Frugal Lifestyle Tips: A Tight Budget to Build a Better Future

Living a frugal lifestyle doesn't mean sacrificing or living a boring life. 

When you tighten your budget, you invest in your future self, making a stress-free financial future possible.

Fortunately, frugality doesn’t have to be hard. Here’s everything you must know about making better money decisions to save and achieve your financial goals.

What is a Frugal Lifestyle?

Frugal doesn't mean cheap, and that's where most people get stuck. 

Someone who lives a frugal lifestyle chooses smart financial decisions, using their money to create future wealth and not just satisfy their present needs to get instant gratification.

A frugal person still shops and has fun but does so in a way that they aren't mindlessly spending. 

They carefully consider each dollar spent and consider its opportunity cost to ensure it's the smartest decision. 

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People living a frugal lifestyle focus forward on future financial goals instead of the present moment.

Why Financial Goals are Important

You might think trading satisfaction today for future wealth is treacherous. Many people hate the idea because they can't feel happy today. 

The key is to find a balance between building a happy future and caring for today's needs.

When you have financial goals, you can better make the hard decisions not to spend today and invest in the future.

The more money you save now, the more time it has to compound to reach your future goals. 

Your financial goals don't have to be anything extravagant, either. You should have short-term (within a year), mid-term, and long-term goals to achieve. 

Tips to Reach Your Financial Goals

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You might wonder how you'll achieve your financial goals. Maybe you live paycheck-to-paycheck or aren't ready to give up your lifestyle. Here are some simple tips.

• Make good purchase decisions: Think about each purchase before making one.

Buy products and services that are high quality and will last a long time.

When buying groceries, compare prices, shop sales, and use coupons. Make sure that each dollar you spend is worth it, so you can ensure smart spending becomes a lifestyle of your own.

• Enjoy what you spend money on: Make sure every dollar you spend is on something you enjoy (or need like electricity).

Don’t mindlessly spend your money.

Instead, ensure each dollar you spend has a purpose.

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This will make you stop and think before spending money.

• Avoid debt: Don’t spend just to spend, especially if you don’t have the funds. You should only use credit cards when you know you can repay the full balance.

Having an available credit line doesn’t mean you should overspend.

• Create passive income: The more sources of income you create, the easier it is to reach your financial goals.

Find ways to include passive income, such as dividends, real estate investments, and compound interest.

How to Create a Budget That Reaches Your Financial Goals

So, how do you reach your goals? The 50/30/20 budget is the key! This budget tool helps you break down your spending while ensuring you meet your savings goals, too. Here's how it works.

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Needs (50%)

No more than 50% of your income should cover your needs. 

Needs or fixed bills are the factors that are essential to your living.

For example, housing, utilities, transportation, and groceries are basic needs for everyone.

To break it down further, consider the following percentages:

• Housing 25%
• Utilities 5%
• Groceries 10%
• Transportation 10%

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Wants (30%)

Next, keep your leisure or non-essential spending to 30% of your budget.

This category helps you keep unnecessary spending in line.

This includes dining out, entertainment, any purchases aside from the essentials, and travel.

This is the easiest category to cut back on because you don’t ‘have to’ spend in these categories.

This doesn’t mean you can’t have fun; everyone needs to schedule fun into their lives, but do so on a budget so you have enough money to reach your financial goals.

Saving (20%)

Savings is the key to reaching your financial goals! If you save at least 20% of your income, you’ll be well on your way to achieving them. Here are some ideas to save money:

• Emergency fund: Your emergency fund should cover as many months of expenses as possible. 

Usually, having an emergency fund that covers 3 to 6 months of expenses is best.

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Job loss and illness are the most common reasons to use an emergency fund, but it can also help with major house or car repairs or medical bills.

• College fund: Sending kids off to college is a big expense, but one that invests in their future. If you want to help your kids cover the high cost of college, you can start a college fund, either as a 529 savings plan, high-yield savings, CD, or even a taxable investment account.
• Real estate: Investing in real estate can help your money grow faster. You must save to purchase real estate, though, since most lenders require at least a 20% down payment when purchasing a property in which you will not live in yourself.
• Retirement: Whether you have goals to achieve FIRE (financially independent, retire early) or retire at the typical age, the earlier you save, the more money you'll have for your golden years.

Final Thoughts

When handling your finances, always think of the future. Don’t spend just because you have money.

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Instead, invest it in your future self to reduce the need to bring in as much income as you get older.

The more time you have to let your money grow, the more money you'll have in the future, and you’ll be able to work less!

The key to building wealth is to avoid debt, invest money now, and make frugal financial decisions. 

Be mindful of every dollar you save, spend, and invest, and consider your future goals when deciding how to handle them.