How Frugal Living Can Build Wealth for the New Year and Beyond

frugal livingFrugal living does not mean shopping in thrift stores and having soup every night for dinner.  Being frugal simply means being deliberate in how you spend money, not impulsive.  There are many ways to be frugal but the key to making frugal lifestyle changes permanent is to find ways to save money that will work for you.

Some Frugal Lifestyle Choices

Automate paying your bills.  By automating your bills you will ensure bills are paid on time avoiding late fees and negatively impacting your credit rating.

Automate your savings.  By paying yourself first you ensure that your savings goals are taken care of before discretionary spending.  Even if it is simply setting up a monthly transfer from your checking account to your savings account you are more likely to spend less simply because it is more difficult to access your money.

Eat out one time less per week. By eating out one time less per week you can save $25-$100+ per month.  Saving $25 per week can add up to over $1200 per year for a typical employee.

Get rid of the land line.  Cutting the land line results in immediate savings however there are some downsides such as some 911 services may have trouble locating you in an emergency.

Adjust payroll withholdings. Receive tax refund over $1000 last year?  Adjust withholdings and use the savings to fund a wealth building account.

Obtain your credit report from annualcreditreport.com and check for errors.  Pay bills on-time and manage your credit properly for preferred credit terms and lower interest rates.

Sign up for monthly equalizer payments with your utility.  This will even out your monthly utility payments over 12 months and if possible take the difference between your old bill and new bill and put the difference in savings.

Use price comparison websites.    Price comparison sites such as Pricegrabber.com and BookingBuddy.com allow you to search for the best prices from the comforts of your home.

Use personal finance software and apps.  Apps such as Mint or PageOnce help you to stay on top of your finances and limit chances of overspending.  If you have current checking account and budget information available on your SmartPhone, you are more likely to not overspend.

Shop for a new car in November & December or better yet buy a quality used car and use the savings to fund your wealth building accounts.

Increase deductibles on Insurance.  By increasing your deductible to $500 or $1000 you can lower your monthly premium.  This strategy is not recommended for those with less than stellar driving records or those that do not have the cash to cover the deductible.

Perform preventative maintenance on home and automobiles.  By performing schedules maintenance on your vehicle you will extend it's life and reduce the likelihood for major repairs.  The same is true for maintaining a home.  Replace air filters to lessen the strain on the a/c blower and extend it's life.

Cancel a magazine subscription and take your child to your local public library instead.  While your child is looking for a book to checkout you can read a magazine for free.

Use Small Savings to Fund Wealth Building Accounts

By making small changes in spending habits you can end up with enough money to fund what I call a wealth building account.  Wealth building accounts are accounts that are designed to grow your money and are typically online savings accounts but can be real property such as real estate or collectible automobiles.

Once you have a 3-6 month emergency savings account funded you can take your additional monthly savings and use it to fund a variety of wealth building accounts such as:

  • Pay down credit card debt
  • Max out your 401k Contribution
  • Start a 529 College Savings Account
  • Open a Roth IRA
  • Invest in Real Estate
  • Buy a Classic Automobile

The key to making a frugal lifestyle work for you is to make small changes and then leverage these savings into real wealth building opportunities.

What ways have you taken small savings and used them to build wealth?

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31 Responses to How Frugal Living Can Build Wealth for the New Year and Beyond

  1. Allan 05/22/2012 at 2:19 pm #

    Barter! Bartering saves me thousands of Dollars each year! You can barter goods, services or even real estate at barterquest.com, check it out.

  2. TonyDivi 04/27/2012 at 1:53 pm #

    Awesome tips and advice! There are plenty of ways to save money if we would only give up unnecessary spending!

  3. Melissa@PersonalFinanceJourney 01/27/2012 at 7:35 pm #

    Good tips. I like how you put aside the idea of thrift store shopping to show there are so many other ways to be conservative with your money without really altering your lifestyle.

  4. Michelle 01/22/2012 at 10:54 pm #

    I really need to adjust my withholding. I’ll be getting back around $5K most likely, and that is just way too much.

  5. Saving My Toonies 01/22/2012 at 10:52 am #

    Great Tips! We’ve done a lot of these tips as well. The only one I really don’t do is have automated bill paying – I like to pay them on payday and get them out of the way, I hate sitting and waiting for them to come out of my account!

  6. Miss T @ Prairie EcoThrifter 01/21/2012 at 10:11 am #

    We do almost all of these things so I guess we are on the right track. Another we have done is make some of our own stuff like shampoo, laundry detergent etc. This has saved us some cash.

  7. krantcents 01/21/2012 at 10:01 am #

    One of the first things I did to cut expenses years ago was cutting dining out for lunch. At first, I dropped one day a week to eventually take my lunch everyday. It was a small change that yielding a couple hundred dollars a month. It also helps keep me fit and healthy.

  8. UltimateSmartMoney 01/19/2012 at 7:58 pm #

    One of ways I am being frugal is not replacing my current car. I decided to drive at least 2-3 more years instead of buying a new car now.

    • Paul 01/19/2012 at 10:27 pm #

      That is a great way to save money! My truck is 10 years old and running strong.

  9. 20's Finances 01/19/2012 at 5:27 am #

    I always love to realize the huge benefits that the small things offer you. Similar to the popular latte factor, anything offer a huge contribution towards wealth if you direct it in the right place.

    • Paul 01/19/2012 at 6:42 am #

      Good point Cory. Generating the small savings in the first step, not spending those savings is the next step. That is where many people fail to realize the potential wealth building opportunities!

  10. Shaun 01/19/2012 at 4:50 am #

    Nice list, I’m a big fan of automation too. For the savings I pay into an online banking account, it is harder to access the money and easier to forget about. Before you know it you have a pretty tidy sum saved up!

    • Paul 01/19/2012 at 6:17 am #

      I am also Shaun. If you can’t get your hands on it easily you are less likely to spend it!

  11. Jen @ Master the Art of Saving 01/17/2012 at 4:12 pm #

    We do quite a few of the things you mentioned above. I love how you threw out so many ideas. 🙂

    • Paul 01/19/2012 at 6:37 am #

      I’m just getting started Jen! Lots more ideas where that came from. 😉

  12. Jeff @ Sustainable Life Blog 01/17/2012 at 2:29 pm #

    Nice tips paul! I have done quite a bit of these – I didnt like automating my bills at first, but then I’d forget to pay them, so I just made sure that I automated them – I keep an eye on the number (to make sure i dont get overcharged) but other than that, they are all on auto, and it’s great.

    • Paul 01/19/2012 at 6:43 am #

      I’m a big believer in automating you finances. Great for the credit score and it frees up time for me to focus on increasing my income!

  13. JP @ Novel Investor 01/17/2012 at 1:56 pm #

    Buy a classic car? Can you be considered frugal after you buy a classic from all that money you saved, lol. Love the idea, though, I’d probably buy the classic car for pure enjoyment reasons, using wealth building as an excuse.

    • Paul 01/19/2012 at 6:40 am #

      I’m not so sure buying the classic car is an example of being frugal, but it can be a great investment if you purchase at the right price. My neighbor has a couple classic cars and has seen some nice appreciation on his investments!

  14. These are some great tips that are easy to implement. I especially like automating my bills. I’ve set up monthly automatic minimum payments for my credit cards. My gym membership, cell phone, internet bill, etc. are paid with my American Express. However, I manually pay off the entire balance on credit cards so that I can make sure I don’t overdraw my checking account. The only bill I have to pay via check is my rent, and I’ve set up a recurring payment to be mailed from my bank to my landlord towards the end of the month for that. Not only do I not worry about late fees, but I save time as well.

    • Paul 01/19/2012 at 6:36 am #

      I’m with you Shawanda on the automated bill pay. Makes managing your money much easier!

  15. Aaron Hung 01/17/2012 at 5:59 am #

    I think I’m gonna keep my car and drive it to the ground. We don’t have a land line either and I don’t think we will ever get one, maybe when we have kids. It does saves a lot though

    • Paul 01/17/2012 at 6:18 am #

      Those are two great ways to save money Aaron, we dropped the landline some time ago.

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