt without letting the interest you’re charged added to your balance due.
Saving Money
While you’re still setting up your financially responsible lifestyle, you’re going to be tempted to eschew saving money until you feel like you can spare the money. Don’t fall into this trap! Start saving now. This way, should there be an emergency; you won’t have to rack up a bunch of debt to pay for it.
Setting aside fifty dollars a month might seem like too much to do in one lump sum. If you break it down into a weekly transfer of $12.50, though, it feels easier and still accomplishes the goal of helping you save at least $600 a year. $12.50 a week is, basically, what you would save if you switched from your morning Starbucks stop to drinking drip coffee at home.
Banking Correctly
You obviously want to save more than $600 per year, especially if you hope to someday have the ability to retire. There are a couple of ways to do this. The first is to, as you pay off each debt, add that debt’s monthly payment to your savings account instead of thinking of it as more money to play with. The second is to choose the right bank account in which to save your money.
Forbes has said repeatedly that online banks like Discover Bank are better than traditional banks, particularly in terms of CD rates and the ability to transfer money from checking/savings accounts into investment opportunities. Spend some time learning about your web based banking options and, if the rates are better, consider switching from your current setup to one that is web based.
Now that you’ve figured out how to properly and frugally manage your money, you’re ready to start finding creative ways to reduce the amount of money you spend in your daily life. By now you already know about going green, using coupons and making stuff from scratch.
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