Frugal living does not mean living like a pauper. But frugal living means living without wasting your hard earned money. This concept is followed by the Champion Investor Warren Buffett. He believes in living a modest life using money with maximum effectiveness. Frugal living is something like this, if a things real cost is Rs 10 then you must pay only Rs 10 and not Rs 12 for it. So living frugal is not easy, this will require you to know the ‘right price’ for all items that you need to buy in your life. I am personally so impressed with the concept of frugal living that I decided to spread the word in my blog.
Frugal living does not necessarily mean lowering your standard of living. But paying right price for things you need in your life is frugal living. If you do not need a BMW to live your life and a small Volkwagen Polo with suit your standard of living then for Polo and not BMW. This is frugal living. For sure frugal living will call for lot of self control. So it will be not be wrong to say that frugal living concepts will discipline you and your family from needless spending.
Some experts who are following frugal living says that spending smartly after following concepts of frugal living has given them so much free-cash in hand they are pleasantly surprised. I do it like this, I and my family has a concept of ‘ideal home’ in our minds. We often discuss about what we have what more we really require. Once we come to a conclusion that we require something (lets say re-designing the layout of our living room), we think not only about the cost of implementing this change but how smartly we can spend our money and reach our goal.
Spending smartly means frugal living.
The first step towards frugal living is to know your cash flows and bank balances. How much you earn and how much you spend will let you know if you are living beyond your means or not. A person can slightly afford to overspend, if he/she has enough savings behind them. Means, suppose you have saved heavily for last 10 years and has developed a huge savings, then it is only fair to give yourself some loose rope. So knowing your bank balance and cash flows is key. How bank balance awareness is important? Because savings also generates income in form of interest, it increases your cash-in. The higher the cash-in the more you can afford cash-out.
Frugal living is applicable whether you are buying vegetables or buying a home for yourself. Frugal living concepts will help you realize if at all you can really afford to buy them or your requirement is unjustified. When I say spending smartly, I mean you must ask yourself if you have the affordability to buy that item. Suppose your income is Rs 100 and your essential expense each month is Rs 95 means your saving is only Rs 5. Lets also assume that your savings is Rs 20. Now, you want to buy a BOSE’s home theater system which will cost you Rs 100, ask yourself can you afford this thing of your requirement is only a Samsung TV which will hardly cost you Rs 20. Being aware of what is beyond your affordability is the biggest realization that frugal living concepts can give you.
This is one aspect of frugal living which will teach you to spend smartly by realizing your true affordability. But another aspect of frugal living is money management. When I say money management if mean debt management, investment management and saving target management.
I think that frugal living concept can be applied to everything which comes at a cost of money. Basically frugal living comes naturally to us. See how attracted we are to visit a store that is offering discount sale, or we prefer shopping using credit card for the sake of earning reward points.
Make a plan what you want on your life. Keep those expense target well written in your diary and apply concepts of frugal living to achieve your targets.