Living below your means is one of the most fundamental frugal habits for building wealth. This means spending less than you earn and creating a surplus that can be saved or invested. You can consistently put money aside by avoiding lifestyle inflation, even as your income increases.
Living below your means reduces financial stress and allows you to accumulate wealth steadily over time. It requires being intentional about your spending and making trade-offs, but it enables you to prioritize your long-term financial goals. Start by tracking your income and expenses to identify where to cut back.
1. Create and Stick to a Budget
Creating and following a monthly budget is key to living below your means. A budget gives you a clear picture of where your money is going and helps you identify any spending leaks. By allocating your income to specific expense categories, you can ensure you’re covering your needs while still having funds to save and invest.
Many tools can help you budget effectively, from simple spreadsheets to budgeting apps linking your bank accounts. The key is to find a system that works for you and that you’ll stick with consistently. Review and adjust your budget regularly as your circumstances change.
2. Prioritize Saving and Investing
To build wealth, saving and investing need to be top priorities, not afterthoughts. Make a habit of allocating a portion of your income to savings and investments before spending it on discretionary expenses. This ensures you pay yourself first.
Aim to build an emergency fund to cover unexpected expenses and provide financial stability. At the same time, invest money consistently to take advantage of compound growth. Set up automatic transfers to your savings and investment accounts so you don’t have to consider it.
3. Cook at Home and Plan Meals
Food is a significant expense for most households; frequently dining out or ordering in adds up fast. Cooking your meals at home is almost always cheaper and has the added benefit of being healthier. With some meal planning, you can keep your food costs down.
Plan your weekly meals based on grocery store sales and seasonal produce. Buy ingredients in bulk and cook them in batches to save time. Bring your lunch to work instead of buying it. Cooking at home doesn’t have to be complicated or time-consuming, but it will make a big difference to your bottom line.
4. Embrace DIY and Upcycling
Taking on some do-it-yourself projects can be an effective way to save money. Before buying something new, see if you can make it yourself or fix something you already have. Many essential home and car repairs are more straightforward than you might think.
Upcycling, or repurposing items you would otherwise throw away, is another frugal habit. With creativity, things like old furniture, clothes, or containers can be given new life and a new purpose, allowing you to save money and reduce waste.
5. Use Public Transportation or Carpool
Transportation costs, including gas, car maintenance, parking, and transit fares, can take much of your budget. To save money, consider using public transportation, biking, walking, or carpooling when possible. This is exceptionally cost-effective if you live in an urban area.
If you need a car, look for ways to reduce your costs. Can you join a carpool group to share gas costs for your commute? Can you use your bike or walk for short trips? Being flexible and open to changing your transportation habits can pay off.
6. Shop Second-Hand
One of the best ways to avoid paying full price for things you need is to shop second-hand. You can often find lightly used clothing, furniture, electronics, sports gear, and more at a fraction of the retail price. This is a great way to save money while getting the needed items.
Thrift stores, consignment shops, garage sales, and online marketplaces like Craigslist or Facebook Marketplace are great places to find deals. Buying used is also environmentally friendly and often supports local charities. Challenge yourself to check the second-hand options first before defaulting to purchase new ones.
7. Cancel Unused Subscriptions and Memberships
Recurring expenses like subscriptions and memberships can sneakily add up. Regularly review your bank and credit card statements to identify any charges for things you’re no longer using. Don’t forget about annual subscriptions that may automatically renew.
Streaming services, gym memberships, subscription boxes, and smartphone apps are common culprits. Be ruthless about cutting anything that doesn’t add value to your life. Those small monthly charges can add up to significant savings over time.
8. Practice Energy Efficiency
Utility bills for electricity, gas, and water are another area where frugal habits can pay off financially and environmentally. You can do many simple things to reduce energy and water consumption without sacrificing comfort.
Some top tips include switching to LED light bulbs, using a programmable thermostat, unplugging electronics when not in use, fixing leaky faucets, and taking shorter showers. Making your home more energy efficient through upgrades like improved insulation and energy-efficient appliances is a wise long-term investment.
9. Delay Gratification
One challenging but powerful frugal habit is learning to delay gratification. It’s easy to be tempted to buy something on impulse, but pausing before making a purchase gives you time to consider whether it’s necessary or worthwhile.
For any significant purchase, try implementing a waiting period of at least a few days or even 30 days. This will prevent many regrettable purchases. Getting comfortable with delaying gratification also leads to more intentional spending that aligns with your priorities.
Case Study: Margie’s Frugal Transformation
Margie had never considered herself particularly frugal or good with money. She made a decent income but always seemed to be living paycheck-to-paycheck. After a series of unexpected expenses left her in debt, she knew something had to change.
Margie started by reviewing her bank statements and tracking where every dollar went. She was shocked to see how much she spent on things she didn’t need or even particularly want, like takeout coffees and impulse Amazon purchases.
With this knowledge, Margie created a lean budget, set some financial goals, and started implementing frugal habits individually. She meal-prepped on weekends, started biking to work, cut the cable in favor of a single streaming service, and learned some basic sewing to repair clothes instead of replacing them.
At first, it was hard to adjust to this new lifestyle. But as Margie saw her debt shrinking and her savings growing, she started to take pride in her frugality. What had felt like deprivation at first now felt empowering. A year later, Margie was debt-free with a robust emergency fund and money invested for retirement. She couldn’t believe the difference these simple changes had made.
Key Takeaways
- Live below your means by spending less than you earn to accumulate wealth.
- Follow a budget to track income and expenses and identify spending leaks.
- Pay yourself first by prioritizing saving and investing before discretionary spending.
- Cook meals at home and plan menus around sales to save on food costs.
- Embrace DIY and upcycling to lower expenses and reduce waste.
- Use public transportation, biking, carpooling, or walking to save on transportation.
- Extend the life of items by purchasing second-hand instead of buying new ones.
- Cancel unused subscriptions and memberships to eliminate unnecessary recurring charges.
- Reduce utility bills by practicing energy efficiency at home and upgrading long-term efficiency.
- Delay gratification and avoid impulse purchases by implementing a waiting period before buying.
Conclusion
The frugal habits outlined here aren’t glamorous or complicated. They’re small, everyday choices to spend thoughtfully, save diligently, and extract the maximum value from your resources. On its own, each habit might not seem like it makes a big difference, but over time, their impact compounds.
By spending less and saving more consistently, you can steadily build wealth and achieve financial freedom. That might mean being able to retire early, weather economic shocks, leave a job you hate, help your kids through college, or achieve other personal goals. Frugality, at its core, is about taking control of your finances to build the life you want. It’s a gradual process but one that’s accessible to anyone willing to realign their habits.