25 Tips for Financial Decision Making in a Frugal Budgeting
I recently came across a quote “A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life” by Suze Orman, a well-known American financial advisor, author, and motivational speaker. It didn’t strike any chord with me at that time but as I grew up, these words began to sink in. As we move ahead in our life and start to take terms like “budget,” “savings” and “investments,” seriously, it becomes necessary to develop a strong financial acumen. Since then, I started developing these 25 tips for financial decision making.
However, I’ve come to realize that it’s not much about numbers as much as it is about our habits and quality of decisions. I mean, you can be winning millions in a lottery and yet end up losing everything if you don’t know how to wisely manage it.
Today, I will share my favorite 25 tips for financial decision making I’ve learned so far to help you make better financial decisions and live a more fruitful life. Let’s get started, shall we?
Understanding Frugality: Beyond Mere Penny Pinching
When you hear the word “frugal,” what comes to your mind? Is it being extremely careful about spending even a penny without being too thrifty? The reality is – it’s actually a lot more interesting and useful than that. Frugality is about being smart with your money in a way that you can afford to have more fun without stress.
So what exactly is it? Frugality is being intentional with your resources. It’s about spending time on what really matters to you instead of buying random things that you don’t even need. The goal is to get the best value for your money and not just the lowest price for it. The benefits are equally worthy:
- More savings
- Less debt
- And of course, you achieve your financial goals faster!
| Topic | Info |
|---|---|
| Frugality | Being intentional with resources, prioritizing what matters, and aiming for value over price. |
| Strategic Questioning | Asking key questions to focus on long-term financial goals and minimize unnecessary expenses. |
| Financial Decision Making | Importance of everyday habits and quality decisions over mere numbers. |
| Tips for Financial Decision Making | Practical tips to manage expenses, develop financial plans and make wise choices. |
Strategic Questioning for Better Financial Decisions
Okay, this might come as a shock but according to a recent report by National Institute On Retirement Security, about 95% of millennials are saving less than what’s recommended. Why is that so? One big reason might be that we are not always asking the right questions about personal finance.
As per my experience, I believe that getting into the habit of strategic questioning can really change the game. When you ask the right questions, you make yourself focus on the problem in areas that might be causing harm to your financial health. Here are some questions that I personally find important:
a. What are my long-term financial goals?
Here you can think about where you want to be in the next 5 or 10 years. Are you saving for a house, traveling, or planning for early retirement? Always keep these things in mind while you make your daily financial choices.
b. Do I need this, how do I want this?
This is the most basic but extremely important question to ask yourself every time you are buying something. We all love to spoil ourselves but it’s important to take a step back and really think if buying something is important or just a nice to have!
c. What can I do to lower my expenses without much sacrifice?
You don’t have to cut things out entirely but be more mindful and tweak your habits. Maybe you can choose to cook at home instead of ordering something online.
Therefore, along with following our 25 tips for financial decision making, I recommend you ask yourself strategic questions for better financial decisions.
25 Tips for Financial Decision Making in Frugal Budgeting
1. Keep Tabs on Your Expenses
In 2024, when spending is much easier than earning, the best financial decision you should make is to keep tabs on your expenses. With the fast internet and a digital shopping mall at our fingertips, we often make unnecessary purchases. According to a recent research published by Cornell University, “approximately 75% of the survey respondents reported increased spending due to UPI, with only 7% indicating reduced spending.” As a result, at the end of the month’s end, we regret our unplanned financial decisions.
So, to avoid this scenario, keep an eye on your expenses. There are so many smartphone applications to help you with this task. In the Android Play Store, you can easily find some of the popular expense-tracking apps like Goodbudget, PocketGuard, Expensify, Mint and so on.
2. Develop a Financial Plan
Making financial planning is one of the most wise decisions in 2024. A good financial plan not only saves you from debt but also keeps you far from anxiety and nightmares. So, how to develop a financial plan? To get started first calculate your monthly income. Then, list down the necessary fixed monthly expenses like bills, debts or EMIs. Estimate the figure after cutting out the cost of essential expenses.
Now, it’s time to categorize and list your remaining expenses. List as much as possible, even your daily tea snacks budgets. Finally, do the math! Subtract all these expenses from your monthly income to complete your finance plan.
Suppose, you have left with some money after spending on expenses as per your finance plan. That means you are doing a great job of sticking to your plan. So, now, one thing you can do to secure your future and that is to invest. There are several options come to our mind when we hear the term “invest” such as the stock market, mutual funds, FD, RD and many more. But, here is the mantra: “Don’t try to rich quick” and “Don’t spend more than you earn”.
3. Plan Your Meals Ahead
I have always believed that it’s always good to be mindful of all the little things we do. Similarly, planning meals ahead can help you save money in multiple practical ways. How? Well, to start with, it lets you build a shopping list that’s only based on what you need, which reduces the chance of impulse shopping at the grocery store.
Meal planning will also help you make the most of leftovers and ingredients, which not only saves time and money but also reduces waste. For instance, you can choose to cook a larger portion of a dish and use the leftovers for lunch or dinner. This way you will develop a habit of using ingredients across multiple meals, ensuring you fully utilize what you buy!
4. Stick to a Shopping List
You go into the store for just a few things, and suddenly your cart is full of stuff you didn’t plan to buy. The urge (and of course the guilt) is real, but it’s important to understand how this can affect your wallets.
As someone who struggles with the same, I can vouch for this tactic that works almost every time. Every time you catch yourself picking up something that’s not on your shopping list, take a pause. Give yourself 10 minutes to think over while you continue shopping. This break will make you realize that you don’t actually need it and it’s just another trap that will make you lose your money! Maybe you can also convince yourself with something like, “I” Works like a charm for me!
5. Lower Your Utility Costs
This one involves a mix of small changes and bigger investments that can lead to huge savings. You can start with the basics – turning off the lights when you leave a room, using energy-efficient LED bulbs, etc. You can also adjust your thermostat by a few degrees when you are not at home – this will reduce heating and cooling costs.
Talking about larger savings, Make sure to upgrade your appliances to energy-efficient models which are more of an upfront investment that pays in the long run. Apart from this, consider adding insulation to your home, seal drafts around the door, and use smart Home systems to monitor and control energy usage. These may sound trivial but can do wonders for your financial health. Recently in an interview, the Former CEO of Google Eric Schmidt claimed, “The Great founders are Frugal“.
Eric Schmidt, Former CEO of Google: The Great founders are frugal. pic.twitter.com/KunozB5Ykw
— Historic Vids (@historyinmemes) April 15, 2024
6. Opt for Public Transportation
This is one of the best ways to not only save money but also do good for the environment. Public transport fares are generally much cheaper than the cost of operating and maintaining a personal vehicle, especially if you commute daily. At the same time, you can also avoid the parking charges if you choose to travel with public transportation.
If you live in a city where public transportation is efficient, you might even find that it’s not just cost-effective but also quicker during certain hours. Plus, since it’s a greener choice, you can also give yourself a pat on the back for contributing to a lesser carbon footprint!
7. Trim Unnecessary Subscriptions
When you have too many active subscriptions, money will slip out of your account every month for things you might not even use or remember. By cutting these out, you can easily keep that cash in your pocket, and manage your finances better.
Simply start by reviewing your bank statements, spot the active subscriptions that you know longer read or use, and cancel them. You will be easily able to save a bunch of money over time without even feeling like you have made an effort. After all, it’s only wise to pay only for what you truly need or enjoy!
8. Develop Second-Hand Purchases Habit
It is not a new fact that the cost of living is increasing tremendously. So, without compromising anything out of life, developing a habit of purchasing second-hand things is the best idea. For instance, in summer you may feel the need for a fridge. But, instead of buying a budgeted new fridge with limited features, look for an advanced featured second-hand item that may be one to two years old. It will not only save your bank balance but also save you from a high electricity bill.
You can find several online websites that offer second-hand items at a meagre cost. Olx, Quikr, and Amazon Renewed are famous ones to choose from. Also, you can look for local shops that sell refurbished items at a bare minimum cost. If the cost of the product is relatively high, make sure you verify the quality of the product by yourself or with the help of experienced ones in your family before purchasing. In this way, you can make a habit of purchasing a high-quality second-hand product with a tight budget.
9. Tackle DIY Home Fixes
DIYs are so beloved for a reason. It’s unbelievable how you can save so much effort and money with some simple hacks. Personally, I believe that it also helps you with confidence as you get to learn these skills. From minor repairs like fixing tap leaks to patching drywalls, learning basic home maintenance skills can also save you on repair costs.
YouTube can be your bestie here. There are countless tutorials available on the platform where you will find people explaining the fixes in a simple way. So try to make the most out of these resources to learn common home fixes and take control of your home maintenance needs!
10. Cultivate Your Own Produce
If expensive groceries are taking a toll on your financial health, try to grow veggies at your home to cut away the cost. When you grow your own produce, you will also be able to harvest only what you need – this will reduce food wastage and save money in the process.
One of the best benefits of doing this is that you know exactly what goes into it – basically, you will save yourself from adulteration. Plus, you can also choose when to pick them and produce exactly when they’re most ripe. The benefits are huge here!
11. Utilize Coupons and Cashback Apps
One of the most common smart spending tips I believe in is using coupons and cashback apps for shopping. It’s no less than that random feeling of finding money in your pocket you didn’t know you had!
While checking out on a shopping app, always see if there is any coupon you can apply to get a discount or free shipping. You can also use cashback apps like Rakuten, Ibotta or Honey that literally pay you to shop. However, if you find it hard to keep them organized, you can set reminders for their expiration dates so that you don’t miss out on the savings.
12. Follow Reduce, Reuse, Recycle Method
Using the 3R approach is not just eco-friendly but also good for your wallets. Try to purchase feeward disposable items and go for things that have less packaging. The less you use, the less you will spend. Similarly, before you throw away something, consider if it can be reused. Maybe you can use cold drink bottles to store water or use jars as containers.
13. Steer Clear of Impulsive Purchases
Whether or not we really want something, impulsive purchases are often a threat to our financial health. To help yourself, you can give yourself a rule like waiting for 2-3 hours before buying anything over a certain amount. This will help you clear your mind and decide if you really need the item or if it’s just another fleeting want!
Another respect to consider here is that impulsive buying is an emotional reaction. Never buy something when stressed or excited as you may probably end up buying something unnecessary. Try to reflect on your emotions as they might be influencing your shopping habits in so many ways!
14. Strategize Your Vacation Budget
Before you start planning your next vacation, decide on the total amount you can afford to spend on your vacation. This can include travel accommodation, food, activities, and other expenses. Now, allocate your budget into categories – maybe keeping one-third for accommodation, the same for flights or travel costs, and the remaining for food, activities, and other emergencies.
Once you have a rough idea of the costs, see how you can reduce them. Google the latest offers on booking platforms, or use reward programs to get better deals. However, you can also try setting a daily limit for smaller expenses and keep track of the same to avoid overspending.
15. Prioritize Preventive Health Measures
When talking about frugal living tips, it’s hard to miss anything related to health. We all have heard how prevention is better than cure, but how often do we really apply this? Taking a few preventive health measures like regular checkups, vaccinations, and screenings can warn you of any possible health causality.
On the other hand, it also helps reduce your risk of serious diseases and maintains your overall health – which again is an improved health outcome. So, if you haven’t been managing your health proactively, make sure to schedule and keep regular appointments with your doctor. Not only will this help you live a healthy life but also minimize your health care spending to a much larger extent!
16. Master Basic Sewing Skills
This can be a game changer for your budget and wardrobe. Repairing and altering your own clothes can save you a lot of money on tailoring services. I have personally applied this and it’s been such a relief for the pocket. There are times when a simple hem or adjusted fit is all it takes to make an old outfit feel new again.
So, the next time you think of tossing your clothes, try to fix them by sewing and customizing them for a good fit. This way, you will be able to save money and develop a rewarding, or let’s say a useful hobby in the meantime!
17. Utilize Your Local Library
This one is an underrated way to save money and still access multiple resources to consume. Instead of buying books, or subscribing to magazines, you can borrow them from a friend or via a free resource. You can also access online courses and databases available for free on online libraries that you would otherwise need to pay for.
By making the most of free resources, not only will you save money but also learn how to substitute things. Eventually, you will develop a healthy habit that will benefit you in the long run!
18. Host Community Potlucks
Another gem in our list of 25 tips for financial decision making, hosting community potlucks is a great way to save money on meals. It’s basically cooking a full meal for multiple people. Each person brings a dish – this spreads out the cost and effort. You get to try different dishes and cuisines, something you wouldn’t usually have if you were dining alone or with your family.
However, make sure to send out invitations early and maintain a record of who is bringing which dish. This will help you and other people keep track and keep things organized to avoid any last-minute chaos.
19. Brew Your Morning Cup at Home
Making coffee at home is way cheaper than going to a cafe simply for the sake of aesthetics. Come on, we all have been guilty of that, right? It’s fine to do that sometimes but make sure it doesn’t become a habit. Instead of catching your coffee at a nearby shop or cafe – try to view it at home and you will slowly start to realize how much money you have been saving so far!
Another good part is that you can also control the quality – you choose the beans, the grind size, and the brewing method. This means it will be easier to tailor your coffee as per your taste preference without having to request someone to do it (as an introvert, I understand the pain!)
20. Seek Off-Season Deals
Who doesn’t love snagging a great deal? As an occasional shopaholic (you get the sarcasm here), I love finding those off-season bargains where you can clear off your wishlist for half the price. Speaking from personal experience, you can easily get a fantastic deal as retailers often discount seasonal goods to clear out inventory during off season.
Another reason why it is one of the best cost-saving techniques is because during this time there will be less crowd. This means there will be fewer buyers to compete with and get your hands on what you want to buy before the stock runs out!
21. Set Up Automated Savings Plans
Automated saving plans are known for seamlessness as they transfer a fixed amount of money from your checking account to the savings or investment account. This happens at regular intervals – on a weekly, bi-weekly, or monthly basis. What you can do here is align these transfers with your payday to make things easier.
This way you will be able to ensure that a certain portion of your income is already saved before you spend it somewhere else. It will also make it easier for you to stay consistent as a lot of US often forget to transfer money to savings. Not to forget – by setting the money aside first, it will be easier for you to avoid impulsive purchases. According to Leo Szac, one of the famous marketing consultants, we should not let our lifestyle and budget sneak up on us. Here is what he tweeted on 14th April 2024:
Don't let lifestyle inflation sneak up on you.
As your income grows, resist the urge to splurge and maintain a frugal mindset.
— Leo Szac 🏘 (@leo_szac) April 14, 2024
22. Consider Downsizing Your Living Space
Ever thought about downsizing your living space? It can actually be a smart move to cut down on your living expenses. Smaller places usually come with lower rent or mortgage payments, cheaper utilities, and lesser maintenance.
Plus it’s a great way to keep your last simple and focus on what really matters. So, if possible, consider going small and switching from your big space. Not only will it save you from random expenses but also turn out to be the refreshing change you probably need!
23. Cook Meals in Bulk
The Agriculture and Horticulture Department Board (AHDB) recently did a survey of 2000 people across all age groups and found something intriguing. It revealed that people who batch cook believe they spend around £60 per month on food costs. Almost 49% of these people said that they do this to save money on their shopping bills. How cool is that!
You can apply this to your daily life budget and have ready-to-eat dishes for several days by preparing large quantities of meals at once. This will save you hours that you usually spend cooking more often – all while keeping a little extra cash in your pocket gradually.
24. Exchange Services with Others
You might have probably not heard about this but it’s an interesting approach to saving some cash while connecting with people. Let’s say you are good at photography but can also use some help with gardening.
So instead of struggling on your own or hiring someone, you can find a friend or someone who is good at gardening and needs some good pictures clicked. It’s just like a barter system but it will save you money in some situations.
25. Unplug Unused Electronics
A research study conducted on standby electricity consumption and saving potentials of Turkish households revealed an interesting observation. The report mentioned that most domestic appliances that remain on standby make up to 15% of the total household electricity consumption.
That’s right – even when they are not actively being used, these gadgets are quietly draining power and your wallet tool. So the next time you see an appliance on standby, make sure to unplug it as it might be using power. This simple habit can cut down on that 15% of power usage and potentially save you some money!
Conclusion: 25 Tips for Financial Decision Making
When it comes to mastering your financial decisions, your everyday choices matter a lot. By implementing these 25 tips for financial decision making, you will be ready to take the first step towards a better financial life. Everything from planning your meals to repairing those little leaks in your home, these aspects may sound small but they eventually add up. So why not start today? Here’s to a financially fulfilling and smarter frugal budget! Subscribe to LearnReal.in & get an instant update on new articles.
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