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Spending less than you earn is a core component of good money management, and a vital part of any wealth building strategy. This guide is intended to provide readers with ideas, how-to’s, and resources on frugal living and expense reduction. It will explore aspects of frugality and provides practical ideas on how to save money and reduce your expenses.

What Is Frugal Living?

Being frugal is not the same as being cheap. And frugal living doesn’t condemn you to a life of deprivation and sacrifice — if it does, then something is wrong. Frugal living means that you are smart about how you spend your money — i.e., you know how to get more value for less money.

Frugal Strategies

There are many ways you can approach frugality. There’s no right or wrong way, and you can adopt any number of strategies.

Addressing Your Needs Before Wants

I think Maslow’s Theory of Needs defines wants versus needs perfectly. Fundamentally, you are putting money toward food (for sustenance), shelter, clothing (functional not fashion), and health before you spend it on other things. Here are some more articles that talks about wants versus needs:

Smart Money Decisions Based On Value

Being frugal doesn’t mean buying the most inexpensive thing you can find. It’s about getting the most value for what you buy, and saving money on what you have to spend. Sometimes this involve sacrificing the bells and whistles, and focusing on buying what you really need. Here are some examples:

Buying a Timex instead of a Rolex

Using the basic cell phone that comes free with the plan instead of spending money on an iPhone

Buying a used car instead of a new car

Minimize Waste

As a society, we throw out a lot of stuff that could be reused, repaired, or repurposed. Here are some great articles to help you get started:

Minimizing waste also means not spending money unnecessarily when you have a lower cost alternative — this usually means giving up some of the convenient factors. For example, walking another block to use in-network ATM machine, finding street parking instead of heading straight for the parking lot, etc.

Expense Reduction

Leading a truly frugal lifestyle is not for everyone; however, reducing expenses should be within everyone’s reach; and cutting costs is a great thing to do during periods of poor economy. Here are some fun and creative ways to reduce your expenses:

Pareto Principle

You can use the Pareto Principle, or the 80-20 rule to work on your biggest financial drains and then work your way down (read the full article).

You can create a graph like the one above easily, by loading your information into free software like Mint.com.

Quick Wins

Instead of going crazy categorizing everything, another easy way to reduce expenses is to just sit down, brainstorm, and figure out the easiest ways to cut costs — this is called Quick Wins. You can even make this a family game where the winner figures out the most ways to save money, or save most money. Be sure to turn your ideas into actions!

If you want to be technical, here’s a chart that rate easy versus outcome.

For example, anything that requires a low effort to implement is a quick win (read the full article).

Scattergram

The third and last geeky way you can cut your expenses is through the use of a Scattergram. This is a little more complicated, but it does give you more control than the other two methods. Here’s what a scattergram looks like (read the full article).

Other Ways To Save Money

Here are some more money saving ideas for you to work with:

A Caution About Frugality

In parting, I’d like to caution that there’s only so much you can do to save money. Frugality has its limitation — it’s called deprivation. Therefore, being frugal is a good thing for your financial health, but in the long-term, effort put into developing income streams to earn extra money is what you should be doing.