How to be Frugal

Warren Buffett may be one of the richest people in the world, but he still lives an incredibly frugal life. And Oscar-winner Jennifer Lawrence may be a young Hollywood “it girl,” but she is also careful with her recent millions and surprisingly prudent with her money.

If even the people who have money to spend are thrifty, then why shouldn’t the rest of us be as well? In fact, it is by being so frugal that some people actually become rich. By maximizing your income and living below your means, you’re enabling yourself to live a fuller, financially independent life.

That doesn’t mean you can’t splurge every once in a while, but the great thing is that living frugally means a splurge won’t break the bank and won’t put you into debt.

So to help you start on the very difficult path of being economical, H&R Block turned to some experts in the area: budgeting and personal finance bloggers.

Large purchase

Stephanie Halligan (The Empowered Dollar) and David Ning (Money Ning) took two different approaches to saving for something like a vacation. Halligan approached saving for the large purchase by curbing impulses, while Ning took a more structured financial approach.

Halligan suggests creating very visible and daily reminders of what exactly you are saving up for to help prevent unnecessary purchases. She wrote to H&R Block:

“For example, when I was saving up for a trip to Vietnam, I wrapped a note around my debit card that said, ‘Every $1 you spend today is one less bowl of Vietnamese Noodle Soup tomorrow.’”

Ning recommends charting the progress by tying saving goals to a date of when the money should be saved up. If you know you need $2,000 by September 1 and it’s January 1, you can start by saving $223 a month, putting away the money each first of the month.

As you go along, you can adjust the monthly savings. So if you can sock away $275 on May 1, then you only need to save $203.25 on the first of the next two months. Or if May is a tough month where the dog gets sick or the car is towed and you can only put away $110, then you know that you need to be careful the next four months and save $249.5 if you want to reach your goal.

Income stream

David Weliver from Money Under 30 suggests creating a designated income stream that can help supplement your savings. For instance, you might take on side work for the weekend. Physicians can find a way to do this as well by using their skills to create programs, become speakers, etc.

Of course, you could always increase income by getting rid of some old belongings by selling them on eBay.

Your turn

So pick the method that works best for you and stick with it. If you know you’ve got some extra marketable skills and a little more free time (perhaps you’re working locum tenens?) then Weliver’s path might be for you. For those more structured people, Ning’s might be easier to stick with. But if you know you need to continuous reminder to keep you on track, you’d do well to heed Halligan’s advice.