Saving money is an essential habit to develop, whether you’re looking to retire early, become financially independent, travel the world, or purchase a nice new car. Fortunately, there are many frugal living habits that can help you grow your wealth by saving money effectively.
Here are 20 real-life and practical examples of how you can save money effectively:
- Don’t buy luxury brands. We all know that branded luxury fashion clothes or the latest iPhone version are very expensive. Before buying these, think about what real practical value these items will bring to you, and search for cheaper alternatives instead that can achieve the same goals for you.
- Consider buying generic brands instead of brand-name products to save money. Next time you’re in a supermarket, take some time to compare the prices of similar products between well-known brands and, for example, the supermarket’s own brand or generic “brands”. Studies have shown that on average, generic brand products are often cheaper than their branded counterparts by around 30% to 50%.
- Stop spending money on things you don’t need, like expensive clothes or unnecessary gadgets. Splurging every once in a while is OK if it really makes you feel better, but as a general rule, only spend on what you really need.
- Avoid buying unnecessary items during sales, as they can tempt you into overspending. Similar to the previous point, sales often tempt you into buying things you don’t really need, by playing on the emotion of “I do not want to miss out on such a good deal” or the feeling that you would be saving money, whereas actually, you are spending money that you otherwise wouldn’t have, by buying something you didn’t plan to buy or do not really need.
- Use coupons to save money on your purchases. Don’t be embarrassed about using coupons. Even billionaires like Warren Buffett and Bill Gates use them.
- Consider buying in bulk for groceries or household items that you frequently use. Many large supermarkets give you better prices when you buy more of a product, which makes sense for products with a longer shelf-life, i.e. non-perishable goods such as washing powder, soap, toilet paper, toothpaste, etc. Also keep a look out for specific sales periods of such items that you anyway plan to use, and buy more of them when they are on sale. Note that as per point 4 above, only buy items on sale that you anyway would have bought and used.
- Opt for cheaper food options, like making your coffee or lunch at home, instead of buying from expensive takeout places.
- Avoid eating out frequently, as it can add up quickly. Instead, cook at home, and try new recipes to spice up your meals.
- Don’t gamble. Although the casinos will not tell you this, but you must have heard the phrase that “The House Always Wins.” In principle, on average, this means that gambling is unprofitable (and can also be very addictive which creates even bigger, longer-term problems), and should therefore be avoided.
- Stop smoking and drinking. These habits are costly and not good for your health, and serve no real practical benefit to you. If you already are a smoker or drinker, consider investing in programs to kick your habit or addiction, as this will save you significant money in the future. Based on research, smoking at least one pack a day can cost you on average US$ 240 per month, or likely more than 10% of your total monthly expenditure. Were you to put this money each month in a low-risk investment option with a return of, say conservatively, 5% compounded per year, you would have more than 37,000 dollars after 10 years and almost 100,000 after 20 years! Imagine what you could do with that!
- Avoid taking loans or debts. If you require a loan, make sure it provides you with a return on investment. If you pay more money in interest than you make as a return from spending that money, it is clearly a non-starter.
- Avoid investing with borrowed money. Warren Buffett once borrowed 25% of his net worth for investing and later deemed it a mistake. This is similar to the previous point of avoiding taking loans or debt in general.
- Don’t buy a bigger home just to impress others. Live within your limits and avoid taking on extra risks that could lead to financial pressure. Even a billionaire such as Warren Buffett spent only $31,500 on his home in Omaha, Nebraska, and has lived there for more than 60 years.
- Avoid upgrading your car unless you need to, and consider buying a used car instead of a new one. Do make sure the car you buy is in good technical condition, to avoid unnecessary repair and maintenance costs.
- Choose a career you love, not one that pays well. Pursuing a job you enjoy is very important, as you naturally perform better at things you love to do. This will, over time, lead to better performance and subsequent higher earning power.
- Turn off the lights and other electronic devices when you’re not using them to save on your energy bills.
- Use public transportation, carpool, or bike instead of owning a car, which can save you thousands of dollars in insurance, maintenance, and gas expenses.
- Don’t pay for cable TV if you don’t use it often. Instead, opt for streaming services that are much cheaper.
- Avoid paying for gym memberships if you don’t use them regularly. Instead, opt for free workouts at home or in your local park.
- Invest in your education and skills to increase your earning potential, which can lead to financial freedom in the future.
Adopting all or some of these frugal living habits can help you save money effectively and achieve your financial goals. By following these examples, you can develop a mindset of responsible spending and saving. Remember to live within your means, avoid debt, and focus on investing in yourself to build a better future.