Frugal living is common sense that involves spending less than you make. However, that is difficult even for the rich. This is difficult because something inside of you says you don’t have enough. Dave Ramsy says contentment is the greatest financial principle. That is how multi millionaires become poor even bankrupt because they are never content. In addition, we live in an immediate gratification world. Nobody wants to put off buying something they want, especially if they can afford it.
Frugal living is impossible without a budget. Dave Ramsy teaches that even the wealthy must follow a budget, because once you stop, eventually your finances will take a dive.
Budget the money you have already made, and not your anticipated income. Consequently, many fall into the trap of spending money they will make in the future. For instance, how often do you celebrate a raise by purchasing something significant with money you haven’t made yet?
Many people will spend their bonus or raise before they even receive it. Don’t do that!
Therefore, spending less than you make is the cardinal rule of finances and frugality, even for the wealthy. That is especially critical if you are strapped for cash. Dave Ramsy teaches that you can’t make too much money to cancel the need to make a budget. He says once you stop making a budget even if you make millions, it is your road down to financial trouble.
However, it is like what Chris Brady and Orrin Woodward teach, it is not about how much you make but how much you keep. Many celebrities and professional athletes don’t understand that principle, because you hear stories all the time about them going bankrupt. Those massive houses and expensive toys become heavy burdens around their necks.
Create a reasonable family budget plan by writing down your income, expenses and debts. Reasonable is the key word here, because nobody expects you to live on bread and water alone. And, don’t forget the infrequent expenses like car repairs; because downplaying your expenses or inflating your income is a mistake. Chris and Orrin recommend if you are going to overdo it on anything, budget for too many expenses.
Never fall in the trap in believing that cars are assets. They could be if you are renting them out for cash. Leasing cars is one of the greatest ways to bleed your cash dry.
Figure out how much cash you have. This is basic but a big challenge for many. Your cash flow is the difference between your income and expenses.
If your expenses are greater than your income, then you have a negative cash flow and you have only two choices. Make more money, and/or cut your expenses down. Knowing how much cash you typically receive you can more effectively create a budget.
When you are figuring out your income and expenses, go back 6 months so you can see patterns.
Frugal living means you don’t use your credit card for common purchases. That is easy to do especially if money is tight but it will hurt you in the end. Paying almost everything with cash might be a big change but will help you a great deal in keeping what you make.
I hope you found this article valuable. Please invest in yourself by purchasing the Financial Fitness.
Everything on this website is for informational purposes only. This information is not a substitute for medical advice. Do not use the information on this website to diagnose or treat any medical condition. Always consult with your own medical professional. All links are affiliate links and I earn a commission if you purchase from these links.