Do you live frugally? If you do, read on to learn why this practice is likely good!
How is frugal different from being cheap?
The word “frugal” is sometimes associated with being “cheap.” In truth, they are two very different things. Per the Dictionary definition, frugal is an adjective to describe “sparing or economical with regard to money or food.” Synonyms for frugal include thrifty, sparing, economical and saving. Frugal equals careful spending whereas cheap is an insult. Should you describe someone as cheap, that is essentially criticizing them for their unwillingness to spend money.
It may be beneficial.
In couple relationships, one person may be more likely to spend money and the other prudent with spending. Having different approaches to spending and saving can sometimes be a source of stress. However, it can also provide a well-needed balance so that people can enjoy living without overextending finances. Frugal people are often quite wise when it comes to spending and saving money.
Am I frugal?
People who are frugal aren’t unwilling to spend money. They simply choose to spend it wisely and when needed. In other words, they exercise control in spending. Frugal people often share some common traits such as:
- Desire to save more than spend.
- Lack of desire to impress others by owning material things.
- Can enjoy what they already have.
- Willingness to go without something brand new.
- Willingness to shop around for competitive prices.
- Understands the difference between wants & needs.
- Considers the present & the future when making monetary decisions.
- Seeks ways to reduce debt or avoid it entirely.
- Tendency to waste less.
- Eats at home to save money.
- Monitors store sales and waits for good deals.
- Shops secondhand.
- Practices wise habits such as turning off unnecessary lights to save money or only running the dishwasher when full.
- Chooses quality over quantity.
- Enjoys the trend of going back to basics.
- Declutters regularly to avoid excess or unnecessary extras.
- Feels empowered & satisfied.
Budgets: restrictions vs. choice?
Frugal people often create home budgets to allocate funds. A budget is a financial calculation plan based on income and expenses for a defined period. The word undeservingly carries negative connotations, especially for those who view budgets as spending restrictions. In function, budgets are vital tools that people use to make well-informed spending and saving choices.
Types of home budgets
There are many different types of household budgets. They include and are not limited to:
- Zero-based budget: In home budgeting, this is when your income minus your expenses equals zero. Expenses and spending are planned and accounted for ahead of time. A zero-based budget doesn’t mean spending zero money, rather everything is budgeted so there is zero left over in the end. This is done by listing all sources of income, then allocating funds into categories such as rent, auto, groceries, utilities, childcare, entertainment, savings, and more. All money is accounted for in this type of home budget. (Note that zero-based budget means something different in business where it refers to the process of justifying all expense items from scratch or a zero-base per financial period.)
- 50/30/20 budget: This budget categorizes spending and takes into consideration needs, wants, and savings/debt. Necessities account for at least 50% of one’s monthly income, about 30% goes to wants or variable expenses, and 20% is for savings and debt repayment. Many people find this is an effective way to budget and ultimately save a fixed amount of money per month.
- Cash envelopes: This budgeting requires people to put money into an envelope for variable expenses like groceries, gas, entertainment, clothing, etc. The idea is to cover expenses using a set amount of cash in each envelope without using a credit or debit card. While this may sometimes be challenging to do, essentially people are more careful with spending when cash vs. card is used. Therefore, this type of budget encourages responsible spending.
What we’ve learned
Being frugal isn’t about not spending money. It’s a lifestyle choice whereby people are sensible about spending and saving. Frugal people tend not to buy things to impress other people. Nor do they need to own the newest invention or gadget on the market. Rather, they spend carefully and prepare for the future by building savings. In addition, they employ smart practices such as creating a household budget so that they are in control of managing their financial affairs. Being frugal is not a dreadful thing, rather it means one is wise and in control.
This article is purely informational and is not a substitute for financial advice.