Many people are experiencing reduced wages, job insecurity, and retrenchment due to the poor response to the COVID-19 pandemic on the part of governments and corporations. As we are now recovering slowly from the multiple issues, the economy remains uncertain. More people are finding themselves having to dip into their savings to maintain their lifestyle. Some are looking for second jobs, part-time work, and auto title loans to help them meet the pressures of reduced wages.
If there was ever a time to start living frugally, this is definitely it. Perhaps the best way to weather the coming times of difficulty before the economy recovers is to start budgeting and making different financial choices. Living frugally can take away some of your pleasures in life, such as requiring you to reduce to only one streaming service and canceling cable. But, at the end of the day, it will give you a better appreciation for the entertainment you do receive and help your financial situation.
Table of Contents
Re-evaluate Your Checking Account
Some banks charge customers a fee for various services. You may receive fees for overdrafts, falling below a minimum account balance, and using an ATM that is out of their approved network. If you find that your bank does this, it is time to move to a different bank that will not charge several fees. Consider choosing a credit union instead of a bank as they generally have fewer fees and better interest rates.
These are not-for-profit organizations and are more focused on helping you out in your difficulty. They can also offer budgeting tips and suggest ways to deal with loans and insurance obligations while on a lower income.
Start Saving
You need a savings account that is separate from your checking account. If you keep all your money in the checking account, you may be tempted to spend it. But a separate savings account allows you to save money.
This way, you can only keep the money you need in your checking account. It will also help you understand your spending and saving habits better to make more informed choices when budgeting.
Automate Finances
Set up an automatic deduction for your most important bills. Auto deductions will stop you from making difficult choices in emotional times as it takes the decision out of your hands. You can be sure that your rent and utilities are paid and focus on other aspects of recovering from your financial straits.
If you still receive your full salary, you may want to direct 20% of your pay to your savings account automatically as well. The auto deductions for bills and savings will allow you to spend the remainder in the ways you need it most. Only keeping the money after deductions also helps keep you from spending frivolously as you transition to a frugal lifestyle.
Understand Budgeting
Some people are under the impression that a budget tells you what you can and cannot spend money on. This is only a part of what a budget represents. Financial gurus often say that how you spend money matters more for financial stability than how much you make. This is where a budget comes in.
Your budget should show how much money you make every month. List every source of income that you have from your job, part-time job, and any money you make with a hobby. Then, identify how much is being spent and on what. This is very important to identify as it can reveal a great deal about why you always feel like you run out of money and have nothing to show for it.
Budgeting will help you to see where you need to make cuts and reductions. It can be hard to let go of things you are used to having, so do not feel disheartened if you make a few of those purchases. It will take time and willpower before you can start following your new budget.
Understand What Counts as Savings
If you want to save real money, you have to change the way you approach saving money. Coupons and vouchers are great for reducing the price you have to pay at restaurants. But ask yourself if you really did need to go out to eat. If you spent money on eating out without a special occasion to celebrate, you did not save money but spent it.
Find a cheaper place to live. Your big apartment may make you happy, but if you spend most of your time at work and the rent eats up more than 30% of your paycheck, you are spending money. The housing market is in a bad way right now, so you could find a nice place for less than the usual rent.
You should approach your landlord and let them know that your financial situation is causing you to look for different accommodations. Paying tenants is hard to find right now, so they will want to keep the ones they have even if they need to make some accommodations.
There are many avoidable expenses in everyday situations that you can identify and prepare contingency plans for. Buy a good quality reusable water bottle, so you no longer need to buy water at restaurants or the mall when you feel thirsty. Organize movie nights at your house instead of going out to the movies with your friends. Plan potluck backyard parties instead of going to a restaurant.
Start turning off appliances that are not actively in use. Turn off phone chargers and microwaves. Reduce air conditioner and heater usage, and only wash full loads. This reduces passive electricity usage, active electricity usage and can help reduce your utility costs.
