Frugal Living and Budgeting

Frugal living and budgeting go hand-in-hand. Without a workable budget, you’ll find that trying to live frugally will be difficult and downright impossible. If you’re trying to scale back your spending, you can follow these tips for budgeting that will allow you to get control over your money and your life.

The Importance of Budgeting

To most people, the word budget is like the word diet. It’s something that they dread and try to avoid. In actuality, determining a budget for your income is the only way that you’ll ever know how much money you have to work with.

Most people budget for their major expenses, like mortgage payments and loan payments, but then leave the rest of their finances up to chance. They spend $5 here and $10 there on things that they don’t really need. At the end of the month, they wonder where all their money has gone.

When a person is trying to live frugally, wasting money like this just isn’t possible or practical. By setting a budget for all of your expenses and sticking to it, you can manage your money more efficiently. You can also save money and put it toward things that are really important to you.

The Mindset of Frugal Living and Budgeting

Living frugally is more than just a decision to spend less money. Before you start working with a budget for your money, you need to develop the right mindset. Frugal living and budgeting aren’t about deprivation. They are about control and mindful spending. The money you earn is representative of the time and energy you spent working during any given month.

With a few calculations, you can figure out how much of your time $1 is worth. When you think about your money this way, it will be easy to give up that $4 morning latte or that $20 DVD.

Why Most Budgets Don’t Work

The problem with most budgets is that they are developed from the outside in. A person sits down and writes out a certain amount of money he or she will spend in different categories each month. Then he or she will try to spend money in the right way during the month. The category limits are often based on something that the person reads in a book or advice from the Internet. Since these limits don’t reflect how the person really lives and spends money, these budgets are hard to work with.

Tracking Your Spending

To create a budget that really works, you have to start taking note of how you really spend money. Spend at least one month writing down each and every thing that you purchase. When you write down the expense, also make a note of the general category that the expense belongs in. You should use as many categories as you feel are necessary.

Some of the categories you could use are:

• Mortgage/Rent
• Groceries
• Gas
• Auto Loan payment
• Credit card payments
• Household items
• Utilities
• Entertainment
• Dining Out
• Shopping
• Hobbies
• Memberships

Look at free budgeting templates for ideas.

At the end of the month, take a look at how you spend your money. You may be surprised to see that categories like entertainment, dining out and shopping are a lot higher than you expected. Review your categories and see where you can make changes in your spending. Reducing spending in several areas in your budget will give you more money to save or spend on things that are more important to you.

Developing Your Budget

Your budget will evolve out of your month long tracking project. Instead of using numbers based on other people’s standards for spending, your budget will reflect your habits. You’ll be able to see instantly where you need to spend more money and where you can other money saving ideas.

Evaluate how much joy you get from each category and whether the amount you spend on your flexible expenses is too much or not enough. You can choose where you want to cut back and then either save the extra money or make extra payments on debts so you can take steps toward becoming debt free. In no time at all you’ll be using your frugal living and budgeting skills to improve your financial picture.

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