When I die, my obituary will no doubt read quite similarly to those of the crazy eccentrics we always hear about about in the tabloids. You know the type, they are the nuts who live in the dark and wash their aluminum foil but secretly have millions stashed in investments and real estate which have bequeathed to the cat or their old alma mater.
I am sharing this anecdote to illustrate my big secret for saving money. If you haven’t guessed it by now, the big secret is by living frugally.
How to save money by living frugally.
There are all sorts of tips, tricks, and secrets for saving money and I am sure you have read them all. However, living frugally goes beyond watching your money, it means controlling your spending by not living flamboyantly and doing as much as possible for yourself. By living frugally, my husband and I have managed to accumulate a nice little retirement portfolio which includes a smattering of real estate holdings, stocks, CDs, bonds, a collection of art work, IRAs and a 401K, and a pension from my husband’s place of employment.
Some of the ways we save or money are very common sense tips that anyone can do. These include:
* Living in a modest sized house in an older neighborhood
* Driving older cars
* Having a vegetable garden, canning produce, and cooking from scratch
* Never eating out, seeing movies at the second run theater, taking advantage of free local entertainment instead of pricey venues
* Wearing out clothes instead of buying new every season
* DIY yard work and lawn care
* DIY repairs on the house and car
* Buying second hand furniture or refinishing existing furniture instead of buying new
* Cutting your family’s hair
* Watching utility use
* Making your own toys & clothes for the kids
These are just a few ways how we save money by not spending. While on the surface this may seem a bit austere, this is actually how the average American used to live up until 40 years ago. They understood that living frugally now meant financial security for the future.
Building your savings.
All this saving money doesn’t do a bit of good without some sort of savings plan. My end-of-the month strategy is to plow the money we saved that month into a money market fund for the short term. Once enough cash has saved up, the funds are invested into something that yields a higher return. If you don’t have the discipline it takes to deposit extra money into a savings account, other strategies include:
* Having a percentage of your paycheck deposited into a savings account every payday
* Earmarking a specific income stream for savings, for example, depositing all your eBay income or rental income in savings
* Upping the percentage of your retirement withholding
* Claiming “0” on your W-4 and then converting your federal refund check into stocks or CDs
* Buying a $25 savings bond every time you cash your paycheck
When it comes to getting rich, the one big secret is all in how you watch your spending so as to free up more money for savings. Aside from marrying into money, a frugal lifestyle is the easiest way to ensure your financial security for the future.