7 Habits of Highly Thrifty People
There is almost no one on the planet that would say that they have too much money. But, some people are better at making each dollar go a little bit further. If you want to have a little more in your life, while spending a little less, check out these 7 habits of highly thrifty people.
1) Take responsibility for your finances.
Whatever situation your finances are in, they got there because of the choices that you have made in your life up till now. Whether you are riding high and well on your way to retirement, or you are sinking deeper and deeper into debt, it is your spending and saving habits that will determine your finances. A quick look at the long list of lottery winners who go bankrupt with months or years of winning millions shows that money will not solve your financial problems, good habits will.
If you focus on yourself and building the habits that will lead to financial independence, rather than the money, you will be further ahead in the long run.
2) Know Thyself
Sun Tzu in the Art of War famously said, “If you know yourself and your enemy, you need not fear the result of 100 battles.”
How do you know yourself? The first step is to track your income and spending. Using a tool such as PocketGuard lets you effortlessly categorize both complete with charts and graphs. Until you know where your money is going, it is impossible to make adjustments. Maybe you are already doing well and keeping your groceries down, but you realize that you spend way too much eating out.
Or you feel like you saved money by renting outside the downtown core, only to find that transportation costs and taxis are blowing your budget.
Creating a habit of knowing what your financial situation is the first step to creating any budget. Whatever your situation is, with minimal effort, you can gain huge insight into your finances that sets the foundation for all your money saving strategies.
3) Treat each dollar like a dollar
Saving 5% on your $20,000 car is a significant saving and worth the hours it might take to find the deal. How long would it take you to save that $1000 by clipping coupons for spaghetti? Our brains tend to turn off these big numbers, but when it comes to big item purchases, that is the time to get more strict about saving, not apathetic because it is just a small percentage of the purchase price.
One reason is that constant attention to the small details can make you too tired to fight the big money battles. This is where each person is different and your habits will play a key role. If you thrive on pinching pennies, then you are lucky. Just let that habit guide your major purchases as well. If the thought of tracking down a coupon to save 50 cents on orange juice tires you out, save your energy for the times when it matters most. Having the energy to negotiate $20,000 off the purchase of your house is far more important than how much the soap costs to clean it.
4) Watch the periodic payments
There is a reason that businesses and cell phone companies advertise prices as monthly payments, rather than lump sums. Your cell phone bill is not just $100 to them, it is a $2400 contract over 2 years. Thinking about recurring payments in these terms can help you see why they are so valuable to businesses. Shopping around for 2 days when it is time to refinance your mortgage can seem tedious, but if you can save several hundred dollars per month for the next 5 years, it could save you thousands of dollars. Who wouldn’t spend 8 hours doing something that earns them $200 per hour or more.
This applies to all periodic payments including, cable bills, rent or mortgage, utilities and insurance payments.
5) Insurance and warranty
Almost all insurance is just another way for someone to make money from your fear. It is important to have insurance to protect you against getting destroyed financially, but that does not apply to electronics, household appliances or older vehicles. If you are in a financial position that your $2000 Toyota breaking down would bankrupt you, it is time to seriously change some of you spending habits, including spending on money wasters like extended warranties.
Shop around for a good health insurance plan, make sure your mortgage is covered. If you have children, purchasing reasonably priced term insurance to take care of them should the worst happen to you is a good idea.
6) Debt servicing
Unsecured consumer debt is usually very expensive. If you have any debt at more than 10% APR it is important to get rid of it fast! Unless you are planning to declare bankruptcy, it might be time to sell off your Elvis paraphernalia collection or dig into that savings you promised yourself you wouldn’t touch to get rid of it. Then change your habits that got you into that mess in the first place by never carry a balance again.
7) Buy used
Buying used often makes sense for items that have long shelf lives, such as furniture, cars or exercise equipment. In the latter case, you can often find completely unused equipment that was bought with the best of intentions but, never taken out of the box. Buying used doesn’t make sense with items that you are not able to accurately judge their condition, such as electronics.
Bonus — Cost of living
If you follow all these rules and you still having trouble making ends meet, there are more radical alternatives. One is to find a truly cheaper place to live. Many millennials are now able to work from home or freelance. If your source of income is not tied to your place of living, then you can significantly improve your lifestyle by finding a cheaper place to live. Whether that is a different city, state or country is up to you.
If you are a junior IT professional, and you are able to work remotely, it doesn’t make sense to hole up in a New York City apartment when you can live comfortably in Arizona or like a king in Panama! Consider all your options including the country you would like to live in and choose the one that suits your lifestyle the best.
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