5 Frugal Living Tips for Tightening Your Budget

Have you ever looked at your bank account and wondered, ‘Where does all my money go?’ Are you guilty of spending your money on pointless conveniences? Do you find yourself envying the strict financial discipline of frugal living bloggers or coupon cutters?

We live in a society of conveniences that can give American households the extra time they desperately crave. Convenience, however, always comes with a cost.

As a starting point for more frugal living, we need to look at the costs that can be avoided and cut down if we simply give up a little bit of convenience. Chances are, there is room for improvement in your budget.  With some guidance, you can save a few extra bucks to spend on something far more impactful, like the vacation you think you can’t afford or retirement.

Let’s break down some of the biggest offenders to your bank account.

1. Paying in Credit at the Gas Station

A big portion of your income goes to fuel your car. Trips to the gas station can eat up significant earnings.

I am a huge believer in paying cash for gas. You might pay 5 to 10 cents more per gallon to swipe your credit card at the pump. These amounts can stack up in your monthly credit card bill, plus add interest if you don’t pay in full at the end of each period. Does it take that much more energy to walk into the store to pay in cash?

If you never seem to have cash available, make a plan to save these extra bucks. Next time you’re withdrawing from the ATM, immediately carve out the gas money you will need until the next time you’re likely to withdraw. Put that cash into an envelope marked ‘gas’ and use the money only for gas.

2. Paying Too Much in ATM Fees

All of us have to use the bank. It’s where and how you access your funds that can cost you over time.

Do you always use your own bank for cash withdrawals? Not doing so can drain significant funds from your account. Using a domestic ATM outside your bank’s network will cost you, and in some cases, twice. You could be charged a fee for the out-of-network ATM operator, which may range from $1 to $10, plus a fee from your own bank for withdrawing at a non-affiliated ATM, which may range from $1 to $5.

Simply taking $20 out of your own bank account could cost you as much as $15. Throwing away money for this convenience is inexcusable.

If your bank is not located close to your home or office, then consider changing banks. Inquire about ATM withdrawal fees and other possible hidden costs before signing up with any prospective bank. Subject to deposit minimums, many traditional banks, online-only banks, and brokerage firms will reimburse ATM fees.

3. Buying Groceries Without a Plan

When people do not understand where their money goes, the first place to look is often at food costs.

For many, food spending can be a disproportionately high cost in the budget due to eating out and bringing in pre-prepared meals. While it’s good to purchase food at the grocery store, you have to be mindful that the grocery store is a hotbed of temptation fueled by creative marketing strategies. Here is a helpful guide on how to avoid making impulse purchases which are often driven by the intentional placement of various products in grocery stores.

Go in armed and ready. That means being prepared with a grocery list. Here are some tips on how to plan out your grocery list:

• Look through the store’s weekly sales circular beforehand, see what is on sale, and preplan the week’s meals accordingly.
• Avoid the convenience of purchasing pre-packed meals as much as possible.
• Set a spending limit that you intend to honor.
• Organize your list (by aisle, if possible) for only the items necessary, and stick to the list.

Once at the grocery store, look at the ‘per item cost’ of what you are buying. The unit cost is usually written on the shelf labels and you can use it to compare the same product in different sizes. This can help you verify if the larger size is the better bargain. Don’t be too shy to whip out your calculator if you need to.

That being said, don’t buy the bigger package just because it is a better deal, unless you are certain you’ll finish off the product before its expiration. Buying toilet paper in bulk may be fine, but buying a lot of fruit with a short shelf life is not.

4. Participating in Flash Clothing Sales

Have you ever opened an email simply because it had a flashy subject line?  Here are just a few of the subject lines currently sitting in my email box (and probably yours too):

‘We’ve Missed You!’

‘A Special offer, just for you – 20% off your order’

‘Exclusive! 50% Off at [store name]’

A client of mine wanted to get a hold of her spending on clothing. When we first began framing out a monthly budget, looking at her household expenses and debt, she did not want to allocate any money to a clothing budget. After all, she already had a closet full of clothing and enough shoes.

This may sound familiar to you — perhaps you’re also tempted to slash your clothing budget in an effort to cut spending. Before you do however, consider whether such drastic cuts are realistic to implement.

My client was required to wear professional attire for work, and we concluded that her clothing would get soiled and her shoe heels would break over time. As a result, she decided that she actually did need to budget a set amount for her clothing allowance. This might sound straightforward, but when I met with my client again, she had actually spent $350 on clothing in June — a purchase that was largely triggered by an email message similar to the ones above.

Like many other shoppers, her fear of missing out took over her otherwise budget-conscious mind.

How do you determine how much you spend on your wardrobe? Do you have a set budget that you stick to? Or do brands get to decide when you buy from them and how much you will spend?

Everyone loves a good sale, but remember: restraint matters. Avoid the temptations of flashy sales if they are out of your budget.

5. Not Factoring All Living Costs When Taking on a Mortgage

Budgeting for a home is not just about saving up for the cost of the mortgage.

So often,  a lender will pre-approve a mortgage based on a high percentage of the borrower’s current gross income, and rather than questioning it, the borrower simply runs with it. Once the would-be homeowner hears the amount they can purchase, that’s the ballgame.

Unfortunately, this amount by itself is not reflective of what you can actually afford.

Listen up: The bank does not know or care about your living expenses. The bank has made a calculated decision to lend you as much as possible to collect fees and to continue to collect interest on the money it is lending you.

Have you considered the other expenses that will come with this new home? These additional expenses may not be in your current budget. Ask yourself:

• Will your transportation needs and costs change?
• Are you prepared to replace major appliances? Refrigerators, stoves, and working toilets are necessities. Dishwashers, washing machines, and dryers are ‘wants,’ but most homeowners have them, and they break down, and usually not on the same day as when you get your paycheck.
• Are you planning to fill this new home with children?

Add in the monthly essentials of electricity, internet, heating fuel, safety, lawn maintenance, pest control, and, let’s not forget, the never-ending taxes and insurance.

Your monthly costs may be a lot more than you understood they would be. As such, it’s important to start saving money by factoring in the cost of living rather than just the cost of the house.

This is one of the most substantial budgeting tips to help you save money and avoid debt in the long run.

Budgeting Can Help You Allocate For Fun

Budgeting for frugal living doesn’t mean you need to give up on having fun. If anything, improving your budget management can actually help you allocate more funds for the things you want to spend your money on.

Set a budget for every pay period for an amount you will use for the ‘necessary’ and the ‘fun’ things in life. Budget for exceptions and emergencies, as well. Be realistic about what the ‘fun’ things include — maybe you’ll want to factor in lattes, trendy clothing, live performances, and dinners out. You can enjoy all of these things by allocating funds for them.

When your pay comes in, set aside a budgeted amount and label it ‘fun $.’ Use only that money for ‘fun.’ When the money runs out, so do you!

A Final Word on Budgeting for Frugal Living

Do not resort to your credit card for things you can’t afford. If you don’t have the money today, and your salary is not increasing next week, then you will not have that money next week. Do not spend your future money.

Instead, build better spending habits for the money you have today. Follow these budgeting tips, and frugal living will become an attainable reality rather than a distant dream.

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[Editors’ Note: To learn more about this and related topics, you may want to attend the following on-demand webinars (which you can view at your leisure, and each includes a comprehensive customer PowerPoint about the topic):

1. The Nuts & Bolts Of Bankruptcy Law
2. The Start Up/Small Business Advisor
3. Real Estate Investing 101: Investing in Residential & Multi-Family Real Estate

This article was originally published on May 31, 2023. This article was most recently updated by the Financial Poise Editors.]

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