6 Thinking Skills Frugal People Should Master

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"Think before you speak" is a lesson most of us have learned well over the years. However, "Think before you buy" is just as important to the frugal shopper. It's not just a case of questioning the reasons you're spending money, but also weighing up hidden costs, wants and needs, and even the usefulness of the item. Here are six thinking skills you can adopt today that can help you become an even better frugal shopper.

1. The 80/20 Rule (Pareto's Principle)

You may well have heard this before, and it has been around for over 100 years. The rule suggests that, for many events in life, 80% of the effects come from 20% of the causes. So, how does that apply to you, and your frugal life?

Well, for a start, take a look at your wardrobe. Almost all of us wear around 20% of the items in our closet approximately 80% of the time. Go in there tonight, and do a little stocktaking; the things you wear regularly, versus the things you hardly ever wear. Is there any point in having those rarely worn items around? It's highly likely you can sell or donate those items, and build your closet based on the items you wear most of the time (such as Steve Jobs filling his closet with black polo shirts and blue jeans).

If you sell items on eBay or Etsy, 80% of your business will come from 20% of your clients. So, you should use this information to keep them happy. Used more broadly, the 80/20 rule can help in other ways. When grocery shopping, 80% of the stuff in your cart should be devoted to "clean eating," such as fresh fruits and veggies, with 20% being more of the treats and packaged goods. And 80% of the items you buy should be on sale, if you can spend the time hunting for bargains. And 20% of your paycheck should go straight into a savings account. What's more, you spend 20% more when using a credit card, as opposed to cash or checks, so keep that in mind.

2. Always Put a Price on Your Time

You know the expression "Time is money," but how often do you apply it to your own life? It is vital to figure out exactly what your own time is worth, and using it as an anchor point whenever you think you are saving money by doing it yourself. (See also: How a T-shirt Equals a Taco)

For instance… washing the car. For the longest time, I used to wash my own car. It would take a good hour to do it properly. The local gas station charges $8 for a decent wash when filling up the tank. I realized my time is more valuable than $8/hour, which is barely minimum wage, and let's not forget the materials that have to be purchased to keep the car clean. So, I stopped washing my own car.

Some people will spend hours clipping coupons, and yet, they forget to use them, or the savings add up to only a few bucks. What did that time actually cost? What else could have been achieved? DIY jobs around the house can go either way. Sometimes, it is clearly worth your time to do something over paying a professional, such as changing a washer or even mowing the lawn. But on other occasions, stop and think first. If you're about to tackle building your own deck, or laying a floor, figure out the cost of hiring a professional, and then figure out how long it will take you to do the same job. Which is the better deal? If it takes you 80 hours, would that have been time better spent doing something else?

If you buy and sell items on eBay, you may be making a small profit. But, have you factored in your own time? If it takes hours each day to list the items, photograph them, package them up, and get them mailed out, does that eat into your profits? Are you really only making a few bucks an hour? Your time is valuable, and you should think of it like that whenever possible.

3. Look After the Pennies — The Dollars Will Take Care of Themselves

Don't think of those expenses that cost a dollar or less as something trivial, because they add up quickly. A candy bar here, a small coffee there, and before you know it, those tiny purchases are eating away at your bank account like termites in a 19th century cabinet. So, get into the habit of tracking your smaller expenditures, and repeating the "look after the pennies" mantra whenever you are putting low-cost items into your shopping cart. It may only be 69 cents, but is it worth it? Do you need it, or just want it? A good way to do this is to pay cash for anything that costs less than one dollar; you'll be amazed at how quickly that $20 bill disappears, whereas swiping a card each time doesn't have the same instant impact on your wallet.

You should also do your best to save that small change. An app like Acorns will literally take care of those pennies for you, putting your small change into a savings account, or an investment. What's more, never be afraid to haggle over pennies. Most of the time, people won't fight you, especially on an item costing $100. So, you ask if you can pay $99.20, and pocket the 80 cents. Do that enough times during the month, and your pennies are quickly turning into dollars. It can seem like a lot of work for small rewards, but remember… they add up. It's not simply 10 cents here, and 20 cents there. It's all adding to a pile that can make a big difference.

4. Keep One Eye Fixed on the Future

Many people who live for today (or YOLO), do not have the future in mind. This can lead to overspending from things like impulse buys and extravagant purchases, and eventually, a lack of funds in savings and retirement accounts. Whether you're 19 or 69, you should have one eye firmly fixed on the future, and it should be something you think of regularly.

One such example is growth.

Money, when combined with compound interest, can grow and grow over time. A small investment today can turn into many thousands of dollars in the future. Of course, when that future is 40 years away, it's hard to think about the impact of a few dollars here and there, but it really does make a vast difference.

When buying big-ticket items, consider the future. Is this going to be something you use on a daily basis, or are you buying it on a whim? Fitness equipment is a prime example of this. The dedication and effort required should be there before spending thousands on high-end machines. If you are not committed now, the shiny new exercise bike or rowing machine won't change that. It may get used for a week, but chances are, it will be at next year's garage sale.

And think about money being spent today, and how it could impact your future. Are you spending it wisely? Would it be better off in a savings account? What are you sacrificing in your future to have things now? It may radically change the way you spend today.

5. Question Value for Money

There's an expression; "Buy cheap, buy twice." There's another expression; "A fool and his money are easily parted." These two philosophies can sometimes be at odds with each other, especially when comparing the prices of two similar purchases. A pair of shoes that costs $100 may last you four to five years, whereas a pair of shoes costing $400 may last a lifetime. However, will you still want those same shoes 30 years from now, or will they be completely out of fashion? If that's the case, the cheaper pair is probably your better bet. They may not last as long, but you don't want them to.

However, the same cannot be said of a major appliance. The $300 dishwasher may do everything you want, but will it last? The $800 dishwasher has the same features, but it's made with superior parts, and will last many years longer than the budget model. In this case, you are better off paying for the more expensive model.

This can apply to almost every purchase you make. Is it worth spending the extra $1 to go from generic ketchup to Heinz? Some people say yes, others say it's a waste. Check the weight of the items on the grocery shelves, too. Perhaps the brand name package of cereal is actually cheaper than the generic, but you may discover the generic weighs twice as much. A plumber that costs half as much as one you have used in the past may take twice as long. Or, the work may be substandard, and will need to be fixed again. However, it may be that the cheap plumber gets incredible ratings and simply charges less than the others because he or she has less overheads. Whatever you are buying, even if it's a service, question the value.

6. Examine Your Wants and Needs

Frugal thinkers have mastered the separation of the wants and the needs. Learn to do it, and you can save a fortune. Sometimes, it's an open and shut case. You need milk. You need gas for the car. You need dog food. But even in those situations, there are wants as well. You need milk, but want the most expensive brand. You need gas, but want premium. You need dog food, but want organic. You have to assess the additional costs, and whether they are worth paying simply because you want it.

Of course, things get a little more tricky when it comes to other expenses. You need a car. But you want a new one, not a used one. There are good reasons for having both. You want to buy instead of leasing. There, your wants may well be justified, or they may not be. So, you have to employ an online calculator, and figure out why you want to buy, and what the pros and cons are of each method. It may turn out your wants and needs are in perfect sync, or that your wants are impossible on your budget.

When you buy clothing, what do you need, and what do you want? You need shoes, but do you need $500 Guccis? Probably not. However, when weighing up a pair of work boots that cost twice as much as the most popular brand, but have much better protection, you may need to spend the extra money.

Wants versus needs should be top of mind whenever you open your wallet or purse. From buying takeout to getting a four-bedroom house, analyze it. Is it a want, or a need? This thinking strategy can save you a small fortune.

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