Do you think frugal living is the answer to improving your current financial condition? It is possible. There are actually a lot of factors affecting your ability to improve your finances. But one of the highest reasons for your financial situation is your spending lifestyle. Regardless of how much you earn, it will dictate how successful your are when it comes to increasing your personal net worth.
Of course, it is foolish to think that increasing your income does not have a hand in improving your finances. It is the catalyst by which you will improve your wealth. However, there seems to be some inequality when it comes to the income distribution. According to the report coming from the FederalReserve.gov, only a small percentage of Americans benefited from the income gains between 2010 to 2013. Simply put, it is was only the rich who was getting richer and the rest of the population is still struggling.
Somehow, you can say that this is a major reason why it is hard to a lot of Americans to experience a boost in their household finances. Unfortunately, this is a tough hurdle to overcome. It will be a long journey before we can hope to deal with the income inequality issue. It is actually tough to determine if someone is already doing something about it.
But even if the issue is far from being resolved, that does not mean you cannot change something to help alleviate your situation. This is where frugal living becomes a solution.
How frugality teaches you that more is not always merrier
The thing about Americans that is destroying our financial lives is our preference for everything that is big. We like everything to be big because we feel that it is the main proof of our success. While buying more may feel like you are rolling high, that only shows superficial success. Underneath it all, you know that the material things will soon fade away and your future is not as stable as you thought it would be.
Frugal living is actually against anything that is excessive. It is not about deprivation. It is about being wise about your expenses so that you will never go beyond what you can afford to spend. It is being cautious about where your money is going. It is making sure that you are not only spending on the present, but also investing in the future.
The thing that should prompt you to use a frugal budget is that it eliminates the usual notion that bigger is better. Being frugal means you can spend your money but only on what is essential and really important to you. It is not about the luxury cars or the big houses. It is more about buying a car and a home so you can live a comfortable life – not a luxurious one.
When you live with the notion that bigger is better, you are exposing yourself to two pitfalls.
The materialism trap
This is the mentality that feeds on the notion that the more you have, the happier you will be. This is one of the most incorrect mentalities there is. While owning a lot of things may seem like being in abundance, you are slowly, but surely, enslaving yourself to your possessions. Moving to a new location will be tough because you have so many things to take care of. You will always feel compelled to own the latest gadgets and expensive items in the market because you feel that your happiness is tied with it. But we all know that material things will not make you happy for long. It will soon fade away and leave you with emptiness.
The pitfall of debt
The NewYorkFed.org reports that non-housing debt increased by 1.9%. These include the auto loan increase of $30 billion, credit card increase of $10 billion and student loan increase of $7 billion. While the mortgage balance decreased, the debt continues to remain at a high amount for American households. Frugal living, while it does not directly oppose debt, strongly teaches consumers to live below their means. This is to avoid the need to be in debt. You do not have to eliminate it totally because you need to maintain a high credit score. However, you should never put yourself in a position wherein you are borrowing money because you have your back against the wall. That is how it all becomes dangerous and your finances end up in ruins.
Things that you do not need to be big in a frugal lifestyle
Truth is, spending is easier than reaching saving goals. But that does not mean you should go the easy way. What you need to understand is that bigger is not always better for you. Frugal living does not support this. What it promotes is getting only what is just right and never anything in excess.
According to the survey done by Gallup.com, 45% of Americans have reported that they are spending more now than the previous year. Most of their expenses are on necessary items so it may seem justifiable. However, you should also criticize if the huge takers of your budget are too excessive for your actual needs.
Here are a couple of things that are not always better when you buy more of them.
- Food in bulk. It is true that you can save more when you buy in bulk – but only when your family can finish it off before the expiration date. If you know that you cannot consume what you have bought before it expires, then you are wasting money in the process.
- Big homes. If you have a big family and your finances can afford it, then go ahead and buy a big house. But if you only have one child, a smaller home is more practical – even if your current income can afford a bigger home. Remember, a big house would also mean bigger repair, maintenance and utility costs.
- Luxurious cars. As long as the car is fuel efficient and will not drain your wallet in terms of repair and maintenance, then it should serve its purpose.
- Huge TVs. While having that big screen is great, they are not always the most long lasting of the bunch. Not only are they expensive, but they are known to have a lower lifespan compared to the smaller TVs.
- Bulky appliances. Lastly, the big fridge or the huge washing machine may seem like a great idea but you should know that they cost more energy to run – even if they are energy efficient.
Try to live by the rules of frugal living and you should be able to free yourself from the need to buy more just to appear successful. As long as you have what is essential to survive, it should be enough for you to live by. And whatever is left of your finances, you should learn to save it. It may not be for the rainy day, but it should be saved for the future expenses that you will make. That way, you can build up your finances so you can hope to achieve financial independence. That means you do not have to work so you can live. You have already placed your money somewhere it can work for you and generate income – like investing!