Live Frugally (But Enjoy Life Fully)

Your closet is filled with unworn clothes, your car is new, you have no savings and your credit card is maxed. From the outside it may appear as though you’re rolling in cash, but deep down you know you barely have enough to pay your bills.

If this is your story, you’re not alone. A recent survey by the American Bankers Association showed that the average American’s spending has so outpaced his or her earnings, people are falling behind on their loans at the fastest rate in 15 years. And savings accounts? They’re going the way of the steam locomotive; the American savings rate has shrunk to less than 0%, according to the Bureau of Labor Statistics.

Whether you are dealing with an unexpected crisis or a spending problem, you could probably benefit from living frugally. Before you worry that you’re going to be living the cheap life, here’s the good news—you can live frugally without skimping on your happiness. In 30 days, you can take back the reigns to your economic future…and still get compliments on your style.

Frugal Versus Cheap

To some people, the word “frugal” is code for “cheap.” But in truth, frugality is allocating your money where you really want it to go; being cheap means you will spend the least amount possible for anything regardless of quality.

“Most people spend money without thinking about it, and much of what they spend it on doesn’t make them happier or feel better,” says Gary Foreman, editor and publisher of "The Dollar Stretcher." “You can reduce this spending and not feel any less fulfilled.”

When James Spradmeyer, an Orlando, FL consultant, began to change his spending habits, he was afraid people were going to call him a cheapskate. He soon changed his tune. “Every time I cut back in one area, it allowed me to spend more in another area,” he says. “Living frugally didn’t mean I couldn’t have a social life; it actually meant that I could do more of the things I liked to do without panicking about how much money I was spending.”

If you’re going to change your spending habits, you’ve first got to change your mindset. Quit equating frugality with cheapness—when executed properly, it’s exactly the opposite.

The Path to Frugality

If you want to live frugally, start by figuring out how you’re currently spending your dough. Take a one-week inventory of where your money is going, making sure to tally each vending-machine soda and every last MP3 download. Add that figure to 25% of your fixed monthly bills, and you’ll have a good sample of what you’re spending—and where—any given week.

Then divide your expenses into two categories—things that are truly important to you and things that aren’t. Where things aren’t important, it’s your job in the first 30 days and beyond to find ways to cut back or eliminate your spending for things that don’t matter.