Tired of being broke all the time with no savings and no investments, living paycheck to paycheck, worrying that if you lose your job you will not be able to survive a week much less 3—6 months. I know the feeling, and it took me a long time to get past the fear, and decide to change the way my family handles money. In this post we are going to cover 5 basics on how to be frugal that will get you on the right track and teach you some basic principles of how to live frugal.
Before we start I want you to know that I’m not talking about extreme cheapskates where you are so frugal people look at you like some sort of freak show, and you family despises you because you so tight with the money that they can’t enjoy anything. No, these are just basic tips on how to improve your life by living more frugal and learning how to save and invest money.
Tip #1 Stop Using Credit Cards
If you are using credit cards and paying interest rates 15-25% then you stand no chance of making it. The borrower is always slave to the lender, and you are throwing away money in interest ever year because you could not wait to have an item, so instead of saving cash and buying it at a discount you charged it full price. This is insanity, by the time you pay off that new laptop or pair of shoes you will have paid on avg 3-10x the amount of the sticker price on that item. Warren Buffet one of the richest men in the world with a net worth of over 70 billion said ‘’the biggest suggestion I have is to avoid credit cards.” Now I know that your cousin has a great plan of how to beat the credit card system, but if you play with snakes you will get bit, and the best plan is to stay away from them all together.
Tip #2 Learn to Save Money
This was extremely hard for me and my wife, and finally to get the ball rolling I had my work take 7% of my check and deposit it directly into a savings account. It’s amazing at how quickly money started to add up, and before long we saved up our full $1,000 emergency fund. You would not believe how much better you sleep at night knowing that if the kids get sick or the car breaks down you have a backup to pay for it. This is for emergencies ONLY! This is helpful so that you don’t accumulate new debts as you start working your debt snowball. It leaves you with cash in case Murphy ’s Law visits you home.
Tip #3 Pay off all Debts
As you can tell most of the advice that I give is going to be based teachings from Dave Ramsey who I believe he gives the most practical advice when it comes to how to be frugal. I encourage you to listen to his radio show and read some of his books because they will change your life. Basically you will list all you debts from smallest to largest, and then proceed to tackle the smallest debt 1st and make your way to the largest. As you pay off one debt you will add the money you were paying to that debt and apply it to the next debt. This is why it is called the debt snowball because the more debts you get paid off the more money you have to throw at the debt.
Tip #4 Buy Used and Save the Difference
Learn the how to swallow your pride and buy things used. Used cars, houses, computers, clothing, and more. You will be amazed at the about of money you can save by purchasing items used. We have 5 children and my wife will find deals on jeans and not just any jeans but brands like true religion, miss me, joe’s jeans, and more for under $10 a pair by purchasing them off a facebook page for a very wealthy neighborhood in our community. That is a 1/5 of the price I would pay at a retail store, so I am extremely grateful for the way she looks out for those deals for our family. Remember, buy used and save the difference.
Tip #5 Live on a written Budget
You will need to live on a budget, and I highly recommend a zero based budget, where you have every dollar that you are going to spend in a week written down and accounted for on paper for the month. I am going to write a whole post on zero based budgeting with some tools that will help you in a future article, and will refer you to that article. The only way to win with money is to make sure that you are telling your money what to do rather than your money telling you what to do, and this is why it is important to budget every month out on paper.
If you have any question on how to be frugal or have amazing frugal stories please leave them in the comments below.