I grew up in a frugal household. My parents would keep the heat low to save on the utility bills. We would bring a bag lunch each day and not spend the dollar or two it cost for lunch at school.
We did it because we needed to save up money for expensive flights home to Taiwan to visit our relatives.
After finding financial success as an adult, I still find myself keeping the same habits. I know that I keep the temperature relatively low in our house but now it's because that's what I'm used to. We can afford to keep it warmer. But my childhood home was cooler than average so I like it cooler. 🙂
Frugality is often borne out of necessity but eventually, it becomes habitual.
But just as frugality is habitual, extravagance is too. And we're not talking gold plated forks or silver spoon extravagance, those most people can avoid without difficulty. We're talking the small daily extravagances that, when you add them up, derail your budget and delay your goals.
The following are a series of daily extravagance habits that, if you want to be frugal and save your money for the things you want, you must break.
Allowing Others to Dictate Your Spending
Peer pressure is a powerful force, it's why so many people participate in gift exchanges or baby showers or wedding showers… when they otherwise would want nothing to do with it.
Less visible but likely more pervasive, how about going out to lunch with co-workers? It would seem like not a big deal but it is if you're only going out because they are and you want to seem like a “team player.”
Frugal people understand that they are responsible for their savings and so they should be responsible for where they are spending. Don't allow others, through peer pressure, to spend your money.
They Don't Fly (Budget) Blind
If you're frugal, you know the value and importance of a dollar.
But not all dollars are created equal. If you make $30,000 a year, the 1st dollar you spend is not the same as the 30,001st dollar. That 30,001st dollar will put you in debt.
And the only way to know that is if you keep and maintain a budget. You can pick any budgeting strategy you want. You can track it any way you want (personally, I use a budgeting spreadsheet because I'm old school). The important part is that you keep doing it.
Budgeting gives you the freedom to make informed decisions. Maybe you want to splurge and do something special… and only a budget will tell you if you're spending your 30,001st dollar.
Forgetting to Comparison Shop
Instant gratification is a difficult force to overcome but frugal people realize that you can slow things down and save yourself a lot of money in the process.
Comparison shopping, whether it's for a gallon of milk or a home renovation, is crucial. For staples, like milk and eggs, I just remember which stores offer the best deals and I don't comparison shop every time I buy them. I just keep an eye out and don't let myself overpay regularly.
For larger one time purchases, like renovation work, I always get three or more quotes. When you have three, you know where the market rate is for that work. If you have the time, get more but stop yourself at ten or if the process takes more than two weeks. At that point, you're not getting any more useful information and are just delaying things (which could be a sign you don't want to do it in the first place!).
Let the market forces work in your favor!
(if you don't like comparison shopping, you can always use a free app to help you do it — Trim helps lower you bills)
Overpaying for Convenience
Think about everything you buy — where are they the cheapest? In bulk.
Where are they the most expensive? Vending machines. Convenience stores.
Convenience is a wonderful thing. When you have a crying kid, are stressed out after a long day, convenience is a wonderful thing. It becomes a problem when convenience becomes common. You can buy a big bag of chips for $3 or you can buy small bags for $1 from the vending machine.
One time? No big deal, we're not sadists here. But all the time? No. Plan ahead and save that money for something important to you.
Ignoring Stock Up Opportunities
Unless you're strapped for space in your home, stocking up on non-perishable staples is a great way to save money regularly. If you see a sale on products you buy regularly, get more and stock up your pantry.
This is like the habit of not overpaying for convenience and speaks to how frugal-minded people are often thinking long term – what they'll need in a month or two or six.
Food waste is a huge problem. Between forgetting what's in your freezer and just letting leftovers go bad, throwing out food should be a cardinal sin. Truly frugal-minded folks have learned how to put systems in place to avoid this. (heck, meal planning is half the battle!)
For our freezer, we put a whiteboard outside of our freezer to list all the items we have inside. This lets us quickly determine what is old and must be used, like frozen meat (Foodsafety.gov has a list of safe storage times), so we don't discover a roast two years later.
For our leftovers, we keep a leftover calendar. It's part meal planning, for days in the future, and part reminder system of what leftovers we have in the fridge. It's a simple system, we write the meals we make each day and then cross it out when we've completely eaten it. Anything that isn't crossed out means it's in the fridge. Nothing remains for longer than a week.
This is not an exaggeration but we haven't discovered a moldy entree in our fridge in years. (we have found sides though, which we don't list on the leftover calendar)
Paying for Services You No Longer Use
Netflix is awesome and when I first subscribed, ages ago, I was on the 2 DVD package. Then I moved to one DVD and streaming. And then finally just streaming, even though having the DVD cost only like a dollar so more. A dollar is not much in the grand scheme but it's $12 a year for something I wasn't using. That makes it too much.
How many services do you pay for but don't use? How many services are you paying for simply because you haven't taken the time to cancel it?
You can cancel your cable, save a bundle, and find ways to invest that money instead!
Buying Cheap All The Time
There are some things that you shouldn't spend more on, like gasoline, and then there are some products where it pays to pay more. Buying something and having to replace it often is not a strategy for long term success. Not only could you save money by paying a little more, but you would also save the time it takes to replace those items.
I employ the Upgrade and Save Strategy to avoid this. It will require you to think about those areas in your life you could spend a little more money today to save more in the future.
Upgrade and Save can also help you avoid those unconscious spending habits you've developed over time. I purchased a Nespresso machine and am now always just 30 seconds away from a delicious espresso, which means I won't even be tempted to buy one for 3 times the price from a Starbucks.
Turning Special Treats into Common Events
Special treats are things you likely don't do regularly but have a positive effect on you, like going to the spa or getting ice cream. It's all too easy to turn special treats into common events and this has two negative effects. A special treat stops being special when it happens all the time. Special treats often cost money. Combine the two and you have a recipe for disaster, frugally speaking.
Preventing the Diderot Effect
The Diderot Effect is a social phenomenon where people buy things that complement what they already own. When they buy something that doesn't fit, oftentimes a higher quality or more luxurious, they feel a need to upgrade their existing things to match.
The classic story is of someone from ancient times who bought a fancy new scarlet dressing gown. It was nice but it didn't fit with the rest of the wardrobe.
So to make it all fit, they bought more items to make it all fit.
We're not talking accessories here, we're talking about new furniture and paintings because they looked so ratty next to the dress. (Kristin at Get Money has a great video about the Diderot Effect)
If this sounds ridiculous, think about the last time you bought a car and then all the things you needed for that car. Or the last time you moved into a new place and replaced some of your furniture because it no longer fit. 🙂
Break these daily extravagance habits and watch your bank account grow. 🙂
(if you're in the mood for more frugal reading, here are some frugal things that are NOT worth doing!)