Learn to Save Money With a Sustainable Lifestyle
The grim economy continues to linger on, despite the best efforts of financial gurus and grassroots consumers to jump start it. This predicament leaves more distressed people than ever before wondering how it's possible to start living below your means. In fact, frugality in a cloudy economy is a survival instinct, and in a better financial environment, it can light up the road to serious riches. Saving money is a simple numbers trick, and luckily, it's easy for anyone to get started by remembering these simple living tips.
How to be Frugal and Build a Cash Stash
To successfully live below your means, there's only one critical principle to master: you must spend less than you earn. This may seem like common sense, but it only takes a quick glance to observe the millions crushed by consumer debt. For those lucky enough to keep up with their monthly bills, only a minority manage to stash away a decent amount of money. The rest gets spent on pleasure seeking activities that can just barely be covered by their income.
Neither approach is sustainable. To have a future, you must learn to save. Luckily, there are almost an infinite number of ways to gradually build a war chest of money to be proud of. Achieving a frugal lifestyle is the same as simple living.
The easiest, but most overlooked path to living below your means involves cutting unnecessary excess from your routine. Food is a necessity, but too often, many allow their grocery bills and restaurant tabs to grow into money chomping dinosaurs that dominate their lives. Eating out half as much as you do now, buying food in bulk, and foregoing expensive beverages can all help tally up an impressive savings.
Controlling other behaviors is another popular way to save money fast. Use the one week rule to control impulse buying. If there's an electronics device, guitar, or other pricey toy that isn't a necessity, but you really want it, force yourself to wait a week before heading to the store or ordering it online. According to theory, this psychologically intense strategy reveals where you really stand in your desire for the object, and what you can do without. Too often, individuals are manipulated by sly marketing into buying products that bring neither satisfaction nor usefulness later on. You may not remember the blender with twenty settings that's stored in your kitchen cupboard, but your savings account will.
Finally, making significant lifestyle changes brings massive savings, but these alterations are usually reserved for truly disciplined individuals. Changing your transportation habits is a guaranteed way to keep extra money. Operating a car costs thousands per year, according to conservative estimates taken after factoring in fuel, maintenance, and insurance expenses. Doing away with one or more vehicles will free up significant blocks of money.
Eating better, ensuring a healthy daily water intake, ditching cigarettes, and cutting back on liquor promotes a healthier lifestyle. The same goes for regular exercise like walking. Small changes to your diet and recreational habits are key to learning how to be frugal, and all are an asset to your health. Remember, the best health insurance policy is to not really need one. With quality personal care, you stand to lower your premiums and cut down on surprise medical bills.
Growing Your Savings Into Wealth
After frugality becomes part of your lifestyle, you might wonder how to allocate your extra money. When done correctly, sending your money to work for you is a great way to protect your wealth, and race towards long term goals like accumulating enough income for retirement. The first order of business should be establishing a good emergency fund. Ideally, saving three to six months of living expenses is enough to protect yourself from disasters ranging from car repairs to job losses. With this money in an interest returning savings account or Certificate of Deposit, you'll never need to worry about going into debt to survive.
Paying down debt is a follow up tactic that can never fail. For debt conquering specifics, books like Dave Ramsey's The Total Money Makeover: A Proven Plan for Financial Fitness are a fantastic blue print. Start by getting rid of loans with the highest interest rate, such as credit cards. Then, move on to making more than the minimum payments with long lasting debts like student loans and mortgages. Holding debt is always an anchor, and never an investment. By cutting the rope that binds it to you faster, you'll save a substantial amount over the years, and free yourself from the last remaining threats to your financial independence.
In the meantime, with the most onerous debts gone or on the way to permanent exile, you can get started investing. There are many paths to building wealth with investment instruments, but the sanest way to is to start with a well diversified, long term portfolio. The Bogleheads' Guide to Investing is perhaps the most rational do-it-yourself guide to getting started. Put your money into equities, bonds, and commodities.
Although traditional sound investment strategies are best, diversifying for an uncertain world with special commodities allows you to go one step further. If you're socking away a good amount in a retirement plan like a 401(k) or IRA, and you still have money left over, try investing in commodities. Precious metals such as gold and silver are clear answers to the riddle of how to hedge against inflation. If your tolerance for risk and speculation is good, consider investing in water and similar unorthodox securities that may one day pay big dividends. These types of investments should never be a major part of your portfolio, but they can give you a third leg to stand on, and present the ability to electrify your passive income earning potential.
Living below your means is difficult at first, but with time, it becomes a way of life. By effectively employing simple living tips throughout your life, you'll be able to guide yourself through the most dire financial straights, without crashing into the choppy waters.