7 Ways to Stay Frugal to Achieve Your Financial Goals
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Frugality does not mean living like a miser or cutting down on your basic needs. It is about spending money prudently. After all, a dollar saved is more than a dollar earned. Every dollar invested grows over time and contributes to creating a substantial net worth.
Here are seven ways to stay frugal to achieve your ultimate financial goals.
1. Take charge of your financial situation
You must first understand your finances to plan them better. It is critical to identify the problem areas and take corrective action to streamline your finances. For this purpose, create a flowchart inclusive of all the cash inflows and outflows. Mention all the sources of income under inflows, and exhaustively list down the expenses, as well as current investments below outflows. Be specific and remember to include all your monthly expenses like rent, school fees, groceries, mortgage, credit card bills, electricity bills, phone bills, etc. A detailed and well-quantified chart is indicative of your current financial situation. This allows you to categorize the areas that need revaluation. Further, when you know your disposal income, you can structure your monthly budget better, helping you live within your means. This in turn, will further encourage savings, enabling you to fulfill your monetary goals easily.
2. Distinguish wants from the needs
All expenses are not essential. You can continue to lead a comfortable life even if you cut down some unnecessary spending. This highlights the importance of distinguishing wants from needs. Needs are your absolute necessities, ones you cannot do without. These are termed as non-discretionary expenses. For instance, food, clothing, and shelter are basic needs. Alternatively, wants are something you can do without. These are discretionary costs, which can be reduced or removed easily. For example, a lavish vacation, luxury items, digital platform subscriptions, and branded products. When you create your financial chart in the step above, tag each expense as a need or want. Below are a few examples to help you understand the difference further:
- Spending on clothes is a necessity. But buying a designer label is a want.
- Food is a basic need. However, choosing a high-end restaurant for dining becomes a want.
- In the current digital world, a smartphone is a necessity. But the purchase of a high-end model is a want.
Distinguishing between your wants and needs helps you to better control your expenses. Moreover, minimizing unnecessary expenditure increases your disposable income, leading to better savings and investments that ultimately help you achieve your goal.
3. Pick the most competitive product
Undoubtedly, a check on your discretionary spending can improve your disposable income. To further ensure that you spend wisely, you should consider comparing, analyzing, and then choosing the most competitive product. For example, if you are booking movie tickets, compare the rates of the different shows. A matinee typically costs less than a late-night show. Similarly, when you enter the supermarket, compare the generic labels with the brands. Look for the ingredients and then check for the pricing. In all, be a smart buyer and spend your money on worthwhile things. This might help you harvest more savings without compromising on the product quality. You can also be more vigilant and keep track of the ongoing sales, seasonal offers, discounts, and other offers in your vicinity. This can also contribute to your saving reserves.
4. Learn the DIY (do it yourself) hacks
DIY initiatives not only help save money but are also fun. If you want a quick home redo, instead of spending money on the project, you could choose to apply your skills, get some paint cans, paint rollers, etc. and decorate your home. Not only will you save more money, but this may also help you bond better with your family and friends. Likewise, in case of minor fixes for the house or office, you can always look up ways on the internet. Browse through informative videos online and self-learn the skill. Projects like changing a tube light or tying a clothesline seem complicated only until you try your hands on it. You will be amazed by how much money can be saved by opting to do these things on your own as decorating your home can be an expensive affair. DIY home décor can add a new look to your home while allowing you to set aside more money to fulfill your financial goals.
5. Reduce the debt liabilities
Debt is never a good idea. The more loans you have to repay, the further you are from achieving your financial goal. The joy of a salary check can vanish when you realize the monthly loan installment. A frugal lifestyle can help you reduce your debt. Spending on what you require rather than what you desire can give you modest savings. It is advisable to prioritize on your savings to reduce your fiscal liabilities. When you repay the loan, you are no longer bearing the interest cost on the borrowing and this can further add to more savings. Moreover, you enjoy a stress-free life when you are debt-free.
6. Plan and upgrade gradually
You can still have all the fun and enjoy your life even while you are frugal in your spending. You do not have to deprive yourself of leisure. You can surely plan a vacation and go out to fine dining restaurants. However, you need to plan for your expenses wisely. Upgrade your lifestyle once you achieve a significant milestone. Alternatively, you could choose to reward yourself when you consistently meet your savings target. The objective is to do it gradually. You could set aside a small part of your savings monthly or quarterly for recreation. Recreational activities are important to rejuvenate the body and soul. Earmarking a small portion regularly for recreational activities does not burden your finances. Moreover, you are relieved of any stress of arranging funds last minute. Thus, spending and planning wisely allow you to achieve dual objectives easily.
7. Periodically review your financial situation
A comprehensive financial chart can aid in gaining better monetary control. However, it is important to also assess your achievement against the set targets. So, when you create a budget at the beginning of the month, remember to compare your performance with actual expenses in the middle, or at the end of the month. Such comparative analysis highlights the deviations from the set budget. In case of variations, you must investigate the reason and try to take immediate corrective action. A periodic review helps to gauge the improvement in your spending pattern and aids in better accumulation of reserves, enabling you to advance towards your financial goals more strongly.
To sum it up
You can make frugality a smart way of living. Living frugally means spending wisely and reducing your liabilities. Moreover, such a way of life encourages savings in the long-term which helps you create a large corpus over time to better achieve your financial goals. If you need professional assistance to create a budget and understand how to cut down expenses and reduce debt, consider consulting a professional financial advisor. The sooner you begin the closer you can be to achieve your financial goals.