Frugality leads to financial freedom because people who live a frugal lifestyle spend far less money than they make per month.
By saving on everyday items and monthly living expenses, people who live a frugal lifestyle can become debt-free in a shorter amount of time than those who spend as much as they make.
Transitioning into the frugal way of life is not always easy. However, the work you put into it is worth the lifetime of financial freedom you can gain during your journey.
How a Frugal Lifestyle Can Lead to Financial Freedom
The saying “It’s not how much you make, it’s how much you spend” is a very true statement when it comes to frugality and financial freedom. You can make $35k a year and be financially free if your yearly expenses are only half of that. Living a frugal lifestyle allows you to spend your money on things that will aid your financial freedom.
Spending Less Can Give You Peace of Mind
When you commit to a frugal lifestyle, you spend less on items you can live without and temporary services you don’t need. This may be a difficult adjustment at first, but soon you realize that those items and services were stretching your cash reserves. After, you have much more money to put toward longer-lasting investments in your life.
Without worrying about making more money to support the need for unnecessary items and temporary expenses, you can have peace of mind. You know that you have more money saved up for emergencies.
Living a frugal lifestyle is about changing your mindset regarding:
- Accruing debt
7 Ways to Gain Financial Freedom by Being Frugal
Here are seven ways you can jump right into the frugal life and get started on gaining financial freedom.
Take Ownership of Your Spending Habits
Spending is a habit, and the more you spend on goods and services, the more you are willing to pay. To gain a frugal mindset, you must first own up to how much you spend. It is best to break it down either by paycheck or by the month.
Adopting a frugal lifestyle may benefit you if you spend over 50% of your paycheck on necessary expenses like rent, mortgage, and car payments.
Likewise, if you cannot add at least 20% of your monthly income to savings, being more frugal can help you reach your financial goals.
Paying Down Your Debts Can Lead to Financial Freedom
You earning a lot of money does not lead you to financial freedom. It helps to make $200k a year, but if you buy more and borrow more because you make more, you have just as much money as someone who makes $50k a year.
Paying off your mortgage, car loans, and high-interest loans to become debt-free are the first steps to financial freedom. Use the money you are saving in other areas of your life and double your monthly payment on your loans until they are paid off.
Resist the urge to accrue more debt when you pay something off. For example, if you buy a car and finish paying it off, the first instinct is to trade that car in for the latest model or another vehicle you have been eyeing.
Resist this urge! It will only put you back in the debt you just worked so hard to get out of.
Have the Least Amount of Fixed Expenses Possible
This way of reaching financial freedom buttresses is the last course in your journey to a debt-free life. As you are paying down your loans, set your sights on other fixed expenses you have that you may be able to live without. Some people don’t realize that they are still paying for something they got years before.
Check your bank statement for recurring payments and cancel them if you can live without it or if you don’t use it at all. This is an excellent way to cleanse your finances and reduce your monthly spending. The goal is to keep monthly fixed expenses to about 50% of your monthly income.
Tip: When you are still paying down your debt, as you cut spending in one area, allot that money to pay down your debt. For example, if you cut spending by canceling your $125 per month premium subscription to your favorite boutique, you can put that $125 per month toward your next mortgage or car payment until it is paid off.
Avoid Buying on Impulse and Following Popular Trends
It is straightforward to fall into the following fashion or technological trend. Everyone wants to get the new PlayStation, a new pair of Air Jordans, or the latest iPhone or android model.
Learning to be happy with what you have can help you resist the urge to follow the latest trends. You can free your mind from the “everyone is doing it” excuse some people use as a license to spend money.
Along with avoiding trends, impulse buying at the grocery store can cost you hundreds of dollars per month. To prevent this, it may be better to buy your items online and pick them up curbside if that option is available to you.
When you avoid trends and impulse buying, this frees your budget to pay down debt or add to your savings for emergencies.
Tip: Keeping a budget sheet of everything you spend per month can help track what expenses you cut and where best to shift those funds. To do this, you can use an old-school excel budget sheet or use an app on your phone to track spending.
Make Sure to Price Check and Compare Prices Whenever You Can
Charging the card or just clicking “buy it now” on a website has never been easier, so it is common to never look at the price of the things you buy. If you live a frugal lifestyle, looking at the prices of items you purchase must become a habit.
Set a budget plan for how much you can spend on any shopping trip at the grocery store and try to stay within or lower than the limit you set for yourself. When shopping, compare the prices of the brand items you want to buy with their off-brand counterparts and pay attention to the cost per unit.
These days, brick-and-mortar grocery stores and online stores will give you the price per unit of an item. Paying attention to these price comparisons can save you money in your monthly budget, allowing you to spend that money on debt.
Tip: Buying in bulk can save you time and money. By not having to go back and forth to the store to buy items you can get in bulk, you can save on gas. The price per unit for bulk items is usually cheaper as well.
Buying Secondhand and Reusable Items Can Save You Money and Help the Environment
Consignment shops are a frugal person’s best friend. If you live a frugal lifestyle, shopping at your local thrift store for clothes or buying items second-hand from online apps or social media platforms can save you money and put you one step closer to your financial freedom goals.
When you buy reusable items, you not only do your part in helping to take care of the environment, but you also save money by not having to buy disposable items. Buying reusable food containers for leftovers instead of using plastic wrap or aluminum foil can save you a lot of money in the long run.
Every little bit of money saved helps in a frugal lifestyle. Like the other examples, this money can be shifted to things that matter more, like paying off debt or putting your money into an interest-earning saving account.
Cook at Home to Save Money on Food and Medical Bills
By cooking at home, you are not only able to make healthier food choices, but it saves you a ton of money. Eating out is expensive, and many people find that just starting with this one lifestyle change can jump start their newfound frugality into the next level.
You could save hundreds of dollars a month by just cooking at home. This can also help you save on future medical bills because cooking is usually healthier than eating out and can lower the risk of obesity, clogged arteries, heart disease, and other illnesses that a poor diet can cause.
As with the other examples, it is easy to shift the money saved from eating out per month to other debt to help pay it off faster.
Tip: The shorter the time it takes you to pay off your debt, the lower the amount of interest you must pay for that debt.
For example, if you take 30 years to pay off a $200k home at 4% interest, your total cost for your house will be $343,738.80. If you pay it off in 15 years, the entire payment for your home will be $266,288.40. This does not include taxes and insurance.
Reducing spending is the only true path to living a debt-free life and gaining financial freedom. Taking responsibility for your spending and telling yourself no sometimes is okay and necessary for your frugality journey.
Putting all of your efforts and money into paying off debt can pay off big time in the long run. Also, making sure not to add debt as you pay it off is very important to keeping a sustainable, financially free lifestyle.
Image by Vitalii Vodolazskyi via Shutterstock.