How to Budget to Maintain Happier Frugal Living

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Three years ago, nearly 50% of my budget was for mortgages.

I was focusing on paying the mortgage off as soon as possible. I couldn’t save or invest much at the time.

I started to save and invest money after I became debt-free in my mid-30s. I look for a balance between frugal living and a happier lifestyle to maximize my savings.

Here are some steps to budget for a happier frugal lifestyle!

  1. Figure out your after-tax income
  2. Choose a budgeting plan
  3. Categorize your expenses and set priorities
  4. Stick to your budget

Disclaimer: I’m not a financial expert. All content provided is for informational purposes only. Please read my full disclaimer here for more info.

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Figure out your after-tax income

If you get a regular paycheck, the amount you receive is probably already deducted from taxes, and health insurance, savings like 401(k). If you are a freelancer, subtract anything that reduces it, such as taxes and business expenses.

Related Post: 5 Personal Finance Tips Every Freelancer Should Know

Choose a budgeting plan

There are many budgeting plans to choose from 50/30/20 budget, cash envelope, yearly budget, etc. 50/30/20 budget you spend 50% of your after-tax dollars on essentials, 30% on wants, and 20% on savings and debt repayment.

The downside of the 50/30/20 budget: This is not a good method for someone with a low income. For instance, if you make $2,000 a month and spend half of your paycheck on essentials. You may need to find out the $300 rent apartment, and that’s nearly impossible. (Especially in this hyperinflation world)

A cash envelope is a way to track exactly how much money you have in each budget category for the month by keeping your cash tucked away in envelopes. The benefit of the cash envelope system is you can see how much cash is left at the end of the month. Also, you can’t spend more than you have. When my monthly income was $2,500, I used this method.

The downside of the cash envelope: You need to live with physical money.

The yearly budget is calculated monthly budget based on your annual income. I use this method now! This is a reasonable way to plan a stable budget.

The downside of the yearly budget: Annual budgets are very rigid. It is challenging to manage if you are not receiving a stable income. Since I’m a freelancer, I determine my annual income every year. If I do not reach the target income, I do gig work to cover the shortfall.

Find budget planning methods that fit your lifestyle!

Free Printables for budgeting here.

Categorize your expenses and set priorities

The budget usually includes two categories “needs” and “wants.” Needs are essential expenses like food, housing, utilities, cell phone bills, and transportation. Wants are non-essential expenses like entertainment, dining out, and travel.

After categorizing your expenses, set priorities for your spending. “Needs” will be a top priority for your spending. Yes, pay yourself first.

We try to minimize necessary expenses as much as possible, but we do not save money on food. I think maintaining a frugal lifestyle does not mean sacrificing happiness or well-being. Health is my top priority in life. We build healthy eating habits even though it’s a bit pricey.

In addition, we don’t have the fastest internet. We don’t own the latest iPhone. We don’t buy designer items. We don’t drive fancy cars. However, we spend money on traveling.

We can’t spend money on everything, but we can spend money on the things we love the most. That is the secret of maintaining a frugal lifestyle while still enjoying your life!

Stick to your budget

Once you’ve created a budget, it’s important to stick to it. Monitor your spending regularly. Avoid overspending on non-essential items, and prioritize your spending based on your goals and values.

Acknowledging your achievements can help you stay motivated and committed to your budgeting goals.

Wrapping Up

Remember, maintaining a frugal lifestyle does not mean sacrificing happiness or well-being. With careful budgeting and prioritizing, you can maintain a frugal lifestyle while still enjoying the things that matter most to you.

Now, it’s your turn! What are your tips for happier frugal living?