You know what’s more effective than setting goals? Developing better money habits. Goals are great things to aspire to reach. But habits require action, and action is your best friend in the financial world.

Here are the 10 things frugal people act upon and understand that help them with their finances.

Habit # 1: Create A To Buy Waiting List

Instead of announcing you’ll never make an unnecessary purchase again, give yourself permission to dream. Never say never – just say not right now.

Create a waiting list of the things you want to buy at some point. By putting it on the list, you won’t feel so deprived. It will be there waiting for you should you decide to purchase it later.

As leading willpower researcher Roy Baumeister of Florida State University explains:

“…telling yourself I can have this later operates in the mind a bit like having it now. It satisfies the craving to some degree.”

Habit # 2: Take Advantage of Easy Wins

Frugal people know that there’s certain personal finance actions that take little time and effort but offer tremendous rewards. For example, taking ten minutes to optimize their 401K investments allows frugal people to potentially cut years off their working life.

Other common habits of frugal people that have a high return on investment include:

# 1 – They’ll shop their insurance with high rated insurers at least once every two years

  • Quick Action: Use a site like Esurance, which takes only a few minutes to get a quote. Why Esurance? Esurance offers Express Lane quoting, which looks up your vehicle’s information automatically, saving you tons of time and hassle. All you need to get a quote is your name, date of birth, and address.

# 2 – They earn cash back on all their purchases

  • Quick Action: Sign up for Ebates, which allows you to earn up to 40% cash back when you shop both in-store and online at over 2,500+ stores. With a 4.3 rating and over 44,000 combined reviews in the App and Google Play Stores, signing up for Ebates is something I wish I did sooner.

# 3 – They pay attention to their credit score

  • Quick Action:  One study showed the difference of having excellent vs. poor credit can save a 35-year old male $274,918 over his life! I use a 100% free site called Credit Sesame, which lets me see my credit score and get updates when there is a change to my credit report. Plus, I get a free customized report with exact tips on how to improve my score.

Habit # 3: Know When Refinancing Makes Sense

A study by the Journal of Financial Economics found 20% of homeowners who could have benefited from refinancing didn’t. As such, Americans paid an extra $5.4 billion in interest payments then they had to.

A mortgage is likely the largest debt you’ll have. A frugal person knows this and understands how much they can save by refinancing.

As interest rates are trending up, time may be running out to save money. Take a few minutes now to make sure you’re not giving more money to a bank than required.

Head over to LendingTree to compare rates from up to 5 lenders in minutes in 3 minutes.

Don’t have a mortgage?

Look to see if you can save money refinancing other debts.

A great resource to help you find a better rate is Even Financial.

Even Financial is like the Expedia of personal loan providers. Instead of going to banks one-by-one, Even Financial searches the top online lenders to match you with an offer in less than 60-seconds. Rates start as low as 4.99%.

This can be a great way to save money for those with higher-interest debt, such as credit cards or car loans.

Habit # 4: Continuous Optimization

Frugal people are constantly optimizing their finances. It’s these little optimizations that may seem insignificant at the time, which compound over time to yield very big results.

As Darren Hardy explains in his best selling book The Compound Effect, ‘’Small, seemingly insignificant steps completed consistently over time will create a radical difference.’’

When it comes to your finances, here’s four small steps you can take today which down the road will mean a big difference.

  • Save more the easy way. Increase your 401(k) contribution percentage by 1% every six months (set a calendar alert if your company doesn’t offer automatic increases).
  • Make money in your spare timeSurvey Junkie pays you for taking surveys in your spare time. They have the highest rating on TrustPilot among all survey companies with an 8.7. You’ll get paid instantly with cash via PayPal.
  • Earn passive income with Paribus. Paribus is a free tool that gets you money back for your online purchases. How it works is you sign up, then Paribus will scan your email archives for any receipts. If Paribus finds you’ve purchased something from one of its monitored retailers, it tracks the price and helps you get a refund when it drops (you keep 100% of the savings).
  • Find a better bank. If you’re paying fees of any kind for banking, you need a better bank. I partnered with Even Financial, to help you do just that. Just enter your zip code and get a list of banks in your area with the highest interest rates and lowest fees.

Habit # 5: Understand Opportunity Cost

Frugal people don’t look at a price tag and take it at face value. They dig deeper than that. They know everything comes at a price and sometimes that cost isn’t apparent on the price tag.

For every dollar they spend, they’re trading something that’s far more valuable than paper money. They’re giving up their time, effort, and energy to buy that item. So they do their best to evaluate that it’s fully worth it to them.

There are multiple ways of doing that, including calculating how many hours it would take to earn the money to make that purchase. But when you do it that way, you’re not considering the true loss – what would happen if you saved that money instead.

For that, you can use the rule of 184.

Here’s how it works.

Let’s say you’re thinking about joining a fancy gym. Let’s pretend that will cost you $100 a month.

If you saved that $100 every month and invested it instead, you might reasonably expect to earn 8% a year on average with a stock market index fund. In 10 years, that $100 a month could grow to $18,444 instead.

With the rule of 184, you can take any monthly expense and determine how much money you’d have after 10 years. You do that by multiplying the monthly cost by 184.

This trick is just one way frugal people look at every expense, at more than just a price they pay today.

Habit # 6: They Protect What’s Important

What frugal people understand well is using insurance for what it’s meant for–to guard against true financial catastrophes, not minor inconveniences.

Frugal people don’t pay for cell phone insurance or warranties on appliances. These “risks” are covered by a fully-funded emergency fund. Instead, frugal people protect themselves with the type of insurance that guards against TRUE financial catastrophe.

A good example of insurance frugal people buy is term life insurance. Term protects your loved ones in the event of your death. There’s no gimmicks or bells and whistles. It’s simply protects against financial catastrophe.

It’s also super-cheap compared to other types of insurance (no-kidding, I pay $12.25 a month for my wife’s $250K policy, which is cheaper than many cell phone insurance plans). Your rate will vary by age and health but most people are surprised at how affordable term is. You can get a free life insurance quote here (it only takes 2 minutes) with A++ Rated Haven Life Insurance.

Habit # 7: Ask the Right Questions before Making a Big Purchase

When it comes to buying a car, frugal people are not asking, “How much car can I afford?” or “What’s the monthly payment?

Instead, they’re asking a totally different set of questions, such as:

  • What is it that I actually want by buying this car and is there a better way to get that?
  • What is the total cost of ownership including gas, parking, insurance, maintenance, etc…
  • What will happen if I don’t buy this car right now?

The questions will change depending on what you’re buying, e.g. a car vs. clothes online. The principle, however, of asking better questions is what’s important.

A personal example, here’s what I try to ask myself each time I buy something online.

  • What will actually happen if I don’t buy this item right now?
  • What is it that I actually want by buying this item and is there a better way to get that?
  • Can I buy it through Ebates to save money
  • Can I find a used one on Craigslist?

=> Click here to sign up for Ebates for FREE & Get a $10 Bonus

Habit # 8: They Don’t Tolerate Hidden Fees

Nothing can eat into your money quite like hidden fees.

Frugal people know to always read the fine print. They know where hidden fees are and are doing what they can to control them.

Hidden fees can be found everywhere. Credit cards have them and so do 401(k)s. Even your checking account might charge you hidden fees if you drop below an average daily balance for the month.

One simple trick to reducing hidden fees in your 401(k), which average over 1.5% and are often hard to spot, is to get a free analysis of your 401(k) with Blooom.

Blooom is an SEC-registered investment advisory firm, that the Wall Street Journal called, “one of the best online tools for retirement planning.” To get your free analysis, all you have to do is enter your name, birthday, and estimated retirement date. Then, let Blooom link up to your 401(k).

Blooom then uncovers any and all 401(k) fees, plus tells you if you have the right mix of stocks and bonds.

Habit # 9:. They Know Where Their Money Is Going

What frugal people excel at is making the most of the money they have. To do that, they have a plan for where they want their money to go. Then, they track their income and expenses to ensure they’re on target.

In the landmark book The Millionaire Next Door, authors Thomas J. Stanley and William D. Danko spent 20 years studying who the real millionaires were in America. To their surprise, they found that the majority of millionnaires were quite frugal. When describing the traits of a typical millionaire, the authors explained:

They know that planning, budgeting, and being frugal are essential parts of building wealth, even for very high-income producers. Even high-income producers must live below their means if they intend to become financially independent. And if you’re not financially independent, you will spend an increasing amount of your time and energy worrying about your socioeconomic future.

Their research also revealed that the majority of millionaires can answer “yes” to these two questions.

  1. Does your household operate on an annual budget?
  2. Do you know how much your family spends each year on food, clothing and shelter?

In fact, they found that for every 100 millionaires who don’t budget, there are 120 who do. But what comes as an even bigger surprise, the higher the net worth, the higher the percentage of budgeters.

“Only those clients with considerable wealth want to know exactly how much their family spends on each and every category.”

Habit # 10: Turn Hobbies into Businesses

Frugal people understand that hobbies can be a source of income. From pocket change to full-fledged businesses, many frugal people earn money from their hobbies.

Common examples include proofreading, teaching music, gardening, sewing, freelance writing, photography, coaching sports, and baking.

This blog is another example of a hobby turned into a business. As a voracious reader of money management books, I started The Ways to Wealth in 2016 to share what I was learning. In a year, I left my full-time job in financial services to run this blog full-time.

Hobbies make for the best blogs because any popular hobby has an army of people wanting to learn more. If there’s something you’re passionate about, consider starting a blog on it.

What’s also nice is blogs take very little time, money, and knowledge to get started (read The Ways To Wealth’s Insanely Simple Guide To Starting A Blog).

The Ways To Wealth Exclusive OfferLaunch a blog for under $3.00 /month with Bluehost. Get a FREE domain ($15 value) and great customer service, too. That’s more than 50% off of the original price of $7.99/mo when you use TW2W’s exclusive link.

If you’re interested in starting a blog, I have a free 7-day email course: How To Make Your First $1K Blogging.

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