Frugal Living Without Looking Cheap

The easiest way to increase your savings is by cutting costs, and there is no better way to cut costs than to frugal living

With that said, frugal living can have the wrong connotations. There is a fine line between frugal living and being cheap. Aside from looking cheap, your cost cutting could come at the expense of future revenues.

We will break down frugal living without looking cheap. The key theme is to not worry about what you own, and to enjoy experiences and memories. At the end of the day, all we will have left are our memories. Thankfully, investing in our social and family experiences are the key to a fulfilling life.

Frugal Living Without Looking Cheap

Keep Your Housing Costs Low

Millennials are spending 45% of their incomes on rent during the first decade of their career. With such an insanely high number, millennials have little chance to start investing or saving for a down payment.

We recommend spending no more than 30% of your take-home income on rent or a mortgage, the lower the better. This will allow you to save more money for appreciating assets, be it a future home or investment.

This applies even if you live in an expensive city such as New York or San Francisco. I personally live in San Francisco, and spend less than 10% of my after tax pay on rent. After living in San Francisco as long as I have, I can tell you first hand that those who started on the right foot by keeping their expenses low, continued that mindset even as their salary increased.

Those who spent too much on their rent were often victims of lifestyle inflation, consistently spending more as their salary increased.

Negotiate Your Purchases

It blows my mind how many people don’t negotiate large purchases, such as a bed, television, or car. When you are considering large investments, know the absolute most you will be willing to pay before engaging the sales rep, and walk away if you don’t get it.

If they don’t follow you, then you can consider raising your price at another store. More often than not, the sales reps will have you come back. Negotiating for lower prices is one of the easiest ways to learn frugal living.

Cash Back Shopping

The path to discounts have moved to your smart phone and computer.

Retailers are willing to pay to drive new shoppers to their stores, and marketers are capitalizing on this by offering cash back through your mobile device.

Take advantage of this by downloading the top 4 cash back shopping apps and browser extensions.

Churn Credit Cards

We talked about investing in experiences, and churning credit cards could make those experiences free. Credit card companies are offering lucrative sign up bonuses in miles, hotel stays, and straight up cash. Take advantage of them to underwrite your travel.

Keep Your Auto Costs Low

The 1/10th rule for buying cars is to spend no more than 10% of your annual income on the purchase price of a car. If you make $50,000 per year, spend no more than $5,000 on the purchase price of that car.

This is a very polarizing view that many oppose. Simply put, we live in a society that values automobiles too much. The median purchase price of a car is $34,000, and that asset will depreciate at a rapid pace. Imagine if you instead put that money towards an appreciating asset such as a house or investments, and you’ll see why this rule is so crucial.

Aside from the purchase price, more affordable cars will save you money in countless ways. When you have your valet pick up your beater, they will be amazed if you even tip a dollar. If you have a Porsche, they will definitely expect more.

Another trick is negotiating. When my wife and I were negotiating a bed, I asked if we could go outside and think about it. I had us lean next to our beater of our car, and the associate knew she had to get more aggressive to win our business.

Buy Used Items

Cars and electronics are refreshing at insane rates. Do you really need the most recent television, iPhone, or car? You’ll save a ton if you go just one year back. Even better, if you find several models for sale on Craigslist, you can take a crack at negotiating the price further down!

What Should I Spend Money On?

Your Health

You can never get your health back. Make sure you spend money staying active and eating healthy foods. Eating healthy and staying active will help you live longer, reduce stress, and save you a boatload in future medical expenses.

We talked about stepping over dollars to pick up pennies earlier, and cutting corners on your health is a perfect example.

Experiences

Studies show that when we buy new stuff, we have an immediate burst of happiness. This happiness subsides over a few weeks, and our life with that new stuff becomes the new normal. We’re in a never ending hamster wheel when we buy ourselves new stuff.

The exact opposite is true with experiences. When we travel and spend time with loved ones, we continue building on those memories and stories. Make sure to not skimp on experiences – if you churn credit cards, you could have credit card companies pay for them!

Education

There is a reason why people spend tens of thousands of dollars on ivy league educations, because it’s worth it.

If you can get yourself a highly desired degree in a world class university, make sure you go. World class employers will line up to offer you a job, and the network you build will help for the rest of your life. Whether you want a promotion to a new job, or are seeking investments for a start up, your university network will be a huge advantage for the rest of your career. On top of that, student loan interest is incredibly low.

That is not to say that you should blindly spend on education. Too many people are getting pointless degrees at no-name universities. Whether this is for undergrad, or graduate school such as an MBA, sure your education will be in demand, and that the program is world class. There is no better investment than to invest in yourself.

Social Life

A network of close friends is crucial to living a fulfilling and happy life. Additionally, that network of friends will be a sounding board to self improvement. They could put new job opportunities on your radar, as well as new investments.

With that said, this is only as valuable as the friends you associate with. There are affordable ways to spend time with friends, such as cooking dinner or not buying shots. If your friends are burning through money, you may want to rethink about how much time you should spend with them.

Creating New Businesses

You should never be cheap on building new businesses. Not only could this create a new income stream for you, creating new businesses can reduce your taxes. How many hobbies can make you money and lower your tax bill?

Frugal Living – The Bottom Line

You can learn frugal living without appearing cheap. Doing so will leave you with more money to invest in a home or a business.

As long as you don’t worry about what you own, and focus on experiences and memories, you’ll have a fulfilling life with a lot more money in the bank. However you decide to use that money will be up to you. With these quick fixes, you’ll be that much closer to enjoying this flexibility.