The book 7 Habits of Highly Effective People has sold over 15 million copies since it was first published in 1989, teaching people all over the world how to live a happier, more successful and more satisfying life. One of the prevailing themes of the book is the fact that to change your life you need to change your attitude because no one else is responsible for what happens to you but you, so you can either complain about the things you don’t like in your life or you can set about changing them. Not surprisingly, this directly relates to the state of your finances.
If you are tired of living week to week, of having your phone regularly cut off or having to make excuses to skip dinners with your friends if the money has run out before the end of the month then you can use the seven habits of highly effective people to take control of your money situation and live a more frugal lifestyle, and a happier one.
Habit One: Be Proactive
The first habits of highly effective people is to take responsibility for your life, there is no one else to blame but yourself. Regardless of how you were raised or how you were treated at school you are able to choose your behavior now. Being proactive means understanding that you are in control of the direction your life takes and in control of your day to day interactions. Whereas a reactive person is often affected by their environment and will find external sources to blame for their behavior, for example if the weather is good they are in a good mood but if the weather is bad it affects their attitude and so the weather is to blame for their bad mood.
However what most people forget is that between the stimulus and your response is your freedom to choose your response, and one of the most important things you choose are your words. The language you use is an effective indication of how you see yourself and if you use proactive language such as ‘I can’ or ‘I will’ you are starting with a more positive attitude than a reactive person who uses language like ‘I can’t’ or ‘I have to’ or ‘if only…’
How to be proactive for effective frugality:
- Take the first step. You cannot take control of your finances until you make the commitment to do so because the more you ignore the situation the worse it will get. Instead take a long hard look at your finances and your budget, your debts, income and expenses and understand where your money is going and where you can budget better.
- Tell people. Using proactive language to vocalize your goal of being more frugal and more financially responsible not only helps you crystallize your goal but can also help you avoid the peer pressure which can make budgeting and frugality hard. If you explain to your friends and family how you are trying to live a more frugal lifestyle then they are less likely to pressure you into one more round of drinks at the pub or dinner out, again.
- Listen. Listen to yourself and listen to the reasons you give each time you make a purchase outside of your budget or decide not to put those spare funds into your savings account. Taking the time to stop and listen to the reasons you give yourself for spending more than you earn will give you the opportunity to hear just how shallow many of those reasons are, and can stop you from making purchases which can impede your goal of effective frugality.
Habit Two: Begin with the End in Mind
Those who are effective in achieving their goals are able to envisage their end result despite the obstacles. Highly effective people adhere to this habit based on the principle that all things are created twice, there is the first mental creation and then the second physical creation, and the physical creation follows the mental creation in the same way as the building follows its blueprints.
If you don’t visualize what you want out of life then you are at risk of other people and external circumstances influencing your life because you are not influencing it yourself. Instead begin every day and every task with a clear vision of where you want to go and how you’re going to get there and make that vision a reality with your proactive skills from habit one.
How to visualize effective frugality:
- Define your goal. There are many ways to live a frugal lifestyle and you need to decide on how frugal you want to be. Do you want to be debt free, do you want to build a savings account balance of a certain value or do you want to be able to live on one income in a two income household?
- Decide how you’re going to get there. This will again draw on your budget, but you also need to be aware of the obstacles which are standing in your way. These may be literal obstacles such as credit card debts, or they may be obstacles you have identified in your behavior; for example are you spending $10 every day on junk food on your way home from work because you’re starving when you could be packing a two dollar muesli bar or a low GI lunch to keep you going until dinner. Or do you find that when you go shopping with your sister she always helps you justify a frivolous purchase when you could leave your credit card at home.
Habit Three: Put First Things First
Knowing why you are doing something is an effective motivator in helping you take the mental creation and transform that into an actual physical creation of your goal. Therefore ask yourself which are the things you find most valuable and worthy to you. When you put these things first you will be organizing and managing your time around your personal priorities to make them a reality.
However for many people it is hard to say no but this is exactly the skill you have to learn to be able to keep your goals as your first priority. While we have all of these time-saving devices and we are told we can have it all if we just achieve that elusive work-life balance in reality having it all is really about prioritizing which it is most important to you to have, and then doing that properly.
How to put effective frugality first:
- Recognize the effects of your finances. You may not dedicate as much time as you should to managing your finances and practicing frugal principles because you feel there is always something more important to be doing, whether it is work, taking the kids to soccer practice or getting ready for dinner with the girls. However if your finances are not under control and you are regularly spending more than you earn then this is having a negative impact on every other aspect of your life from your work to your family to your friends. Therefore you need to recognize that being frugal is your first priority.
- Just say no. It is easy to spend more than your budgeted amount each month when you are worried about missing out on a dinner with friends, feel as though you have to cater a birthday party for your son and 50 of his closest friends or you can’t possibly wear the same suit you wore last year to a work conference. However if you recognize that you don’t have to take on everything and that it is all right to say no then you will find you are more in control of your spending and your budget.
Habit Four: Think Win-Win
Growing up most of us are taught to base our self-worth on comparisons to others and competition against our peers. We think we can only succeed if someone else has failed and if you win then that must mean I lose, and that there is only so much pie to go around and if you get a big piece then I’m going to be missing out. When you think like this you are always going to feel like you’re missing out on something and that’s not fair is it? As a result many of us retaliate and take the pie before someone else can take it from us.
Thinking in a win-win mindset allows you to see mutual benefits from all of your interactions and as a result you will see that when you share the pie it tastes even better. If you are able to approach conflicts and problems with a win-win attitude then by showing integrity and standing up for your true feelings and values allows you to express your ideas and feelings with courage while having consideration for the feelings and ideas of others. When you focus on an abundance mentality you are able to see that there is enough for everyone and you can see that balancing your confidence with empathy you can achieve your goals while helping others achieve theirs.
How to create frugal win-win situations:
- Recognize that you don’t always know the full story. As you aim to implement frugal principles and stick to a budget you may often find yourself thinking ‘it’s not fair’. It’s not fair that they get to go out to dinner it’s not fair that they get a new car it’s not fair that they get to go on holiday and I don’t. However take the time to realize that you are only seeing a small part of the finances of your friends and family who seem to ‘have it all’ and that even though your best friend is taking the European holiday which was your dream or your brother is buying a sports car before you are, if you manage your finances frugally you will get there too and there will still be plenty of holiday destinations and plenty of fast cars when you do.
- Understand the difference between possessions and net worth. While your friends and family may seem to have a fuller lifestyle because their house is bigger or their car is newer you need to consider how much debt they are hiding behind those possessions. True wealth is not measured in possessions but in assets and when the value of your assets is greater than the amount you owe in mortgages, car loans and credit card debts then you have a strong net worth and are truly wealthy and in aiming to live a more effectively frugal lifestyle you will be able to achieve true wealth rather than just a life full of stuff.
Habit Five: Communication
Communication is often the desire to be heard and understood and most people will listen with the intention to reply to what you’re saying rather than to understand what you have said. However to effectively communicate you need to first understand and then be understood because if you communicate with the sole intention of being understood you can find that you ignore what others are saying and miss their meaning entirely.
How listening can help you be effectively frugal:
- You are not the only person in your life. Chances are you are married, in a relationship, have children or all of the above. As a result you are not the only person being affected by your decision to live a more frugal lifestyle and to be effective in your goal of frugality you need to be able to listen to and understand the goals and behaviors of the other people in your life. For example consider how effective your frugality would be if you were taking packed lunches to work and avoiding the afternoon coffee run but your partner was still going shopping in their lunch break; instead of living a more frugal lifestyle you are just ending up with more stuff.
- Understand the goals and needs of others. While it is important to explain your desire to live more frugal lifestyle, it is also important that you understand the goals and needs of your family so that you can find a way to be more frugal without them having to give up all of the things which are most important to them and you can’t know what those things are unless you listen.
Habit Six: Synergize
Interactions and teamwork are some of the most important ways you can learn new skills and more effective behaviors. To synergize is the habit of creative cooperation where you work as a team to find new solutions to existing problems. Synergy is not something which just happens but is a process where you need to bring all of your personal experiences and expertise to the table to enable more effective results than you would have been able to achieve individually – the whole is greater than the sum of its parts.
When you have genuine interactions with people you are able to gain new insights and see new approaches to your problems which you would not have otherwise thought of.
How to synergize for effective frugality:
- Look for new ways. In a society which has become so good at consumerism you have probably already realized that you need to find new ways of doing just about everything to be frugal. It is easy to buy your lunch every day but it is more frugal to take a packed lunch. It is easy to drive to work but it is more frugal to catch the train. It is easy to buy a new cocktail dress but it is more frugal to make one.
- Surround yourself with other frugal people. To be successful surround yourself with people who are where you want to be and whether you join online forums on frugal living websites or strike up a friendship with the woman who runs your local op shop you will be able to share ideas and learn from others to be successful.
Habit Seven: Sharpen the Saw
You are the greatest asset you have on your journey to achieving the lifestyle you want and so you need to look after yourself physically, emotionally, mentally and spiritually. When you take time to renew yourself in all four areas of your life you are creating growth and change which allow you to continue with the previous six habits you have mastered, which still need to be maintained to achieve success.
How to frugally renew yourself:
- Physically. By eating better you will feel better and if you start your own vegetable patch for example you will be able to save at the supermarket and will be eating better at the same time. Exercising keeps you fit and healthy and it doesn’t cost you anything to go for a walk or bike ride or even skip rope in the backyard. To rest your body you don’t need to go to a day spa you can simply slide into the tub at home and relax.
- Emotionally. Interacting socially with others allows you to make meaningful connections and this can come back to a conversation with the woman at the op shop or even scheduling in coffee and a chat with your mum once a week.
- Mentally. Exercising and expanding your mind through learning, reading, writing and teaching can be done frugally at your local library or even by volunteering at a school or retirement home to teach others a skill you may be taking for granted.
- Spiritually. Spending time close to nature to expand your spiritual self through meditation, music, art or prayer can be done frugally by taking a quiet moment to center yourself and empty your mind before you go to bed or going for a bush walk and being grateful for the beauty of nature surrounding you.
Frugality does not mean having to give up all the luxuries and things which make you happy because if you go through developing habits 1 to 6 without spending the time to renew yourself this is how you burn out, and frugality is something you want to develop and maintain for the long-term and with these seven habits you can be a highly frugal person.
Alban is a personal finance writer. He offer money savings tips and helps people to compare home loans online.
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{ 25 comments… read them below or add one }
Currently sharpening my saw! Well another thing we can add to this list every penny counts. I don’t know about your kids, but my nieces and nephews(around 10 years old now) do not care to keep pennies anymore. They don’t know about the frugal ways that we have to live. These kiddies toss their spare change like it doesn’t matter. However, what they didn’t realize was that frugal auntie saves that spare change throughout the years and collects a couple hundred dollars when she cashes it in!
Every penny and dime matters, frugal or not.
We try to teach frugality at home….but as to the spare change, me and the wife began with a 5 gallon jar 12 years ago. We turned it all in for $1996 !!!!
Splurged on a new TV.
It weighed 181 pounds!
Tony
I have a funny story to tell you about spare change. My ex-husband and I were really struggling to get our construction company off the ground. I knew when the time came, we would not have enough money for Christmas. Because I stayed home with our girls and ran the business from there, I was not receiving a paycheck. So, when he would come home at night, I would dump all of the change out of his pants pocket and put it in a big jar. Then, I would get in his wallet and take one of whatever he had the most of. If he had a ton of ones, then I would take one. Same with fives, tens and twenties.
When the day came and he wanted to sit down and talk about Christmas, he told me that we couldn’t have Christmas for our girls. So, I went back to my hiding spot in our bedroom and pulled out a bag of money and said, “Will this work?” He just about fainted. All in all I think I saved around $1,000.00 and we could get everyone in our families nice gifts. So, I know what a little spare change can do.
Debby
It’s a little bit harder to be frugal if you listen to people, whom you don’t even know, gossip about you. I’ve always been frugal with buying clothes because I prefer to save for other things. For example, when I was working and going to college, a co-worker once made a comment, within earshot of me, that I always wore the same thing over and over. Well, most likely I did because it’s hard to find clothes that you can wear directly for school to work, which will fit it with both places. I also used to attend a yearly charity benefit, and once, I wore the same outfit as the year before, and I overheard a woman telling her friend that I wore the same thing last year, in a very mean tone. All of this is true, but now I’m only 45 years old and retired! So, only buy what you can afford, at the time, and don’t pay any attention to the gossip. Also, anything that you can do yourself do it, get moving, and don’t pay others for things you can do yourself, such as cleaning……. All of those other women that said all those bad things about me are working 80 hours a day in a cubical or a store and won’t be retired until they are 70 or more.
Honestly Margo, forget what they say! I know that sounds super cliche but look like you said, you’re not busting your butt 80 hours a day to wear a new dress to an event. As long as you look good, it’s alright!
Another thing, you might never guess it but even their dresses may be rental dresses! A great frugal thing to do in the future if you absolutely must wear a new dress is to rent a dress. Many boutiques offer rental dresses now for very affordable prices. The best thing is that you can give it back to them after and not worry about which event you’re gonna have to wear that dress to next.
Yes, and I was astonished when I visited a thrift shop to find
the quality (yes there was some trash) of some of their goods
for trivial prices. I swear some may have been worn only
once, some perhaps never — bought optimistically, and then
failed to lose weight as expected.
I have just finished teaching this term’s 2 hobby sewing classes at that particular college. Sewing and patternmaking are becoming enormously popular as hobbies, and I have noticed that hobbyists often become much more skilled, more quickly than the fashion students, because the students assume they’ll be able to pay a menial to do it once they have graduated, whereas for hobbyists, it’s personal and the process is the whole point.
Careers
Nice job as always, Rafe. But doesn’t CNet have an android shopping app as well? I recall it being mentioned in an episode of Mailbag. I don’t have an android phone, so I can’t verify.
Saving Money
These are really great, in-depth tips! And they require such little effort. I agree also that every penny counts! I still have a change jar. Even though I don’t use a lot of cash anymore, it still somehow gets filled up and cashed in around every six to eight months. I love guessing how much there is and I’m always pleasantly surprised.
One thing we do is to take out a set amount of money per week (usually Friday). The allowance for your walking around money. Two schools of thought for how to spend it. One is that you allot a certain amount per day or allot half over the week end and half to stretch out over the week. Where many people fail is that they run to the atm because they discover they are low on funds (and then don’t know where they spent the money).
I suppose these are good tips, but I had a great deal of trouble reading this article because it contains so many errors in grammar and sentence structure.
Regarding 7 habits of highly frugal people. Another tip is switch to CASH for those everyday purchases such as lunch, snacks and impulse buying. Only take so much with you per week and when it is gone, it is gone. This help to stay within your budget.
The vast array of clothes and technology to purchase and the c-l-e-v-e-r marketing tactics have cleaned out the average citizen. One just has to be more clever than the advertisers constantly shoving discounts under our noses when the original price was marked up anyway. We need in our diet only a fraction of what the modern supermarket has to offer. To eat healthy is to be very selective in your purchases to begin with so there is not so much sugar and starch in the house.
How right you are with regards to the vast array of choices. And the marketing strategies. For some reason, we didn’t have the need for something as long as we hadn’t seen it or known of it’s existence, but as soon as it appears that others have that item, we suddenly seem to think we couldn’t live without it(what did we do prior to knowing about it)! A prime example here is the cell phones with all their whistles and bells that 1. we’ve not needed prior to this and 2. chances are we have some other piece of equipment that does the same thing(radio, camera, computer, etc). The most basic Tracfone for example($10) does what we ultimately need a phone for…at a fraction of what’s on offer though. Same thing with the contracts…do we even question or investigate the cheaper prepaid options (I recently heard you can get Straight Talk unlimited minutes, texts and web for $45-a huge saving for most and so much simpler than billing). We need to cut out what others have and dictate we should have and make logical and practical choices if we want to live frugally.
Theres 12 million+ Americans that have become frugal experts due to unemployment.
yes, and when Americans find out that the frugality can go only so far. That we are slipping into poverty status and homelessness. We will have a revolution in this country and take down the govt.
In my humble opinion, I believe that “WE THE PEOPLE” need to TELL our ELECTED Officials that they ALL need to take a PAYCUT instead of voting themselves a PAY RAISE @ “OUR” expense. With the state our Country is in right now there is absolutely no excuse for “BONUSES” or PAY RAISES for the people who are supposed to be looking out for OUR COUNTRYS WELLBEING. Clearly, they (on both sides of the isle)are only looking out for “THEIR” own best interest, not “OURS”!!
Horay!! First time I’ve read this, but I’ve thought it many times. Those in DC give themselves raises & benefits & when we replace them, they take much of this with them & we begin to pay someone else for the job. We just add to the number of people we must pay. There must be some way to stop this madness. Our reps. should be willing to do the job for much, much lower pay, etc. just for the CONNECTIONS they make while in DC. They do not live in the real world.
As for reducing Dividends & Cap. Gains taxes, there are many who depend on this income (widows, orphans, retired). I’m self employed & still working at age 70 and have been frugal & saved as much as possible for my retirement in IRA’s (stocks) – my only retirement. Now the govt. threatens to take away Social Security, Medicare & Up our taxes. How do these guys think we can continue to live?? Maybe Obama would pay for me to survive if I had nothing & paid no taxes.
One thing I always try to do is work out a menu of dishes my family really likes, 5 or 6 main dishes is enough for a month, and buy the ingredients for those dishes in bulk. I make sure, too, that I have things like canned beans of a few types for 3 bean salad on the days when I don’t have fresh produce for a green salad. Also canned and frozen fruit. I serve canned fruit as a side dish or dessert, and often make smoothies with the frozen fruit – an ice cream substitute that satisfies everyone. Breads and rolls are whole wheat, sometimes home made using Mark Bittman’s amazing bread recipe. Salad dressings are oil and vinegar.
I try also to keep the quality of the things that really flavor our food fairly high – good quality chicken and beef stock, good pepper, grated pecorino, good olive oil, canned italian tomatoes, and always grow a big basil and rosemary plant at the kitchen door. I try to stock up on at least one flavorful ingredient with every grocery order so that I don’t run out, and this keeps me out of the store.
The other thing I find that makes a huge difference to my wallet is to pay the exact change for what I am buying. Even if I have to dig down for the pennies, a huge embarrassment to my children, it keeps my ones and fives intact. If I give a 5 dollar bill for a 2.79 purchase, that 5 is gone. But if I scrounge up 2 ones and 79 cents, I keep that 5 intact. My money goes much further paying this way. I always get ten or twenty extra ones and several 5 dollar bills. I always have some extra change just for this purpose.
It’s hard to be frugal when my electric, gas, and water are monopolies.
AMEN!
You say: It is easy to buy a new cocktail dress but it is more frugal to make one.
I say: Poppycock!
Obviously it’s been a while since the person writing this article stepped inside a fabric shop – patterns for $20+, yards and yards of expensive fabric (even the “cheap” stuff), notions that cost an arm and a leg, and all of it required to make one simple dress, cocktail or otherwise. I know. I’ve been sewing since junior high school – in the 1970s!
There’s absolutely nothing frugal about handmade clothing today. Frugal fashions come from the thrift shops, discount warehouses, price-slashing sales, and clothing swap meets, among many, many other perfectly acceptable venues. Never before has the American consumer had so many frugal ways to fashion an impressive wardrobe but sewing it yourself is not one of them.
Clothing made by hand at home today is not an exercise in frugality. It’s the very best way (short of haute couture) to get custom-designed, tailor-made fashionable clothing that is unique in every way, but it’s rarely cheap or the frugal route to a stylish wardrobe. Today’s home seamstress sews for the fun or the artistry of it, not the frugality of it anymore.
Writer, do your homework.
Amen to that! I too, started sewing my own clothes back in the 70′s and find that it is now so much more expensive to purchase fabric and notions than it is to just buy a new outfit at a good retail discount store.
Good article, but I too took exception to the “sew a dress” suggestion. One, as LovesToSew points out, it is no longer inexpensive. And two, most people don’t know how to sew, duh! A better suggestion that everyone can do is to accessorize what you already have in a different way. Or to do what is now my favorite thing to do which is shop in my closet! I always find a blouse or a skirt that I’d forgotten about that I can turn into a new outfit. And then accessorize that with a different bag or jewelry or shoes and make it a whole different look. A former shopaholic, I have stopped going shopping. I shop my closet (or my sister’s closet) and accessorize, accessorize, accessorize!
These are not “habits” of frugal people, but the author’s philosophical musings. Habits of frugal people would include things like (1) only buy things that appreciate in value, (2) don’t eat out unless necessary, (3) buy used cars only, (4) put aside at least 10 percent of each paycheck for savings and investment, etc. Telling people that I’m going to be frugal is hardly proactive. You have to do things!