Frugality is the other side that needs to be done if you want to save. Without frugality one cannot save. On the other hand, an effective way of saving means that saving leads to the goal faster.
Different steps and ways to save
Frugality is not limited to cutting costs. This will not allow you to raise funds effectively. Below are a few steps with tips for proper frugality:
- Identify priority needs
- Use the resource allocation formula
- Lead a regular lifestyle
- Separate incoming and outgoing accounts
- Do profitable money management
- Don’t buy groceries even if you get a promotion
- Live a more creative life
- Don’t make sudden purchases
- Save energy and water
- Use e-wallet wisely
1. Determine the priority need
An effective way to save money is to identify the goals or reasons why you should save money. The reason for thrift is, for example, to buy a smartphone or to intentionally charge IDR 10 million for certain activities. By determining your priority needs, you can focus more on saving money.
Identifying priority needs does not mean eliminating other needs. All you have to do is set the priority scale. Reduce the allocation of funds to non-priority needs so that more funds can be saved.
2. Use the resource allocation formula
Experts have introduced several distributions or allocations of salary funds for different needs of life. The goal is that all needs can be met, including preparing for future needs such as retirement savings.
Some of the salary assignment formulas that can be used are the 50-30-20 and 40-30-20-10 formulas. In the 50-30-20 formula, the distribution is 50% for basic needs, 30% for hobbies and 20% for savings. While in the 40-30-20-10 formula, the distribution is 40% for basic needs, 30% for installments, 20% for investments and 10% for charity.
Of the many payroll savings formulas, typically 20% of the total salary is set aside for savings or investment purposes. Meanwhile, relative to other needs, basic needs represent the largest allocation of resources.
3. Lead a regular lifestyle
One of the causes of frequent unexpected expenses is an inconsistent lifestyle. For example, if you get used to eating three times a day, you can calculate how much you eat in a month. On the other hand, if it is not consistent, the allocation of funds is difficult to regulate.
Another example is if you consistently use a particular mode of transport, transport can be assigned in a week or a month. It is different if you sometimes use bus transportation, online motorcycle taxi, walking and others. When this is the case, spending will be volatile and difficult to control.
4. Separate incoming and outgoing accounts
If you are a person who finds it difficult to resist spending money, creating two accounts is a solution that can be chosen. Separate funds that can be spent from funds that need to be saved. Of course, this must be accompanied by a strong commitment.
Share funds from the start. Enter the funds provided for daily needs in the expenditure account. After that, you must commit to not adding money to the expense account even though it will be used up before the next payment period arrives.
To beat the management fees charged by the bank, you can choose the type of savings account with a low limit. This type of low-limit saving has no ledger. However, you get the benefits of an ATM card, mobile banking service, no deposit of funds, and no monthly management fee.
5. Conduct profitable money management
Instead of saving funds conventionally, you can transfer those funds to various money management tools. In this way, you not only benefit from the advantages of saving but also expand your assets. One of the fund management tools to choose from is modal rakyat peer-to-peer lending.
Modal Rakyat is an OJK-regulated fintech that matches equity owners with economic actors in need of additional funding. To manage funds, you can act as a lender delegating capital to business actors. Later you earn up to 18% profit per year.
6. Don’t buy groceries even though you get a promo
In times of frugality, it is better to buy disposable items. Don’t buy excess items even if you get a promo. This usually happens with one-time consumption of food and goods.
Instead of buying two servings of chicken satay at a price of Rp. 20,000, it is more effective to buy one serving at a price of Rp. 12,000. Despite this, the use of food promos and other consumer goods is very well optimized. What needs to be considered must not be wasted.
7. Live a more creative life
Basically, being frugal requires a more creative life. You must be able to process cheap healthy food ingredients to turn them into delicious foods. Additionally, you should also be able to redecorate old clothes to make them more suitable for reuse.
Indirectly, a creative life also leads to a minimalist lifestyle. This means that when buying, you need to pay attention to health and comfort. Avoid purchasing items whose function can be replaced by other items.
8. Don’t shop suddenly
Unplanned purchases can lead to waste, as is common when traveling. To avoid this, create a monthly or weekly grocery list. In this way, the budget can be allocated from the start.
You can also use the wish list feature in the eCommerce platform. Don’t checkout immediately, keep the items you want to buy on the wish list for a few days. After a few days, if you feel you still need the item, you can make a purchase.
9. Save energy and water
Saving energy is also an important part of saving. This can be achieved by reducing the consumption of electricity and water at home. This way, your monthly expenses will automatically be lower.
At a more advanced stage, you can also reduce activities related to electronic devices such as smartphones and air conditioners. As a result, power consumption can be reduced and at the same time consumption-related activities such as online shopping can be avoided.
10. Use e-wallet wisely
Small change is money that is often hidden and not used optimally. It must be overcome in order not to waste even a few dollars. The trick is to take advantage of digital payments, which are now becoming more common.
By using payments via e-wallet, there is no need to give change. You can pay for what you need down to the smallest denomination with pinpoint accuracy. This digital payment can even save up to Rp.
However, attention must also be paid to digital payment, as it makes it easy to shop from anywhere, anytime. For someone who likes to shop online, saving cash is actually a better savings solution.
Frequently asked questions about savings
What is the 50-30-20 method?
The 50-30-20 method is a salary allocation method that splits 50% for living expenses, 30% for entertainment, and 20% for savings or investments.
Who in the household has the right to manage the finances?
Both wife and husband can manage finances together. This can be done by agreement of the couple. For the people of Indonesia, financial management is usually left to the party that also runs internal affairs, namely the wife.
How to save household electricity?
Unplugging electronic devices when not in use is a small but very important step. Instead of putting electronic devices in a standby state that consumes power consumption, it is better to unplug them from the power outlet.