Money Management

How to Live Cheap But Good: 12 Tips for a Rich Life on a Budget

How to Live Cheap But Good
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Living cheap but good is the art of thoughtful frugality. It means spending on what enriches your life, and saving on what doesn’t. It’s about ensuring that every dollar you spend adds value to your life while minimizing waste on the non-essentials.

Ready to learn how? Here are 12 ways to master this balance.

12 Ways to Live the Rich Life on a Small Budget

#1. Invest in Experiences

To live cheap but good, focus on buying experiences rather than things. 

In their book Happy Money, Professors Elizabeth Dunn and Michael Norton highlight the fact that spending on experiences brings more satisfaction than buying material items. 

Their research reveals that the joy and memories derived from experiences far outweigh the temporary pleasure of physical possessions.

This approach is like building a “memory bank.” Every experience you choose adds a rich, lasting memory to your life’s collection.

Related: Five ways money can make you happier (as proven by science).

#2. Try Values-Based Budgeting

There are many types of budgets. But a Values-Based Budget — inspired by the book “Your Money or Your Life” — is one of the best ways I know to make sure your spending aligns with what’s truly important to you. 

The process starts with understanding your “real hourly wage,” which is how much you earn per hour after factoring in all work-related expenses and time. 

This helps you see the true cost of your purchases in terms of time, not just money. 

For example, if you earn $36.64 per hour (see the illustration below), you can think about a $100 item not just as a price tag but as costing about three hours of your life.

Life Energy Examples

Once you understand your hourly wage, you can then start the process of reviewing your expenses by asking yourself the following questions:

  1. Does this spending bring me enough joy or value to justify the time it cost me?
  2. Does this spending reflect my personal values and goals?

The goal of this process is to ensure that every expenditure brings the greatest possible benefit to your life.

For more on the values-based budgeting process, see our guide on frugal living tips

#3. Create a List Of 100 Dreams to Maximize Everyday Fulfillment

Making a list of 100 dreams is an exercise created by career coach Caroline Ceniza-Levine, which I first learned about by reading Laura Vanderkam’s book 168 Hours.

As Caroline writes about the process:

“Make a list of everything you have ever wanted to accomplish (e.g., get a Master’s degree), experience (e.g., travel to Fiji), have (e.g., own a home), learn (e.g., play guitar), or do (e.g., go snorkeling under the moonlight). Don’t censor yourself by worrying if you can actually do it or afford it or schedule it. Just write it down.”

When I compiled my list, I was surprised to find that many of my dreams were either free or low-cost; things like trying a new recipe or exploring a nearby park with my kids. 

I review this list monthly and schedule these activities, bringing fulfillment to my everyday life.

Pro tip: Keep this list accessible on your phone. This way, you can easily add new ideas.

#4. Embrace Quality Second-Hand Goods for Savings and Durability

When you buy something brand new, it most likely depreciates in value immediately after you purchase it. The most common example of this is a car, which loses about 10% of its value within the first month

There are now many online marketplaces where people sell their barely-used stuff. Starting your search at these sites (think of platforms like eBay and Facebook Marketplace) can save you a significant amount of money over your lifetime, while still allowing you to have whatever it is you’re looking for. 

Similarly, sites like The Real Real and GOAT work like online consignment shops for authenticated luxury items, often allowing you to save substantial money on high-end goods that are still in perfect condition.

Of course, finding great deals on these marketplaces is a skill in and of itself. The more you do it, the better you’ll be at spotting good products from honest sellers. So, as with most things, start small, find out what works, and work your way up. 

Pro tip: Most marketplaces allow you to set up alerts so that instead of checking the sites daily you can get an email when your search terms pop up. 

#5. Challenge the Status Quo for Better Results

In his book Living The 80/20 Way, famed management consultant and investor Richard Koch advocates for focusing on desired outcomes and finding the most efficient and enjoyable paths to achieve them. 

This approach encourages rethinking conventional solutions for more innovative, cost-effective alternatives.

Take social gatherings as an example. The usual go-to might be dining out, but if the real goal is to connect with friends, there are numerous other ways to achieve this.

Hosting a potluck, organizing a game night, or planning a group outdoor activity can fulfill the same social need at a significantly lower cost.

The idea is to cultivate the habit of looking past the first, most familiar option. In turn, you’ll open up new, often more rewarding and cost-effective possibilities.

#6. Choose Regular Small Treats Over Big, Infrequent Splurges

Buying things we value brings temporary joy. In the field of behavioral science, this concept is known as hedonic behavior.

But what’s interesting is that research shows this boost of happiness occurs regardless of a purchase’s value. 

Therefore, spreading out our money over a higher number of smaller joy-inducing purchases — compared to concentrating it on a more limited number of high-cost purchases — is more beneficial. 

For instance, taking multiple smaller vacations throughout the year, or dining out more frequently at lower costs, can provide more sustained happiness than one luxurious vacation or one super-fancy dinner.

A study by researchers at Harvard, Princeton and the University of Chicago, titled “Mispredicting the Hedonic Benefits of Segregated Gains,” found the following:

“The hedonic benefit of a gain (e.g., receiving $100) may be increased by segregating it into smaller units that are distributed over time (e.g., receiving $50 on each of 2 days). However, if these units are too small (e.g., receiving 1¢ on each of 10,000 days), they may fall beneath the person’s hedonic limit and have no hedonic benefit at all.”

#7. Select High-Quality, Long-Lasting Products

One subreddit I enjoy following is r/BuyItForLife, where people post pictures of quality products that have often lasted decades. 

Example of an item posted on r/BuyItForLife
An example of the kind of posts you’ll find on the BuyItForLife subreddit.

Clothes, cookware, appliances and tools are some of the most popular items on the forum. 

Making the investment in these high-quality products might mean paying more upfront, but over the long term, doing so can save money. 

You’ll also enjoy these high-end products more every time you get to use them as their cost-per-use declines over time.

#8. Rent Luxury Items for Affordable Indulgences

Indulging in luxury doesn’t always have to mean owning luxury. 

Renting high-end items like vacation homes, designer clothes or dream cars can be a smart way to experience luxury without the long-term costs. 

This approach saves money and hassle and capitalizes on the initial joy we often feel from new experiences or items.

#9. Travel to Where the Cost of Living Is Low

Anyone who has traveled to Western Europe on a budget can tell you that money is constantly on your mind. Food, transportation, lodging and entertainment run high in these counties. 

On the other hand, when you visit a lower-cost-of-living country, it’s more a question of how much you can fit into your schedule. 

For example, when I visited Buenos Aires, the goal was to eat at each of the top 10 restaurants on TripAdvisor because a high-end meal for two would run just $30 to $50. To knock off the top 10 list in a place like Paris, you’re likely looking at 10 times that cost. 

Recommended resource: Numbeo: An Open-Sources Cost of Living Calculator.

#10. Enjoy Affordable Premiums for Everyday Luxury

The wine market is a fascinating example of extreme price ranges, with bottles available from just a few dollars to the staggering $558,000 paid for the world’s most expensive wine

In contrast, the world’s priciest chocolate bar is relatively affordable at $18.99.

Experiencing the finest doesn’t always require a fortune. 

Consider finding your luxurious indulgences where the best in the world is accessible for under $100. 

In my experience, items like chocolate, coffee, tea, olive oil, and high-quality journals offer a taste of luxury. 

These top-tier products often cost only 5 to 10 times more than their budget-friendly counterparts, yet they provide a significantly enhanced experience.

#11. Find Your Money Dials

Ramit Sethi, author of I Will Teach You To Be Rich (one of my favorite personal finance books), has a fun exercise that he calls Money Dials

The idea is to ask yourself the following: “What do I LOVE to spend money on?”

According to Sethi, there are 10 different money dials:

  1. Convenience
  2. Travel
  3. Health/Fitness
  4. Experiences
  5. Freedom
  6. Relationships
  7. Generosity
  8. Luxury
  9. Social status
  10. Self-improvement

The initial step in the “Money Dials” exercise involves identifying which money dials matter to you. 

Then, it encourages you to think ambitiously by contemplating what it would be like to significantly increase your budget in those areas by 10 times. 

The purpose isn’t necessarily to commit to such high spending. Rather, the exercise is about recognizing your priorities and exploring how even a modest increase in spending can lead to substantial satisfaction.

For instance, if health and fitness are your focus, a 10X budget might lead you to consider hiring a private chef for healthy meals. While this might seem extravagant, it reveals a deeper desire for convenient, healthy home-cooked meals. 

A more practical and budget-friendly adaptation could be treating yourself to a healthy meal delivery from your favorite place every Friday evening. 

#12. Develop a Skill or Hobby That Saves Money

Learning new skills such as cooking, gardening, home brewing, DIY home projects and cycling can be deeply fulfilling and potentially save you money. 

Some of these activities even have the potential to evolve into a money making hobby.

The aim is to discover activities that truly resonate with you and don’t cause you to incur additional expenses. This approach ensures that you’re not only saving money but also significantly enhancing your everyday life.

Final Thoughts on Living Cheap But Good

The goal doesn’t always have to be minimizing costs by any means necessary. Instead, recognize that it’s OK to spend money, especially when you’ve done the hard work of identifying what matters most to you. 

Living cheap but good is all about identifying and prioritizing what truly matters to you. It’s an approach that goes beyond simply just saving money, but is an alignment of your resources with your life’s goals and passions

R.J. Weiss
R.J. Weiss, founder of The Ways To Wealth, has been a CERTIFIED FINANCIAL PLANNER™ since 2010. Holding a B.A. in finance and having completed the CFP® certification curriculum at The American College, R.J. combines formal education with a deep commitment to providing unbiased financial insights. Recognized as a trusted authority in the financial realm, his expertise is highlighted in major publications like Business Insider, New York Times, and Forbes.

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