This is a complete beginners guide to frugal living.
This page will help clarify what frugal living is, as well as give you 75 practical frugal living tips.
So if you’re looking to begin living a more frugal lifestyle, you’ll love this guide.
Let’s begin with defining frugality.
What Is Frugal Living?
There are many reasons why people want to be more frugal or search for frugal living tips.
Some people are tired of living paycheck to paycheck and want to learn how to spend less money in order to reduce their everyday financial stress.
Others need to save as much money as possible because they have a big, one-time expense on the horizon, like a wedding or a home purchase.
And many begin researching this topic because they have the sudden and sometimes startling realization that they’ve waited too long to start saving for their children’s college fund or their own retirement.
There are countless reasons to live a frugal life, and they’re all valid. And while being frugal can help you achieve each of those specific personal finance goals, there are some important general benefits of frugality that apply to almost everyone in the world — even people who already have their financial ducks in a row.
Frugal Living 101
People tend to think of frugality as perfecting the art of couponing, as becoming a thrift store master shopper, as cutting back or even cutting out extraneous, frivolous, unnecessary expenses and purchases.
In general, that’s the thrust of the advice you’ll find when you research this topic. I’ve read many articles written by good experts that encourage people to cancel all their subscription services, like Netflix and Spotify; to only order appetizers when they eat out, instead of full meals; to never buy coffee at Starbucks, to never buy a book they could borrow from the local library, to never pay full price for anything.
Those are all fine things to think about when considering what frugality means for you. For some people, part of frugality might be ditching that daily $5 latte.
But for many people, the concept of frugality is all about sacrifice. And in my opinion, it doesn’t have to be. I think that’s the wrong way to look it. I think you should view frugality as something that empowers you rather than something that constrains you.
There are two key reasons for that.
Frugality Can Give You More Freedom
In a recent article titled “How to Get Rich Quick, the Not-So-Secret-Formula,” I wrote that most people’s primary motivation in striving to build wealth is the desire for more freedom. Whether that’s freedom to pursue work they’re passionate about, freedom to make their own schedule, freedom to live where they want, or freedom to purchase things and experiences that bring them joy. Wealth itself doesn’t drive happiness, but it gives you the ability to live life on your own terms.
What’s the relationship between wealth and frugality, and between frugality and freedom? Building wealth requires savings and investment. That’s an unavoidable truth. But the harsh reality is that most Americans — by a wide margin — live paycheck to paycheck. A recent study found that 78% have little or nothing left to invest at the end of the month. And we’re not just talking about people below the poverty line, or those living on minimum wage; nearly 30% of workers making between $50,000 and $100,000 per year live paycheck to paycheck.
Regardless of your income, chances are that you’re not saving and investing enough. But wherever you fall on the spectrum, being frugal can help you identify opportunities to spend less, save more, and use those funds to grow your net worth.
Growing your net worth gives you flexibility. Maybe not today, when you’re just getting started. But sooner than you think. When you start investing, your money goes to work for you, and you’ll be surprised how quickly your portfolio grows if you make a consistent effort to divert money into it.
And as it grows, guess what? You’re not quite as locked-in to staying at that job you hate. You increasingly have the ability to make choices about your future, instead of having them made for you. You start to see many paths in front of you instead of just a few. And, when you’re ready, you can finally jump off the hamster wheel.
Additionally, as you gain more freedom in your life, you start viewing money in an entirely new way. Instead of always trying to spend the least amount of money, or trying to figure out how to make your money last to your next paycheck, you’re able to start making choices based around the concept of optimizing for your happiness rather than your necessities.
Frugality Can Improve Your Quality of Life
Frugality can help you live a better life. I know that probably sounds counterintuitive.
I bristle at the suggestion that it means giving up the things that bring you joy, learning to settle for inferior substitute products, or going through life feeling like every purchase that isn’t 50% off the sticker price is a failure. We all get one life. Just one. If that $5 latte brings you joy, I say drink it.
But that doesn’t mean you can ignore reality. That’s an expensive cup of coffee, and buying it means you can’t use those funds for something else. Budgeting is about priorities. And so is frugality.
It’s about identifying the things that are important to you and adopting corresponding financial habits. It’s about learning how to reduce wasteful spending so that you have more money left over for the things you care about.
In that sense, frugality is closely linked with the concept of opportunity cost, which simply means that everything you spend money on has both an explicit cost as well as an implicit cost.
Take that $5 coffee as an example. Its explicit cost is the $5 you hand over to the barista. When you buy it, you suddenly have $5 less in your wallet.
But was that the best possible use of $5? Would it have been better to invest it, pay off debt, or maybe even forego two cups of coffee a week so you can buy that new book you’ve been wanting to read?
Opportunity cost doesn’t mean you should never buy something if there might be a better use for the money. When it comes to frugality, it often means the opposite. Frugal people keep opportunity cost in mind because it helps them connect their financial behavior to their goals and values. For some, delicious lattes are important. But for many others, spending $5 on coffee is just a habit. If you fall into that camp, then frugality might mean learning to make your coffee at home so you have more resources to invest (or spend on something else that’s more important to you).
That leads me to the second critical thing you need to understand about frugal living.
Frugality Doesn’t Have to Mean Trading Down
There’s a major flaw in the argument that frugality means consistently trading down: The reality is that many lower-cost substitute products, like clothes and store brand foods, are often simply not as good as their more expensive counterparts. I know that goes against the common wisdom in the personal finance world, but it’s true.
For example, the inexpensive “fast fashion” sold by H&M is far inferior in quality to the clothes sold by similar but more expensive stores like J.Crew and Banana Republic. As a result, clothes from H&M need to be replaced more frequently — and that’s by design; they’re made cheaply to be sold cheaply. But if you have to replace them twice as often, they’re not a better value.
Similarly, while it’s true that some store brands are identical to their name-brand counterparts, often they’re not the same at all. Their lower prices are frequently the result of using lower quality (less healthy) ingredients; they might use high fructose corn syrup instead of raw sugar or honey, or they might contain added preservatives aimed at increasing the product’s shelf life.
I urge you to flip the script on frugality. Don’t think about it as trading down; think about it as trading up.
Think about it as learning how to trim the fat from your spending habits so that you don’t feel like you have to skimp on the stuff that matters. Frugality should be about learning to be smarter with your money so that you can make better purchases that bring you more joy, more satisfaction, and enhance your quality of life — not learning how to be content with less.
Instead of just trying to spend less, view frugality as a way to get more value out of your money.
How to Live Frugally
Understanding the benefits I outlined previously is important, because frugal living requires you to change your mindset. It’s about more than clipping coupons or growing some of your own veggies. Those habits will save you money in the short term, and they can be helpful. But frugality is a philosophical decision that gives you the opportunity to actively reshape your relationship with money. So rather than just showing you how to save a few bucks here and there, I want you to understand how this concept can help you take charge of your personal finances.
There are three core principles of frugal living. I call them The Three I’s, and they are:
- Impulse control
Frugal living depends on your commitment to using your financial resources purposefully. Too often, people approach frugality with the vague goal of saving money. Without specific goals, you won’t have a framework for making decisions about when and how to use your financial resources. Additionally, you’ll have no way to evaluate whether your efforts are paying dividends.
Now, I’m not saying you need a detailed financial plan for the rest of your life before you start implementing frugal living tips. But you do need to define why you want to be frugal — because your goal will drive your actions.
If your goal is to take more vacations, your frugality might lead you to different decisions than someone whose goal is to save for their child’s college education.
Intention is also important because it helps you understand what not to do. If your goal is to build that college fund, then you’re making a decision that education is a priority. Adopting a vague overarching money-saving agenda could easily lead you to cut back in other areas that are associated with your child’s education.
If you make decisions for the sake of frugality without considering your long-term goals, your efforts might be for naught. So the first step is thinking about what really matters to you today, and what will matter to you tomorrow.
Nothing we’ve talked about in this article matters without initiative. Being frugal isn’t always easy or convenient. It requires an ongoing commitment to learning about the best ways to use your money. And while there are some apps and services that can help you, the responsibility for knowing what constitutes a good deal ultimately rests on your shoulders.
So you have to understand that there’s no single service that’s going to magically shrink your shopping budget enough to really make a difference. There’s no one rewards program that’s going to fundamentally alter your financial trajectory. But if you integrate these practices and others into every part of your life as a consumer, you’ll see them start to add up and build on each other.
Without initiative, here’s what happens: You end up paying more and getting less in return. Why?
Because you’re leaving money on the table. You didn’t do your research and aren’t taking advantage of all the available opportunities to save. This happens every single day: people go to the grocery store (without a shopping list) and don’t even bother to check the sales flyer or use the store’s loyalty program. They’re just flushing money down the drain. But this also happens with almost everything in the economy — from banking, to buying a home, to buying a car.
Having initiative means that you put in the legwork to make sure whatever your purchasing offers a relatively good value compared to other options. If you’re buying a car, you should walk into the dealership knowing how much the dealer paid for the vehicle. If you’re buying a house, you should know the full real estate history of the street and neighborhood. But the same principle applies even when you’re buying something small. Knowing what an item should cost empowers you to determine whether you’re getting a good deal or a bad deal. And that empowers you to make better decisions.
So you’ve identified your goals, and you’ve started to take the initiative. And everything is going great. You’re building up a saving account, little by little, and in a month or two you’re going to put a couple thousand dollars into an index fund.
But then again…
Wouldn’t your life be better if you had that new iPhone Z that was just announced? After all, your battery doesn’t work as well as it used to, and you’re afraid it’s going to die sometime just when the kids desperately need to reach you. And besides, you work hard enough, right? You deserve this.
Here’s the thing: You’re right. You’re absolutely right. Like I said earlier, being frugal doesn’t mean you have to live a life of self-sacrifice. The whole point is to have more freedom and live better.
But there’s a catch.
Does buying a new smartphone fit with your goals? Is this purchase part of your “why” for learning how to be frugal, and would it represent a purposeful use of your financial resources?
Maybe one of the reasons you want to be more frugal is because you’re frustrated that you often have to go without the things you want. Trimming parts of your budget so that you have more disposable income to dedicate to other things is perfectly, completely and absolutely fine.
But on the other hand…
If your goal is to take more vacations, you might need to say “no.” If your goal is to build up that college fund, you might need to say “no.” If your goal is to grow your net worth so you can have more freedom and flexibility in your life, then you might say “no.”
Saying “no” is hard. And that makes impulse control the hardest part of living frugally for everyone — even for me.
But that’s why we identified our goal. It’s our North Star. Our goal keeps us on the right track and helps us make better decisions that lead us to where we want to be.
With all of this in mind, here are 75 of the best frugal living tips that outline simple ways to live a more frugal life.
75 Tips For Frugal Living
Basic Frugal Living Tips
- Track your income and expenses. Millionaires do.
- Set financial goals. You spend the majority of your time making money, so make sure it’s for the right purpose.
- Make a meal plan before you go grocery shopping. This will help you avoid spending money on eating out.
- Adjust your payment due dates. Most banks, credit card companies, and service providers will let you choose your monthly due date. Don’t make the mistake of making minimum payments (or being late) just because your paycheck hits later in the month.
- Pay off your debt ASAP! If you have high-interest debt, there’s no need to carry more then $1,000 of cash. The interest is what’s causing you to stay behind, and paying it off quickly will mean spending less in the long run.
- Try the envelope method of budgeting. If you’re always spending more than you earn, this can be a helpful way to wrangle your budget.
- Don’t pay banking fees. Check out Fiona, a free search engine that helps you find the bank that pays the highest interest rate in your area. When I did this, I found a bank that paid 22X the national average on their savings accounts and wasn’t going to nickel and dime me on fees! See what banks are paying around your area — check out Fiona today.
improve Your Credit Score & Credit Report
- Use Credit Sesame. It’s completely free, and you’ll get customizable tips on improving your score.
- Check you credit score regularly! Your credit score is a huge factor in your financial life. One study showed the difference between having excellent and poor credit translates to over $250,000 in a lifetime.
- Take 5 minutes to understand how to improve your score. It’s not complicated.
- Pay off your credit card payments in full each month. This will lower your credit usage, which is 30% of your credit score. Also, make sure you understand how credit cards actually work.
- Raise your credit limits every six months. If you’re paying your credit card bills in full each month and have no trouble avoiding high-interest debt, then raising your available credit will improve your credit score. Set a calendar alert to try to increase your credit card limits every six months or so.
- Work on your credit score before making a big purchase. Are there any big purchases, such as a home, you’ll be making with a loan in the next few years? Then the time to start improving your credit score is now, not when you’re about to take out a loan.
- Get a good, no-fee credit card like the Chase Freedom or Chase Freedom Unlimited. Then, plan on keeping this card open indefinitely. This will increase the average age of your credit accounts, which will increase your score. You can read my review/comparison of the two cards here: Chase Freedom vs. Chase Freedom Unlimited.
Manage & Eliminate Your Debt
- Review your credit report. The best way to find out how much you really owe (and to whom) is your credit report. AnnualCreditReport.com is the website set up by the Fair Credit Reporting Act. This site allows you one free copy of your credit report for each of the major agencies each year.
- Set a calendar alert for every four months to pull different reports on AnnualCreditReport.com. Reports may differ from agency to agency, and they aren’t updated at the same time. Pulling one every few months will keep you up-to-date on your credit file throughout the year.
- Use a free credit report monitoring service, like the one offered by Credit Sesame. A recent FTC report found that 20% of Americans have an error on their credit report, so make sure to know what’s on your report and take advantage of Credit Sesame’s free credit monitoring service to get updates anytime there are changes.
- Use the debt snowball or debt avalanche method to pay off your credit card debt ASAP.
- Commit to a plan and stick to it. Want to start paying off the debt with the highest interest rate first (which might not be the smallest)? That’s fine. Don’t spend weeks debating which plan or approach is best — just start!
- Check interest rates frequently to make sure you’re getting the best deal possible — especially after your credit score improves. Interest rates change all the time. You want the lowest rate possible on your debt, because you’ll pay a lower overall amount in less time. If you find a better deal, you can easily transfer your balance or refinance your loans.
- Do what’s best for you, not the bank. Typical debt-to-income ratios, like the one that says you can afford debt payments equal to 36% of your income, are meant to maximize the bank’s profits, not to optimize your finances.
- Use Dave Ramsey’s mortgage rule of thumb instead. It says that payments should be 25% of your income, on a fixed rate for 15 years.
- Keep some cash around (but not too much). Aim for an emergency fund of about three months, and make sure it’s in a bank account that’s hard to access.
- Plan big purchases in advance. Things like cars, homes, and weddings can and should be planned for. If you don’t, you’re going to end up taking on unnecessary (and expensive) debt to pay for them. Proper planning, marked by realistic forward thinking, is one of the hallmarks of sound money management.
Maximize Your Savings & Investment Portfolio
- Find a better bank. Don’t settle for a bank that charges you fees and pays next-to-nothing on their savings account. Head over to Fiona, which is a free search engine that helps you find the bank that pays the highest interest rate in your area. No personal information is required, just enter your zip code to get the results.
- Focus on your savings rate. Beating the market is very hard. What’s easy is increasing your savings rate over time. It’s also 100% in your control.
- Harness the power of compound interest. It’s how the everyday person can grow extraordinary wealth and gain more financial freedom.
- Invest in low-cost index funds. Want to be an above average investor? Don’t overthink it. Low-cost index funds place you in the top half (actually about top 20%) of investors.
- Celebrate when the stock market goes down. If you’re in the accumulation stage, be excited when the stock market goes down. It’s an opportunity to be thrifty and buy stocks at a discount. You’re investing for the long term, so take advantage of people’s overreactions to short-term economic signals.
- Invest up to 5% of your net worth in individual stocks. Like the idea of investing in individual stocks, as opposed to just index funds? That’s OK — just don’t bank your entire financial future on it. A good rule of thumb is investing up to 5% of your net worth in individual stocks. Just know that the average individual investor doesn’t outperform index investing.
- Be ready for both the ups and the downs. The stock market has returned about 7% a year after inflation. But by no means has that been a smooth 7%. Some years will be up 30% or more. Others will be down 30%! Expect this, and don’t freak out! You’re investing for the long term.
- Track your investment returns (but don’t obsess). What gets measured gets managed. I use the excellent Personal Capital app to check in on my portfolio about once a month. Click here to sign up for Personal Capital and get a free $20 Amazon gift card.
- Pay attention to fees and taxes. The goal of investing is to obtain the highest return after fees and taxes, so don’t forget to factor them into your assumptions.
- Read The Little Book of Common Sense Investing. It’s the best book for beginning investors. Even with no investing knowledge, you can breeze through the book in one night and understand how to use stocks to grow wealth.
- Ask questions. It’s OK if you don’t know everything — or if you don’t even know where to start. If you have a hard (or easy) investing question, post it on The Bogleheads forum. The forum is filled with very qualified and knowledgeable people who can lead you down the right path.
Grow Your IRA The Right Way
- Open an account ASAP. Outside of a 401(k) match, your IRA is the best place to put your retirement savings. Fees are typically lower than employer-sponsored plans like 401(k)s, and offer better investment choices.
- Open one for your children, too. There’s no age limit for opening a Roth IRA. All you need is earned income. As such, it’s a good vehicle for gifting your children money, as long as they have income (e.g., if they’re a college student with a part-time job). It’s also a good place to start investing even if you’re not working somewhere that offers a 401(k).
- Find a great broker. If you know a thing or two about investing (e.g., you understand fees, asset allocation, etc.), one of the best brokerages (and my favorite) is Vanguard. I have my spouse’s IRA 100% in the Vanguard 2050 retirement fund.
- Simplify the process. If learning about investing is getting in the way of opening an IRA, just open up an account with Betterment. Instead of picking an asset allocation, you simply tell Betterment your goals by answering a few simple questions. Then, Betterment will place your funds in an optimized portfolio.
- Don’t wait to start investing. There’s no need to wait until you have $1,000 or some other arbitrary number saved up. You can get started with Betterment for as little as a $1.
- Optimize your after-tax returns by choosing either a Roth or traditional IRA. Run the numbers yourself using a calculator like this one.
- Use all available loopholes. For example, if you’re over the income limits, a backdoor IRA can still let you put money away tax-deferred.
- Use a spousal IRA, which lets you make a contribution to your spouses IRA, even if he or she has no earned income.
- Pay yourself first by setting up automatic withdrawals from your bank account to invest in your IRA.
Optimize Your 401(K) or Employer-Sponsored Plan
- Start contributing from the first day on the job. The longer you wait, the harder it is to start.
- Contribute up to the 401(k) match — at least. Even if your plan has relatively high fees, the match will still outweigh higher returns.
- Use Blooom’s free asset analysis tool to learn whether your assets are properly allocated given the options available to you.
- Let Blooom manage your account for you. Don’t even know how to begin investing? Blooom can manage your account for $10 a month, with the first month free.
- Increase your savings rate over time. Even bumping it up by 1% a year will make a huge difference over your lifetime and help you achieve financial independence.
- Save aggressively while you’re young. The power of compound interest is greater the longer you leverage it, so if you’re relatively young, try increasing your saving at a faster pace. Set a calendar alert to increase 1% a quarter instead of 1% a year.
Make Extra Money
- Think of making extra money as a skill. A skill that can be improved with practice.
- Start with the lowest-hanging fruit. Maybe the easiest way to start improving your money making skills is with surveys. You won’t get rich, but it’s a start.
- Make money while doing other things. Downloading these passive income apps is an easy way to earn some extra cash.
- Give freelancing a try. You can make good money outside of your regular job, you’ll quickly ramp up your skillset. Check out my complete guide on how to start freelancing with no experience.
- Think of your first three freelancing jobs as an experiment. Don’t worry about the money. My personal example: I spent about 10 hours on my first project and earned less than $50. But within a year, I was comfortable charging $100+ per hour.
- Don’t limit yourself. Not interested in freelancing? Not to worry — there are many other options to make good money.
- Try blogging. You’ll learn valuable skills, meet amazing people, and you can choose your own adventure regarding what blogging does for you.
Advance & Expand Your Career
- Focus on growth. While salary is an important part of picking the right job, there are other questions to consider. One to try out: “What career path allows me to grow the most?”
- Learn negotiation. Read one good book in your life on negotiation. It’s a valuable career skill. Plus, it allows you to maximize your earnings.
- Be likable. Studies show it’s not always the top performers who get the best jobs. Often it comes down to who the boss likes the most. So do good work and be friendly.
- Be good at two things. Make sure that the first thing is the primary objective of your role. However, the second thing can be anything else that has value. Maybe you’re a customer service rep who likes to write, and therefore handles social media.
- Pick up one new skill a year. Don’t obsess over becoming world-class, but it’s good to have a working knowledge of new skills. In the past, I’ve focused on copywriting, web design, email marketing, and SEO. If you have an Apple store near by, they offer free coding classes that will teach you how to make basic apps. The opportunities to improve your skillset are endless.
- Have a system for increasing your income and responsibility. For example, find a higher paying job with more responsibility every three years.
- Invest in yourself. A lot of turning points in my career and in life have come after investing in myself. One course I bought changed the trajectory of this blog and allowed me to go full-time. Short on money? Invest time.
Get Better Insurance For Less Money
- Only buy insurance on what you can’t afford to insure yourself. For example, a house fire vs. cell phone insurance. If your house burns down, you probably can’t afford to replace it. But chances are that over time, cell phone insurance costs more than just replacing a broken phone.
- Go with the highest deductible you can afford. As a good rule of thumb, make the deductible large enough that it stings a bit to write the check, yet small enough that it doesn’t derail your overall financial goals.
- Buy term life insurance once you have a family. It’s the best value and protection when it comes to life insurance for 99% of people. Check out Policygenius, which will show you great rates from multiple life insurance companies.
- Insure your house for its replacement value, not what you bought it for. Your biggest asset might be worth more now than when you bought it.
- Compare insurance costs before buying a new car. You might be shocked at the seemingly arbitrary difference in cost between two similar makes and/or models. Checking this ahead of time can save money.
- Take advantage of policy bundle discounts. The largest discount offered by most insurance companies is for home/renters + auto. This is one of those basic money saving tips that often gets overlooked.
- Shop for insurance regularly, and consider a usage-based insurer like Metromile (read my in-depth review here). Your credit history is one of the primary factors in the price you pay for auto insurance. If your credit score has improved a lot since the last time you shopped for insurance, shop for it again. You can save a lot of money just by exploring your options.
- See if you can skip rental car insurance. Chances are, you can. Most people’s regular auto insurance covers rental cars. Even if it doesn’t, your Visa or MasterCard might! So next time, call your insurer and/or credit card company to ask what they cover before renting a car.
- Check annually to make sure you’re still getting the best price. Rates vary DRASTICALLY from carrier to carrier. Esurance is a quick way to get started and is always the first place I look.