There is an interesting article on SavingAdvice.com that discusses the life of 10 rich people who are known for their frugal ways. While their wealth is brought about by other factors like talent and extreme genius, there is one aspect that you can actually emulate – frugality.
But how can being frugal make you rich? What is it about this lifestyle that will help shape you to be a millionaire?
Simple, it teaches you the basic rules of financial management.
What a frugal lifestyle teaches you about financial management
The thing about frugal living is it teaches you to live below your means. This is the number one rule in financial management. Knowing how to manage your money will help make your dreams become a reality.
No self-made millionaire got all their wealth by being irresponsible in managing their money. They all got to where they are not because they earned millions annually. That usually came later. The secret is they knew how to maximize the limited resources that they had – no matter how small it was. They used frugality to help them pay for their needs and still have enough to put aside to finance their business endeavors.
Here are the important concepts that frugality can teach you about financial management.
Budget planning. Management is all about planning. It is difficult to be organized if you leave everything to chance and if you only make impulse decisions. Even the simple things that you buy all have to be part of your plan. It has to be clear that being frugal is not about deprivation. On the contrary, it will help you be more extravagant with what you really want to spend on. If that means continuing with your morning latte routine and cutting back on the movie dates, then that is what you do. The budget plan takes effect because you can identify where you will cut back and how much you can spend on what you really want.
Smart spending. Frugality, as mentioned, is not about deprivation. Through the budget plan, you will actually make better spending decisions. Frugality is not about buying the low priced item. It is more of finding the best value for your money. It can allow you to spend on expensive things if it means it will give you a high value over a longer period. But smart spending is really beyond buying only what you can afford. It is about deciding not to buy something even if you can afford to pay for it in cash. It is choosing to save that money so you can spend it on something more worthwhile.
Saving. Since frugality teaches you budgeting and smart spending, you will find that it is easier for you to save. Developing the habit to save is equally important because this is will bring you closer to your dreams. It can finance the business that will make you rich. It will help you buy a home without putting you in too much debt. If you save enough money, you may be able to buy your home in cash! Your savings will pave the way for the capital that you need to build a company or invest in profitable endeavors.
How to keep frugal living from being too restricting
In some cases, people find it hard to enjoy frugality because they find it too restricting. If this is what you are feeling, then there is something wrong with the way you are implementing the frugal lifestyle.
Here are some tips that we have to help erase that notion that frugal living is restricting.
Budget for fun activities. People who started a frugal budget without including the fun activities will be doomed to fail. You cannot live without these fun activities and at one point, you will just lose it and splurge on something unexpected and unnecessary. Try to keep this from happening by budgeting for the entertainment activities in your life. You can be extravagant with the things that you want as long as it stays within your budget and you have funds for priority payments. Your budget will help you identify what expenses you can let go to make room for what you want to spend on.
Use your creativity. All it really takes is your creativity and imagination. If you want to have fun and you have set a budget for it, you will not find it hard to come up with a fun activity that will not cost you too much.
Do not eliminate, instead substitute. If your fun activities cannot be funded, then you need to find a substitute that is more economical that will fit your limited income. Watching a movie does not have to be in a cinema. You can rent a movie or borrow one and watch at home. Eating out does not have to be costly too. You can cook your meal at home, grab a picnic blanket and spend an afternoon in the park.
Here is a video that distinguishes people who are being cheap and being frugal. These two concepts are actually confused with each other and this probably contributes to why people turn their backs on frugality. Nobody wants to be called cheap. Learn the difference so you know how frugal ways will benefit you in more ways than you imagined.