The 5 Frugal Living Tips That Have the Biggest Impact (+ Tips To Avoid)

Don’t expect your typical list of frugal living tips here. 

Why not?

Frugal living isn’t just about saving money. 

Tips like cooking in bulk, using coupons and taking a staycation can help trim your day-to-day expenses, but this advice misses the mark because it doesn’t take into account the true purpose of frugal living: getting more of what you want out of life.

In this article, we’ll talk about why that means thinking about much more than pinching pennies.

With that foundation in place, we’ll get into the core habits and tips for living a frugal life.

Let’s dive in…

What Is Frugal Living?

Frugal living is managing your money based on your values and priorities. Done right, you’ll spend your money on what’s important and minimize what’s not.

What does this look like in practice?

It means:

1. Prioritizing the goals and expenses that are most important to you.
2. Allocating resources, such as time and money, to these goals and expenses. 
3. Being OK with the fact that money may not be left to satisfy other goals and wants.

This can be difficult. But if you want to manage your money effectively, it’s one of the most important things you can do. 

Deep Dive: Want to learn more about how to live frugally? Check out our guide to the difference between frugal and cheap, which digs into the three key concepts of frugality.

5 Habits of (Happily) Frugal People

When people think of frugal living tips, they think of stuff like this:

The fact is, there are a lot of things you can do to save money. And most people can benefit from cutting waste out of their budget. 

But if buying a home is important to you — your number one priority, perhaps — then advice like “rent, don’t own” doesn’t exactly make you want to live a frugal life.

And while I love a good loyalty program and cash-back app, these tips are about saving money, not living a life of intention. 

Frugal living is all about prioritization. It’s about living cheap but good. It’s about getting that maximum value from every dollar you spend. 

So in the list below, we’ll focus on tips that show you how to do exactly that.

#1. Create a Values-Based Budget

The book Your Money or Your Life became a cult classic soon after it was published in 1992. Today, it’s widely regarded as one of the best personal finance books of all time. 

While you’ll want to read it, the core practice of the book — which aims to help you get the most out of every dollar you spend — is an exercise called “Three Questions That Will Transform Your Life.”

The process starts by calculating your life energy. 

This number represents your real hourly wage. With this number, you’re able to determine the opportunity cost of your most important asset: time.

For example, let’s say your real hourly wage is $36.64 per hour. 

Knowing that allows you to determine how much every purchase costs in time. 

But that’s not all there is to the exercise. The next step is that each and every month, you’ll review every expense while asking the following three questions:

1. Did you receive fulfillment, satisfaction and value in proportion to the life energy spent?
2. Is the expenditure of life energy in alignment with your values and life purpose?
3. How might this expenditure change if you didn’t have to work for a living?

According to the book’s co-author Vicki Robin:

“These questions will clarify and integrate your earning, your spending, your values, your purpose, your sense of fulfillment and your integrity.“

Pro Tip: To save time, use a good budgeting app. We recommend Rocket Money, which pulls in all your financial transactions from your various accounts and lets you see them in one place. Learn how it works in our Rocket Money review. 

#2. Pay Your Priorities First

Once you understand what’s important to you, you want to make it as likely as possible that your spending matches your priorities. 

Sounds easy, right? 

Let’s say that by analyzing your past expenses, you’ve found that you get a lot of value from traveling but very little value from ordering takeout food.

Given that, you’ll just stop ordering takeout and start setting aside that money for travel, right?

While you’re at it, why not exercise, start a garden, read for an hour a day, learn a new language and limit yourself to one Netflix show a night. 

Here’s the fact: changing anything is hard. It goes against human nature.

We’re bad at prioritizing what’s best for us in the long run over what feels good right now. So, we usually do what feels right in the short term. And that’s not always in line with our goals. 

The most powerful strategy to make sure your actions match your values is through automation. 

A 401(K) automatic contribution is a prime example here.

The key is that it happens automatically. You don’t have to go into your account every paycheck and decide whether you’d like to set aside money. You set it up once and then forget it. 

The same concept can be applied to any priority or goal you may have. 

If travel is important to you, set up an automatic transfer from your checking account to a savings account earmarked for travel. 

Pro Tip: Research shows that naming your goal something exciting — e.g., “Our Dream Hawaii Trip” — increases your ability to save towards the goal. 

For smaller goals, such as hosting friends for dinner, you can use the cash envelope method, where you set aside cash in an envelope at the start of the month. Then, you can spend that money guilt-free throughout the month. 

This practice is known as reverse budgeting and is one of the most powerful ways to control you’re spending.

#3. Create a “To Buy” List

It’s not that frugal people don’t have wants and desires. What separates frugal people from the typical impulse spender is time. 

With time, those who are frugal reflect on whether a purchase really does reflect their values. 

An interesting study featured in the book Willpower had participants in a nutritional survey write down their sweet cravings instead of immediately acting upon them. 

Here’s what the researchers found:

“[…] people who had told themselves not now, but later were less troubled with visions of chocolate cake than the other two groups…Those in the postponement condition actually ate significantly less than those in the self-denial condition…The result suggests that telling yourself I can have this later operates in the mind a bit like having it now. It satisfies the craving to some degree—and can be even more effective at suppressing the appetite than actually eating the treat.”

Just like healthy eating, living a frugal life isn’t about deprivation. It’s more about giving yourself time to step back and make good decisions. 

So, when it comes to something you want to have, never say “never” — just say “not right now”. Then, create a waiting list of the things you want to buy at some point. 

Pro Tip: I store my “To Buy” list on a note-taking app on my phone. 

By putting an item on the list, you won’t feel deprived. It will be there waiting for you should you decide to purchase it later.

But you’ll likely resist that urge – either permanently or for quite a while.

#4. Set up Barriers to Temptation

Dan Ariely, a professor of psychology and behavioral economics at Duke University, has a powerful tactic when it comes to avoiding tempting behaviors. 

He calls it a Ulysses Contract. 

As he explains: 

“As you will recall from Homer’s ancient tale, Ulysses knew that if he allowed himself to hear the tempting calls of the Sirens, he would follow them and in the process kill himself and his crew. So he asked his sailors to tie him to the mast of his ship and put wax in their own ears. Ulysses thus protected himself from temptation by making it impossible to take action when temptation appeared. He didn’t have to summon his willpower to resist.”

You want to make it nearly impossible for you to act on bad behaviors. 

Earlier, we talked about reallocating what you’re spending on eating out to travel, noting that setting up an automatic transfer to a savings account earmarked for travel was a powerful step to do just that. 

But to give yourself an even greater chance of success, you want to make it as hard as possible to spend money on dining out.

A good place to start would be deleting food delivery apps from your phone. For better results, delete those accounts altogether (not just the apps), so that you don’t find yourself re-downloading the app when you’re hungry and don’t feel like cooking. 

You’re doing it right when you have to go through multiple steps — all of which you despise — to do the bad behavior. 

#5. Show No Mercy on Stuff That Doesn’t Matter

When you declare something unimportant, show no mercy in cutting costs in that area.

For example, having a nice car has never been on my list of desires. I therefore drive a 10-year-old Ford Fusion, which I have no plans to replace. 

Other things that fall in my “not-important” category are tech (TVs, phones, tablets and home automation), dining out and clothes. 

My expenditures in these areas fall far below the average household.

It’s not that I don’t want the 75-inch, 4K UHD QLED LCD TV I see each time I walk into Costco. And a Tesla SUV would be a nice dad car; who wouldn’t rather drive that than an old Honda Odyssey?

It’s more about the trade-offs I’d have to make to buy those things. And the trade-offs would entail giving up on some expenses I get more value from, such as family experiences and high-quality food. 

Frugal Living Tips Summary

Nobody needs 100+ frugal living tips. 

What’s really going to make a difference in your life, is:

1. Understanding the expenses you get the most value from.
2. Making sure you’re spending money on what you’ve defined as important.
3. Minimizing your spending on what you’ve defined as least important.

While frugal people tend to have lower monthly expenses overall, prioritization is fundamental to creating your own financial plan at all income levels.

The best part?

You get to decide what is and is not important to you.