(Steve is a guest blogger from Think Save Retire)
There are three types of people in this world: those who spend a lot of money (often more than they make), those who spend almost nothing, and those somewhere in the middle who have mastered the fine art of money management to the point where every dollar spent results in undeniable happiness, every time. I like to call these people the "epically frugal", and they tend to lead simple, happy and productive lives.
The habits of the epically frugal are extremely powerful, yet strangely straightforward. We all know that frugal people "save money" - that goes without saying. But what else? And how many of these lifestyle techniques can be mastered by the rest of us? Probably more than you think.
Let's take a look at what these epically frugal habits are and how we can apply them to our lives.
One of the best ways to maintain a frugal lifestyle is by knowing where your money is being spent every month. I haven't met very many frugal people who don't have a precise understanding of not only how much they spend, but also where their money is going. This process need not take hours and hours to keep up with, either - once your initial system of tracking your expenses has been created, maintaining it should be as easy as plugging numbers in - and sometimes, not even that through the use of automated tools like Mint and Personal Capital! For the record, this is how we approach tracking our expenses.
The idea is to reveal the individual items that you spend money on every month, like magazine subscriptions, for example, as well as how expensive your movie habit may have become. Take a look at your bank and credit card statements and try to categorize those expenses, line-by-line. Slowly but surely your financial life will become much more apparent, and this is where serious changes to your spending habits ultimately start.
Getting out of your comfort zone is a mind-game. Spending is an addiction, and our minds keep planting the poisonous seeds of comfort within our decision-making process when it comes to the idea of "spending to achieve happiness".
Getting out of your comfort zone can mean a lot of things, like engaging in uncomfortable conversations and NOT choosing the status quo when making decisions. It's about looking people squarely in the eye as you walk past them rather than avoiding eye contact. For an introvert, it's about willingly introducing themselves with ease at a dinner party.
In other words, frugal people have made the conscious choice to escape the more comfortable and societal-approved expectation that spending money and acquiring stuff results in an increase in happiness. They keep themselves from falling into the "but everybody else is doing it" trap and instead remain focused on their own financial goals, even if that means saying "no" to expensive dinners, sporting events or vacations.
The epically frugal realize that the things we buy tend to lose value over time - both in actual resale value as well as the personal value that we place in them. Experiences, in contrast, typically appreciate within our minds. On your deathbed, will you remember the great times that you had or the great things? More than likely, you'll remember times the most!
For example, I would much rather take an inexpensive vacation to a place that I love than get stuff wrapped up as gifts to eventually fill the back of my closet.
Frugal people are mentally over "stuff" and often find that the less stuff they have, the more simple life becomes. Why? Maintenance and storage, baby! The more things we have, the more of our time those things will demand. More cleaning. More fixing. More clutter.
Generally, there is a point of diminishing returns when it comes to the rampant acquisition of stuff. We humans need essential items like food, shelter and, yes, a reasonable collection of personal items that we can call our own. But, there is an often-elusive point where accumulating more things no longer adds to our state of happiness. Beyond that point, more stuff has a way of destroying happiness within our lives as we slowly build a dependence on possessing more things.
The epically frugal have discovered where that point is for them and resist the temptation to cross it. Studies have shown that salaries in the neighborhood of $50,000 a year provide the majority of us with the resources we need to truly find happiness - or that point of "enough" in our lives. Anything beyond that point probably fails to make us any happier.
To understand what "enough" means to us, it demands self-reflection and an honest, nonjudgmental accounting of how much true happiness our things bring us. For example, do the majority of your things get used for the first couple of weeks after a purchase and then sit in a closet for months or years at a time? If so, many of those items may not provide you with much happiness. How many things lie around your house, unused?
Ironically, epically frugal people are not cheap. In fact, they might spend more money on some of the things that all of us buy, due to the value they get out of these more expensive items. But, they also tend to purchase these items less often.
For instance, a "cheap" person might buy the $5 t-shirt for their kids only to have the shirt rip a month later, requiring another shirt (or brazenly making the poor kid wear a ripped shirt!). The epically frugal, on the other hand, might spend $15 on a nicer shirt with the expectation that the more expensive shirt will last longer than the cheaper one.
Related Post: The Difference Between Being Frugal and Being Cheap
Price is only one component that plays into the buying decisions of the epically frugal. Perceived value is the much larger and more important component of making a purchase. If a more expensive item truly offers more value - even in the long run - then it might make more sense to spend the additional money now rather than buying multiple items that are less expensive. In other words, frugal people often possess fewer - but nicer - items.
And there you have it, five awesome money-saving habits of the epically frugal. How many of these do you practice in your daily life? Remember, this isn't about placing judgment or giving criticism. Rather, this is about taking your frugality game to the next level, saving cash and leveling up your money skills.
Check out DealsPlus for all the best money saving tips on your quest to become epically frugal!