Does life seem crazy busy, with no time or energy to spare?
Frugal living comes to the rescue to free up time and energy by increasing the simplicity of your life.
Your newfound resources can then used to improve well-being.
I cover some research-backed ways to use time, energy, and money to improve well-being in this Ultimate Guide on Money, Happiness, and Wellbeing.
Finally, frugal habits and decisions keep expenses at bay, setting the foundation to reduce financial stress and grow long-term wealth.
The gap between your expenses an income allows you to:
- Pay down debt.
- Build an emergency fund.
- Invest to grow wealth.
This post covers the frugal living tips that work for me. I’ve ordered them with the most impactful tips first.
The last tips, #12 and #13, are implementation tips to help you execute the frugal living tips in this post.
You and I are different. Some of these tips may not work for you. That’s okay – I hope you find some to be helpful.
What Is Frugal Living?
Frugal living is a way to squeeze the most out of your money. This involves:
- Slashing spending on goods and services that add zero value to your life.
- Deliberate spending on quality goods and services that add value to your life.
- Understanding and controlling your expenses – see the expense tracker.
- Keeping clutter to a minimum.
You will get a better sense of frugal living as you dig through the tips. Lets roll.
Table of Contents
1. Don't Buy Too Much House
I find it helpful to think about a house in terms of the time, energy, and money it consumes.
When looking through this lens, you can view a house through two categories:
- The stuff that fills the house
- The cost of homeownership
Small House = Less Stuff & More Time
“Stuff” is like a fart – it naturally expands to fill all available space.
You will fill the space of the house with furniture, tables, lights, paintings, and generic “stuff”.
A big house means more stuff. And more stuff means more time, energy, and money expended to:
- Shop for the stuff.
- Organize the stuff.
- Maintain the stuff.
- Dispose of the stuff.
Understanding this, the frugalite will buy the smallest house required to meet functional needs. These needs generally change based on children and hobbies.
Lower Cost of Ownership
Living in a smaller house will cost you less and will provide excess money that you can invest in actual investments, like rental properties, stocks, and bonds.
Contrary to popular belief, the structure of your house is not an investment. I’m talking about the actual building.
This structure declines in value and needs to be maintained – that costs money.
As home size inflates, so do structural maintenance costs, property tax, home insurance, and heating and electricity bills.
Only the land your house sits on can be expected to go up in value (appreciate) over time.
People often say a “home is my best investment”. It is often true, because the land the house sits on is their only investment.
That’s not a sufficient reason to buy more house than you need.
If you want to buy a real estate investment, and own a big house, then buy a duplex and rent the other half out.
2. The Wealthy Renter Way
House prices are sky high in Canada and the US. And in 2022, rent prices are low relative to home prices.
In this environment, renting can be a wealth maximizing decision. But only if you invest in stocks while renting.
Stocks, with dividends reinvested, provide greater returns than real-estate appreciation.
According to the Credit Suisse Global Investment Returns Yearbook, your house price can be expected to beat inflation by about 1.5% per year, while a collection of global stocks (held via an equity index fund) can be expected to beat inflation by 5.3%/year.
There is a rule of thumb, called the 5% rule. It goes like this:
- It often makes sense to rent if the annual rent is less than 5% of the price of a similar home.
- It makes sense to buy if the annual rent for a similar place is over 5% of the home price.
You can read more about the Buy vs. Rent Evaluation or check out the rent vs buy calculator. The numbers talk better than I can.
Renting should not be taken off the table. It can often be a wealth maximizing decision.
Simplicity of Renting
As a renter, I love the simplicity provided by this frugal living tip.
For example, when my furnace failed, a team was on-site with a single phone call. It cost me $0 and it was not stressful.
Worries about home repairs don’t exist in my wealthy renter life. Not only does this limit stress, but I can also hold a smaller emergency fund.
A few other benefits include:
- No need to renovate to upkeep home value.
- More flexibility to move.
- Reduced exposure to housing market volatility.
- No mortgage debt increases your risk tolerance for investing.
3. Live Close To Work
You are smart, and you know that living close to work slashes transport costs like fuel, vehicle maintenance, and tire wear.
But there is something far more important.
If you are human, you undervalue the time and over-value money. Your time is your most valuable asset, and it has a price.
Commuting consumes a huge chunk of time.
Think about a 45-minute commute. That’s 90 minutes per working day. Every year, you spend 325 hours commuting, or nine full 40 hour work weeks.
At a reasonable $40/hr of time value, that’s $13,000 lost to commuting time.
The single decision on where to live imposes costs that influence your free time for decades to come.
Interestingly, driving without traffic does not reduce well-being. It’s when you are stuck in traffic that well-being tends to drop. The type of commute you have matters.
4. Buy Economy Vehicles With Cash
Vehicles are “depreciating assets”. They drop in value rapidly.
One of the best and most common ways to tank your net worth is to buy a brand new luxury vehicle.
To grow wealth (net worth), you must use your income to buy things that increase in value. You can learn more about this core concept in this post on net worth.
This means minimizing spending on things that go down in value, like vehicles.
- New vehicles lose value more rapidly than old vehicles.
- Luxury vehicles lose value more quickly than economy vehicles.
Buy a used reliable economy vehicle. Drive it into the ground.
This works best with Honda’s and Toyota’s from my experience, provided you take care of the body. The well-engineered engines tend to outlast the body, and they’re great on gas.
You can dig into vehicle depreciation further in this post.
In 2021, we saw used vehicle prices skyrocket way faster than new car prices. This situation is an exception where buying a new economy vehicle may be a wealth maximizing decision.
As I’ve gotten older, I’ve realized that no one cares what type of car I drive. I found this difficult to stomach, especially as a lover of fast cars.
People may like your vehicle, but that doesn’t mean they like you. Life has many layers of complexity. You are not defined by the vehicle you drive.
5. Ask Yourself This Question.
“Would I still buy this if no one knew about it?
I love this question. It helps me figure out my motives for buying an item or experience.
Did I buy it for others, or for me?
It’s tempting to flash that nice vacation to others, or that fine restaurant on Instagram. The resulting social provides a short-lived dopamine hit.
Social validation does not bring sustainable well-being.
And I know this is a tough one because the things we own are like an extension of ourselves. The clothing you wear, the home you live in, the vehicle you drive.
Like the Stoics, you can find this validation within.
When you separate out the social comparison factor, you are equipped to buy goods and services for the right reasons.
How to Meet The Need to Fit In
And I’m not pretending that you can fully disregard the desire to fit in. That urge is naturally human.
Instead, I suggest you meet this urge through experiences that are cost-effective. These experiences naturally build real relationships – a key factor in sustained wellbeing.
- Working with others at work
- Joining a book club
- Joining a local gym (Crossfit is good for this, although I dislike kipping)
I dig into our need to belong, and how it relates to your spending, in this post on 5 Ways To Stop Buying Things You Don’t Need.
6. Cook In Bulk
I won’t eat healthy unless I cook in bulk, because cooking healthy is time-consuming.
Healthy eating improves your energy, reduces the rate of cognitive decline (how quickly you get stupid as you age), and limits stress.
With increased energy comes improved willpower. And with more willpower (self-discipline) comes more freedom.
Healthy eating is foundational to a wealthy life.
To save time and sanity, I cook two large meals every week in a giant pot. I call it my “stew”.
Then I put “the stew” on the most cost-effective food on the planet – rice.
Not only does cooking in bulk cut the frequency of cooking, but you also do dishes and clean countertops less often.
Finally, there is your decision capacity. Bulk meal prep saves brainpower as you no longer have to think up a new recipe every day – less decision fatigue. Now you can allocate creative energy to the important things in life.
7. Buy Simple, Quality Goods
At the center of frugal living is the art of owning a small number of quality items that bring true value to your life.
These quality items and services will be unique to you, based on your set of values.
For example, I spend hundreds of hours on my bike and love the experience that a nice mountain bike provides.
Therefore, I spend big bucks on my bike. It’s a clear investment in my well-being.
Similarly, if you want to be frugal, you will purchase goods that are:
- Durable and long-lasting (quality).
- Simple and basic.
- Enhance your life by saving time or enhancing experiences.
Such goods are designed by engineers who use quality materials to offer the necessary functional value with maximum simplicity.
And these aren’t normally luxury goods. For example, a simple Honda Civic wins the frugal battle against a Luxury BMW 3-Series any day, although both may be perceived as quality.
The Civic’s simple design increases reliability and reduces maintenance costs while providing the same functional value – it gets you from A-B.
This comparison between the civic and BMW would change if you are an avid German car lover, provided you answer “yes” to the question “Would I still buy this if no one knew about it?
Quality: The Difference Between Frugal vs. Cheap
The concept of quality is the defining difference between “frugal” and “cheap”. Let’s consider Cheap Chad and Frugal Frank.
Cheap Chad buys low-quality stuff, and he buys a lot of it.
Chad spends an immense amount of time shopping, maintaining, and disposing of his cheap stuff.
Plus, cheap Chad must organize his cluttered living space often.
On the other hand, frugal Frank buys quality goods but limits the quantity – he is a minimalist.
Frank has more time, and although his goods are more expensive, he saves in the long term because his stuff lasts longer.
I’ll also note that Frugal Frank lives also in a modest house because he knows that stuff will naturally fill up available space.
Example: Frugal vs. Cheap
Consider a high-quality $40 T-Shirt that lasts 4x as long as a $20 T-Shirt of lower quality. The $40 T-Shirt is the lowest cost option, but not the “cheapest” option.
Frugal Frank would obviously buy the $40 T-Shirt. Cheap Chad would buy the $20 shirt, while also wasting time shopping.
8. Schedule A Purge
A purge reduces clutter.
More clutter means more organizing and cleaning time. And there is something weird about physical clutter – it also clutters your brain.
A clear brain is a good brain. It will earn you more income and help you make better financial decisions.
Do a mass clean twice per year and purge unnecessary items.
But how do you know if an item is unnecessary? Here are some criteria:
- You have not used the item in the last year.
- It has no functional value.
- Does not add to the “feel” of your environment.
- It has no sentimental value.
The first bound is to sell the item on Marketplace or Kijiji. If that fails, donate. And finally, when all else fails, a trip to the dump.
Here are some categories of items you can purge:
- Kitchen Utensils
- Garage, Shed
- Winter gear
9. Assess Your Subscriptions Annually
Gym memberships, ink replacements, Spotify, Netflix, and meal delivery services.
Assess these guys.
I believe some of these services are a great way to save time and simplify life. But there is a catch.
Automated services can be easy to forget.
Then you end up paying for subscriptions that you don’t use. These small amounts add up over time, especially if you consider what this money could do if invested.
For example, $30/month over 30 years would be $68,000 if invested in an index fund that returned 10% annually.
This also applies to bills with automatic payments turned on. These automatic payments make it too easy to miss unexpected changes to cell and internet bills.
For this reason, I do not allow automated payments and always pay manually. It forces you to review the bill.
10. Call Service Providers Annually
Wonder what it would be like to earn over $100/hour?
You can do the equivalent by researching competitors for your service providers and making a few phone calls.
Let’s cover the apporach.
A 1-hour phone call can often save you $10/month for a full year. That’s $120/hour, tax-free. You can likely do this with a single phone call.
Step one is to research competitors to your key service providers:
- Cell Provider
- Insurance Provider
- Internet Service Provider
Find the rates for equivalent services. Often there is a discount period when you first connect to the services. Don’t forget about connection fees and the fine print.
Step 2. Make phone calls to your current service providers when you find a better rate. I like to call cancellations directly. But don’t do this unless you are actually willing to change service providers. You need to have skin in the game.
11. Erect Barriers To Impulse Purchases
Today’s environment makes it harder than ever to limit impulse purchases due to:
- One-click ordering
- Easy access to credit
- Reward programs
- Custom-tailored advertising
Caving to these impulses can result in a house that needs a purge.
It is hard to suppress these impulses with self-discipline alone. Instead, you need to work smarter by making it harder to act on these impulses.
Examples: Barriers to Impulse Purchases
The seven-day rule. Wait 7 days before you purchase anything worth over $500. Your desire for an impulse purchase will likely subside after a week.
Turn Off One-Click Ordering. Make it harder to order stuff online. By turning off one-click ordering, you make it harder to purchase items.
Get Rid Of Your Credit Card. This one is hardcore, but often necessary if you find yourself buying stuff you don’t need. ?
12. Hone In On Your Purpose
When you are focused on “your purpose” you place more value on your time and energy.
That provides a motivational “oomph” to simplify life so that you can vector your energy towards your purpose. Many of these frugal living tips will come naturally.
What do I mean by “purpose”?
To me, the pursuit of “your purpose” is to apply your knowledge and skills to overcome obstacles (solve problems) to reach a goal that you find important.
Such a goal almost always involves improving the lives of others, either directly, or indirectly through an organization.
Pursuit of purpose is similar to flourishing, a concept central to well-being. Interestingly, it requires that you endure hardship.
Here are some examples:
- Elon Musk is electrifying transport and reducing the cost of spaceflight.
- Bill Gates trying to put a PC into the hands of everyone.
- Arnold Training to become Mr. Olympia.
- Providing the best possible life for your children.
- Starting a business that helps people develop strong nutrition and exercise habits.
- Mentoring others to change behavior to reduce financial stress and grow wealth.
When you are locked onto your purpose, your desire to chase material goods naturally declines, and you place greater value on time and energy.
13. Improve Your Self-Discipline
It’s one thing to read about frugal living tips, but it’s another thing to implement them.
Implementation requires self-discipline.
Whether that’s suppressing your impulse purchase desires, forgoing the luxury car, or pursuing your purpose. These all require delayed gratification – the sacrifice of present pleasure for a reward in the future.
So how do you improve self-discipline?
Practice. Do hard things daily.
As discussed in the fantastic book Dopamine Nation, doing hard things increases your pleasure-pain balance. Things that once felt hard will no longer feel difficult.
I find fitness is the best way to suffer a bit daily, and improve self-discipline.
Apart from frugal living, self-discipline is the key to building wealth.