How you handle your money may say a lot about who you really are. Since no two people are the same, their spending habits can differ greatly from one person to the another. In some cases, an individual may be classed as someone who is free with the money that they spend daily since they will spend every penny as soon as it reaches their hands. Others may not be grouped as free spenders but as cheap or frugal with the finances that they manage. In fact, because every person may fit into one of the 3 classes, it may be interesting to know which group that you will fit into. Particularly, if you may be grouped as either cheap or frugal since there may be a fine line in some cases with these results. Therefore, if you want to know if you are frugal and not cheap, here are some characteristics that will describe the frugal person.
- Knows Their Money
When people are frugal, one of the first things that they will do is become very closely acquainted with their money. For instance, these people will know exactly how much they earn, how much is being spent as well as where every dollar earned goes. This is one of the foundational principles of being a frugal person. Without this basic knowledge, it will be impossible to save money or track where the finances are to be spent.
- Live Below Your Means
If a person is living above their means, they can not be described as living a frugal life. Nor, can they be described as being part of the group that is considered to be cheap. Instead, to live frugally, you will need to live below your means. For instance, the person will always have a surplus on their hands not only for rainy days but for added savings and any other expenses that may crop up later on. The name of the game for this group of people is to cut unnecessary expenses, while they grow their income.
- Frugal People Understand the Differences Between Investments and Spending
Though investing and spending may feel like they are one in the same, this is not necessarily true. This is because investing is considered to be an outlay of specific money amounts in exchange for some form of tangible asset. This type of exchange usually involves various kinds of things like money spent on job training, buying a g primary residence, or shares in safe stocks or mutual funding. On the other hand, spending is considered to be an outlay of money for an item that will more than likely depreciate in value within a short period of time without any type of long-term value. For instance, spending usually involves going out to dinner, paying for tickets to a play and the like. In either situation, the act of being frugal does not necessarily mean that you cannot spend money on some short-term items but it does mean the person knows and understands the distinct differences between each.