Do you know what’s more effective than setting financial goals? Developing better money habits.

Goals give you something to reach for — they help you visualize what you’d like your life to look like five, 10, or even 20 years down the road.

But habits require action, and action is your best friend in the financial world.

Here’s a list of 10 important money rules that frugal people know and follow. No matter what your financial situation is, you can put these tips into action today to start saving more money and building your future.

Habit #1: Create a “to buy” waiting list

Instead of declaring that you’ll never make an unnecessary purchase again — a totally unrealistic goal, since we all give in to our impulses occasionally — give yourself permission to dream. Never say “never.” Just say “not right now.”

Create a waiting list for the things you want to buy at some point in the future. By putting items on the list, you won’t feel so deprived. They’ll be there waiting for you should you decide to make a purchase down the line when you have more disposable income.

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 are certain actions that take a little time and effort but offer tremendous rewards. For example, taking 10 minutes to optimize their 401(k) investments allows frugal people to potentially retire years earlier than people who never think twice about their investment funds.

One of my own favorite frugal wins is maximizing cash back on online purchases. To get up to 20% cash back, I use a cash back app called Swagbucks.

Here’s how it works: Simply sign-up for Swagbucks, and then visit your favorite stores — from Amazon to Target — by clicking the links available in the Swagbucks app and website. 

When you buy something, Swagbucks gives you extra cash back for the shopping you were going to do anyway. 

There’s also a $10 sign-up bonus when you use this link


Habit #3: Utilize effortless couponing

My Grandma was my frugal role model. She was cutting coupons in her 90s, despite some in the family giving her a hard time. 

The fact is that coupons can save you a lot of money, especially in helping reduce grocery expenses. The problem is that they’re difficult to remember to use, and finding them takes time. 

Fortunately, technology makes that problem a thing of the past. Ibotta is an app for your smartphone that gives you easy digital access to the best coupons available.

All you have to do is download the Ibotta app (which is free), browse for coupons from your favorite brands and products, and save them to your digital coupon book with the tap of a finger.

When you’re done shopping, just scan your receipt — Ibotta will add cash back to your account within 48 hours. Ibotta users save $240 per year on average, so you don’t want to overlook this opportunity. 

Habit #4: Know where your 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.

For their landmark book The Millionaire Next Door, authors Thomas J. Stanley and William D. Danko spent 20 years studying who the real millionaires are in America. To their surprise, they found that the majority of millionaires lived frugally.

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. 

One of the core concepts here at The Ways to Wealth is “Growing the Gap.” The idea is to consistently measure the gap between your income and expenses, with the goal of always trying to increase it. 

Benjamin Franklin said it best when he explained, “There are two ways to increase your wealth. Increase your means or decrease your wants. The best is to do both at the same time.”

With so many financial transactions today being automated, it’s easy to lose track of money coming in and out. 

That’s where a free budgeting app like Trim is super helpful. Trim automatically pulls together every bill and subscription you’re paying for, so that you can easily keep track of your income and expenses in one place.

What really separates Trim from a lot of the other budgeting apps is that Trim takes things a step further and will negotiate your bills for you (you can learn more about how this works in our in-depth review of Trim).

Sign up to start tracking your money with Trim.

Habit 5: Partner with only the best financial institutions

While we’d all like to think they do, many financial institutions don’t act with their customers best interests in mind. One such example is the Wells Fargo account scandal, where the bank was caught creating fake accounts that caused customers to pay millions of dollars in additional and unnecessary fees they didn’t consent to. 

The financial institutions we choose make a big difference in our lives. Frugal people understand this and carefully choose their banks, investment providers, and insurance and mortgage companies. 

I recommend starting your search for better providers with your checking and savings account, as this is something just about everyone can improve upon. 

If you paid even $1 in banking fees last year, a bank worth looking into is Chime. Chime is a mobile bank that guarantees it will never charge you a single fee, including overdraft, minimum, service, foreign transaction, and transfer fees.

Another great benefit of Chime is that it allows you to receive your paycheck up to two days earlier, which can come in handy when trying to avoid late fees from things like credit card bills.

If you already do a great job of avoiding bank fees, head over to Fiona, which is a search engine that helps you find high-interest banks in your area. No personal information is required — just enter your zip code to get the results.

When I did this, I found a bank that paid 22X the national average on their savings account! Getting a bump in your savings rate while avoiding expensive bank fees is a low-risk, low-effort way to save money.

Find a better bank today.

Habit #6: Strive for continuous optimization

Frugal people are constantly optimizing their finances. These little optimizations may seem insignificant in the moment, but compound them over time and they 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 are two small steps you can take today that will make a big difference down the road.

  • Save more the easy way. Increase your 401(k) contribution 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 8.7/10. You’ll get paid instantly with cash via PayPal.


Habit #7: Understand opportunity cost

Frugal people don’t take sticker prices at face value. They dig deeper than that. They understand that everything has both implicit and explicit costs. It’s not just what you pay today that matters, but also what you could have done with that money instead. 

Simply put, opportunity cost measures the opportunities you lose by making a particular decision. For example, if you invest $1,000 in the stock market and earn 5% per year on your investment, you did pretty well. But you could have invested that same $1,000 in an index fund and earned 8% instead. In this case, you walked away from an additional 3% per year in returns by not taking the time to fully evaluate all your options. That lost 3% is your opportunity cost. 

Equally important is the fact that for every dollar you spend, you’re trading something that’s far more valuable. You’re giving up your time, effort, and energy to buy that item. So it’s important to do your best to evaluate whether or not it’s really worth it.

There are multiple ways of making that evaluation, including calculating how many hours it would take to earn the money to make that purchase. But even when you look at it from that perspective, you’re still not considering the true loss: what would have happened if you had saved or invested 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 per month.

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

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 — they look at more than just the price they pay today.

Of course, there’s more to life than numbers. Not going to the gym also has costs. You may not be as healthy, which could impact your lifestyle. And failing to get enough exercise might lead to increased healthcare costs as you get older. Even saving money has an opportunity cost, so take the time to think about all aspects of your finances in detail. 

Habit #8: Pay yourself first (effortlessly)…

Many financial experts attribute today’s widespread lack of personal savings to the increasingly “frictionless” ability to purchase anything we want (common culprits are credit cards, subscriptions, Amazon one-click, and smartphones).

The idea that companies today are making it easier and easier to spend is a powerful one: we can use it to our advantage by leveraging the same technology to help to make saving money just as effortless. 

One great example of this is your 401(k), where contributions are deducted right from your paycheck. The money never makes it into your checking account, so you can’t spend it. 

Another idea is to use the app Digit

Life is full of financial responsibilities and it can be hard to set money aside for the things we want (like vacations and entertainment), rather than just the things we need. Digit is a simple app that helps make saving as easy as spending.

With Digit, you don’t even have to try to save — the app does it for you. Digit analyzes your income, expenses and spending habits and figures out how much you can afford to transfer into savings. Then it transfers those funds automatically, and allocates them to your various savings goals (which you can set and configure in the app). 

Getting Digit set up is easy. Just sign up, tell the service your savings goals, and then watch your account grow. It’s easy and free to transfer funds back to your bank, so you always have access to your cash. 

There’s a super-low monthly fee ($2.99), but you can try the service free for the first 30 days. Also, Digit has a 4.8 rating with over 100k reviews in the App Store.  

Save money effortlessly with Digit

Habit #9: Ask the right questions before making a big purchase

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

Instead, they ask a totally different set of questions, including:

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

The specific questions will change depending on what you’re buying — e.g., a car vs. clothes online. The principle is what’s important: ask better questions if you want better answers.

Here’s a personal example. This is 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 Swagbucks to save money?
  • Can I find a used one on Craigslist or Facebook Marketplace?

Habit #10: The little things matter

If you save $20 a week for 10 years earning 8%, your account grows to a staggering $15,769.

That $20 might not seem like much, but having $15,000 in savings is the difference between paying cash for a car and taking out a loan. Or, the difference between avoiding debt on a big purchase like a wedding or being able to afford a 20% down payment on a home. 

For many of us, $20 a week can seemingly slip through our fingers. A cable bill that hasn’t been reviewed in years, credit card interest, or letting food go to waste are easy expenses to put the blame on. Whatever it is for you, the important thing to understand is that the little expenses matter.

If you’d like this $20 a week to just take care of itself, consider downloading the investment app Acorns

Acorns has a “round up” feature that allows you to invest your spare change. For example, if you spend $22.10 at the grocery store, 90 cents goes to your Acorns account. Then, Acorns takes care of investing that money for you — all you have to do is choose between a few portfolios designed for long-term goals like retirement or short-term goals like saving for a car

The idea is that you’ll barely notice the money is gone… and what’s gone can’t be spent. 

The app does have a $1 monthly fee, but you’ll get a $5 bonus when you use this link. You can also get four years of free service if you sign up with a valid .edu email address.


Want to return to this post? Save it below on Pinterest:

Check out these 10 tiny frugal living ideas and habits that will make a big difference in your finances and life. #frugalliving #frugal #frugaltips #frugality