If a budget plan can lower your monthly expenses, a frugal budget will take you to the next level. Some people try to avoid this because they feel that the restriction that it gives is bordering on the extreme. While there are people who practice extreme frugality, you have to know that it is usually by choice. If you really want to be successful in changing into a frugal lifestyle, you need to make the changes based on what you know you can accept.
Some people make radical alterations in their lives and quickly implement extreme budget cuts just to be “frugal.” While your needs may require extreme budget cuts, that is not how you become frugal. Frugality is all about stretching your money to the limit but it does not mean you restrict yourself. The truth is, that is the perception that ruins frugality for other people. It is not about deprivation but more of finding ways to satisfy your needs while sticking to your frugal budget.
5 reasons why frugal budgeting can benefit you
There are many reasons why a making and sticking to a frugal budget can benefit you. Here are 5 different reasons that you may be able to identify with.
It teaches you to be smart about your money. As mentioned, a frugal budget should not make you feel the pain of deprivation. It actually teaches you to be smart about you money. Since your frugal budget tells you just how much you can afford to spend, it teaches you to implement proper money management. Not only that, it makes you implement smart spending because you eliminate the unnecessary expenses that end up wasting your money. You stop buying “stuff” and prioritize purchases that are more important to you. Smart spending does not only refer to saying no to purchases you cannot afford. It is more important to learn how to say no even to the things that you can afford – but you know are not relevant to your personal goals. That is something that you will be forced to learn while implementing your frugal budget.
It motivates you to develop your skills. As you learn how to be smart about your money, you are motivated to develop skills that will help you fit your expenses in your new budget plan. For instance, you will have more reason to tend to you garden in hopes that you can grow your own produce. You will have the initiative to cook meals from scratch, learn how to bake bread, find out how to change your the oil in your car, etc. There are so many things that you can do for yourself to save money. You just didn’t have the motivation to do so before.
It encourages you to be creative and resourceful. Apart from motivating you to do things on your own, living with a frugal budget can also help you find new ways to do the things that make you happy. Frugality should not make you miserable. On the contrary, it allows you to shift your expenses so the important ones are financed. For instance, a frugal budget will not tell you to stay at home to save money if you want to go out. Frugality will encourage you to look through the community boards to find fun things to do with your time that will not cost you a lot. It can be helping in the community center, hiking in the local park, bike riding, etc.
It trains you to survive a financial crisis. A frugal budget also trains you to survive a financial crisis. Take for instance the recent government shutdown. People sometimes have to adapt a frugal lifestyle once they experience a financial crisis to help stretch their savings for a long time. If you have been living a frugal lifestyle in the first place, you don’t have to change anything about your life even when a crisis happens. If there will be changes, it will not be too drastic that it becomes too depressing.
It assists you in debt relief. Lastly, it helps you achieve debt freedom. Frugal living can help you increase your debt payments to achieve a faster debt relief. For instance, if you opted for balance transfer, you can use a frugal budget while you are within the promo period. That way, the payments you will make while the zero interest is still in effect will be maximized. Another debt relief program that it can help with is debt settlement. If you do not have the lump sum money to offer, you can adapt a frugal budget to help you save up for a settlement fund.
Steps to create a budget for a frugal lifestyle
Creating a frugal budget is really just like any normal budget plan. The only difference is you allocate lesser amounts for every category because you are incorporating frugality principles of doing things yourself, etc. There are online budget templates that you can use to jumpstart your frugal budget plan creation – at least if you are hesitant to create your own from scratch. We found a list of free budget templates that you can download from websites like CoolToBeFrugal.com. You can also use budget calculators like the one from About.com to make the budget creation easier.
Here are specific steps that will help you create a frugal budget.
List your monthly expenses and rank them according to priority. The priority includes your utility bills, insurance premiums, food, groceries and other important stuff that is necessary for you to survive. Your entertainment expenses are usually found at the bottom of the list. You don’t have to input your debt payments here yet.
Identify your average net income. Never base your budget on your gross income. Make sure it is your net income – the amount you receive from your employer after taxes, etc.
Subtract the expenses from the income to determine if you are living within your means. Tweak your expenses and remove the unnecessary spending if you are going beyond your income.
Analyze your frugal budget to remove more expenses so you live below your means. If there are expenses that you know are just wants but you really need them to motivate you, then allot a small budget for that or find a substitute that is more cost efficient.
Allot an amount that will boost your savings.
See if what is left of your income is enough for your debt payments.
- Try out your budget for a month or two and adjust it based on how you think it will be more effective.