If you’re trying to save money, frugality is essential. The secret, according to Money, is to understand the difference between a need and a want. “Being able to distinguish what we want from what we need is a prerequisite for making wise buying decisions," writes Kentin Waits. “If you can’t master this skill, your needs will be endless and your paycheck will never keep up.” Waits goes on to list out six rules of frugal living, a handful of which we’re sharing below.
- Know your money. Become one with your money. Get acquainted with how much you earn, how much you spend, and where every dollar goes. You need this basic information to be successful at budgeting and saving.
- Live below your means. Waits says that “living below your means is where the real magic happens. The surplus it generates is the capital for saving and investing and the fuel behind long-term wealth building. If you’re unable to run a surplus a majority of the time—either by cutting expenses or growing your income—you’ll never get ahead of the game.”
- Know the difference between spending and investing. Investing is when you exchange cash for a tangible asset, like job training or a primary residence. Spending is when you exchange cash for something that will depreciate in value and does not provide long-term benefits, such as dinners out or a new handbag for summer. Although spending is a part of living life, know the difference, and put your income to good use most of the time.
- Buy for quality. Being frugal isn’t always about buying the cheapest products. It means you seek out the best value. Sometimes you have to pay more for better-quality items that will last longer.
- Avoid consumer debt. Stop using your credit card to pad your lifestyle. Interest and other charges will choke your chance at real financial security.