Penny pinching may sound unattractive at times.  The extent or how far we go entirely depends on us. By seeking out bargains and discounts, we pile up a significant cash saving over time.  The purpose should be to add to an investment, rather than just storing for future use.

Here are a few frugality tips to help you keep more of what you earn.  The whole ideas is to accelerate a little bit further.  You many not be competing against anyone else, but wealth building its a race against time, inflation, and to get the very best out of compound interest.

Live within your means

Spend less than you earn.  As easy as it may sound, this is not so easy for many of us.  Knowing the principle is one thing, but applying it is another. So many people err by spending far more money than they earn resulting in less cash saving. This habit is counter-productive in trying to achieve any level of financial freedom in life.

There are about three (3) things a person can do to overcome this.  First of all, earn more money if you can.  Or secondly, just make do with the current earnings and avoid going over board of that amount.  Finally, get sold into slavery.  Yes that’s right.  The easiest historical way to get out of debt in the world is to become a slave.

In this regard, borrow more money from others, the bank, and credit card companies and become indebted to them with interest payment obligation until the debt goes away (hopefully).  That will simply not work unfortunately.  Do the easy things and life will be hard; but do the hard things today and have an easier life tomorrow.  Pay for stuff with only what you get as income.

Use a cash saving budget

A budget is the way to go.  It helps a person see how well their limited income meets their unlimited needs and wants.  Most budgets have just one stream of income paying for all the multiple expenses and bills that are due.  But prudent money management state that, people should aspire to increase their income streams or the amount of their primary income source.  They must also have a corresponding decrease in their life expenses to accumulate cash saving.

Your budget can be very basic.  The 50/30/20 rule budgeting standard will allow a well structured allocation of your after tax income in three (3) broad categories.  These are needs (having 50% allocation), wants (with 30% allocation) and savings (with 20% allocation).

Learn more here to begin planning your finances to avoid falling into a mental trap of seeing bonuses and pay rises as surpluses and ‘disposable incomes’ to be consumed on therapeutic shopping and vacations.  You can also save to create contingency fund to enable you have access to cash in time of emergencies.

Track every expense made

The next tool for the frugal and prudent money manager is the Expense Tracker.  In order to curtail any current budget deficits, one needs to critically see how all monies are spent.  There are many apps out there nowadays to help with that.  There is also the manual route of writing out daily expenses in a pocket sized note book.  The latter strategy has been used by John D. Rockefeller over a century ago.

We all know how much money we spend on products and services. But there is no mental valve of self discipline to force us into spending wisely.  But with an expense tracker, you have the privilege of getting slapped in the face every now and then by your own conscience.

Most financial mistakes or wrongs and unplanned purchases are usually made during emotional moments of shopping.  It is a behavioral finance norm that people do not realize.  How much money goes out of your bank account within a given month? Until you get a statement or a prompt, you’re surfing blind.  Therefore an expense tracker works just like a daily bank statement for reviewing all the money mischief you may have committed.

Once you can track it, you can also plug the hole that leaks gold out of your financial pot.  The format is simple.  Just use a small booklet and title it.  As you accumulate savings, you’ll  be able to invest in stocks or some other assets that will bring you returns.

1. Use a small note book and title it “Expense Tracker”
2. At the top of each page write the Day, and full date.
3. On the left side of each page, write down “Items” signifying all the stuff you bought (or currently buying) on that day.
4. On the right to each listed item, write down how much they cost.
5. Next to the cost, indicate if the purchase was a necessity or needful item. Put an ‘N’ (for Necessity) next to the amount.  Or place an ‘L’ (for Luxury) where an item on your list constitutes Luxury.  Be absolutely true to your self – use your own judgment in this regard.

Examine your expense tracker and see how unnecessary financial waste could be curtailed.  If the method above sounds like a caveman’s edition, you may get an app that does all that for you.

Insurance and hedging

Insurance may be defined in a number of ways.  Let’s try this for humor.  Let’s go!  Insurance is the act of paying a bribe (premium) to a person (Insurance Company) on a regularly (monthly or otherwise) basis, within a few guidelines (Policy Agreement) so that the person (Insurer) could pay a SMARTER you a lump sum payment in the event of hard-times (occurrence of insured risk); or sometime like that at the end of a certain period.

Insurance can be in the form of Life, Property, or any other insurable or risky event.  Does this sound like a clever way to hold on to your own savings and investments you’ve worked so hard for?  Let someone else pay for your unforeseen troubles you may encounter in future.  Let insurance become a component of your cash saving strategy.

Surely, you just need to start immediately by looking for the right insurance company to negotiate a great policy deal to protect you, your assets, and the people you care about.  But be sure to cultivate the habit of screening and calculating a few open deals from different insurance firms.  Check and see how much premium payments are required periodically and if this rises by time.

Positive Procrastination

Procrastination is the resistance or enemy of action.  A procrastinator seldom gets through his tasks at hand.  So how can this factor of failure have a positive side?  Positive procrastination uses this natural resistance to completion, to your advantage.  Our finances are always limited compared to our wants.  Every human on earth has this problem.  The only folks exempted are the rich.  They seem to earn more money than they can spend.

To live frugally, one must postpone all major purchases to one month ahead.  This would allow you to think through the decision if it makes long-term sense.  You might even realize that the purchase could have been a luxury rather than a necessity.  This way of thinking in terms of value, will keep your money safe from spontaneous purchase of costly items.  Use this as another cash saving technique.

Using a budget and a shopping list before going shopping will also certainly keep your expenditure within your means.  This is positive procrastination.  To put off making financial decisions with regard to your spending, until the numbers make sense  – leading to a more prudent money management administration.

In Conclusion

Frugality sometimes sounds like a religion.  It may look like a bunch of people who think alike, pursing a higher calling of some sort through deprivation and cash saving.  But for those who like by it, it’s a simple way of life.

A basic way of thinking and living well within one’s means.  Your joy-to-stuff ratio would be a little bit higher than others.  It really take a little to make a frugal person content with life.

Is frugality a new thing to you? Please share your personal insights and experiences in the comments below this article.

In Summary:

1. Live within your means
2. Use a monthly budget
3. Track every expense made
4. Insurance and hedging
5. Positive Procrastination

Further Reading: Check out our book recommendations on this topic from our Resources Page.

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