I spend too much money. How can I get on the path to a frugal lifestyle?
"My father imparted this advice to me when I was a teenager, and it hasn't failed me yet. > Pay yourself first What this means is that the first ""bill"" you pay should always be your savings. Preferably in a way that automatically comes out of your paycheck or account without requiring you to take an active step to make it happen.  I save a ton of money, but I am no more disciplined than anyone else. I just realized that over the years of progressing in my career that I gradually got higher and higher salaries, yet never had a substantial increase in the money I had leftover in my bank at the end of the month despite the fact that I make about 8x the money I used to live reasonably comfortably on. Therein is the point, we spend whatever money we see, so you almost have to hide it from yourself. First, participate to the fullest in your company's 401k if they offer it. After a while you will adjust naturally to the net take home pay and won't miss the savings you are accumulating. Absent that, or in addition to that, set up a separate bank or investment account and arrange an automatic transfer from your checking account every month. Then set up automatic investing in CD's or some other less-liquid-than-cash investment so you it is just enough hassle to get at the money that you won't do it on a whim. It sounds too simple, but it works." Since you ask.... How do I do it? My frugality doesn't come from budgeting or even half so much from keeping money away from myself (though mostly-one-way retirement accounts help). It's a matter of world-view. Spending and shopping for things you don't need is a vice. Limit your indulgence in it. I've also made wasteful purchases in my life. When I find myself considering buying something that I don't really need, I ask myself whether it will end up like... like the stupid eyeglass cleaner gadget from the Sharper Image that I used twice. Or the Bluetooth earpiece that spent 98% of its time lost and .02% of its time in my ear. Or the little Sony VAIO laptop which was great on the train, but probably cost 8 times as much as an EeePC and didn't do way too much more. (In my defense on that one, it was just before netbooks were really taking off... but I still felt bad about it the next year). I've also got two savings goals. The first is responsible and very big (financial stability: a year's expenses plus money for a down payment on a house. a California house. in a good neighborhood.) The second is personal and just medium-big (a large musical instrument). I've decided not to spend money on the second until I'm financially stable and I have enough money to take care of the first... so that makes me more willing to scrimp and save to pursue the first than I would be otherwise. Advice for others? Ask yourself: Why are you buying that thing? You can survive without it, can't you? You didn't need it a week ago, did you? Does the old one have holes in it or something? Or will you at least use it regularly, for years? Why aren't you buying the cheaper kind? Or buying it used? "As others have said, doing a monthly budget is a great idea.  I tried the tracking expenses method for years and it got me nowhere, I think for these reasons: If budgeting isn't your cup of tea, try the ""pay yourself first"" method.  Here, as soon as you get a paycheck take some substantial portion immediately and use it to pay down debt, or put it in savings (if you have no debt).   Doing this will force you to spend less money on impulse items, and force you to really watch your spending.  If you take this option, be absolutely sure you don't have any open credit accounts, or you'll just use them to make up the difference when you find yourself broke in the middle of the month. The overall key here is to get yourself into a long term mind set.  Always ask yourself things like ""Am I going to care that I didn't have this in 10 years? 5 years? 2 months? 2 days even?  And ask yourself things like ""Would I perfer this now, or this later plus being 100% debt free, and not having to worry if I have a steady paycheck"".   I think what finally kicked my butt and made me realize I needed a long term mind set was reading The Millionaire Next Door by Tom Stanley.  It made me realize that the rich get rich by constantly thinking in the long term, and therefore being more frugal, not by ""leveraging"" debt on real estate or something like 90% of the other books out there tell you." There are a lot of great suggestions here on how to get and keep your finances in shape. But I have to say, I disagree with some on the starting point. The first step to living frugal is to convince yourself that it is worth it. That it is the way to go and the way you want to manage your finances. As @DrFredEdison and @fennec stated, the reason we frugal people don't spend wildly is because of what we believe. So I would suggest buying a book or video/audio series from someone like Dave Ramsey who will encourage and motivate you to spend wisely and show you practical ways to get started. With that said I do agree with a lot of the practical suggestions that have been given here. "Gail Vaz-Oxlade from the television show Til Debt Do Us Part has a great interactive budget worksheet that helps you set up a ""jar"" or envelope system for each month based on your income and fixed expenses.  We have used this successfully in the past.  What we found most useful was, as others have said, writing everything down, keeping receipts, and thus being accountable and aware of our spending." Agree wholeheartedly with the first point - keep track! It's like losing weight, the first step is to be aware of what you are doing.  It also helps to have a goal (e.g. pay for a trip to Australia, have X in my savings account), and then with each purchase ask 'what will I do with this when I go to Australia' or 'how does this help towards goal x?' Thrift stores and the like require some time searching but can be good value. If you think you need something, watch for sales too. "Keep track of everything you buy.  Write it down and be accountable.  Try not to buy anything on credit cards, if the money is not in your account now then you can't afford it.  Ask yourself whether what you're buying is a ""need"" or a ""want"". If you find that you are buying things because you are bored and you like shopping then try taking up a (cheap) hobby that fills that void and is something you enjoy doing." Get on a written budget at the BEGINNING of the month. If you dont write down where your money goes BEFORE you spend it, you have no way of keeping track of it.  I couldn't do a thing until I got on a written budget but now that I am, I've paid off $10,000 in 7 months. "There's plenty of advice out there about how to set up a budget or track your expenses or ""pay yourself first"". This is all great advice but sometimes the hardest part is just getting in the right frugal mindset. Here's a couple tricks on how I did it.  Put yourself through a ""budget fire drill"" If you've never set a budget for yourself, you don't necessarily need to do that here... just live as though you had lost your job and savings through some imaginary catastrophe and live on the bare minimum for at least a month. Treat every dollar as though you only had a few left. Clip coupons, stop dining out, eat rice and beans, bike or car pool to work... whatever means possible to cut costs. If you're really into it, you can cancel your cable/Netflix/wine of the month bills and see how much you really miss them. This exercise will get you used to resisting impulse buys and train you to live through an actual financial disaster. There's also a bit of a game element here in that you can shoot for a ""high score""... the difference between the monthly expenditures for your fire drill and the previous month.   Understand the power of compound interest. Sit down with Excel and run some numbers for how your net worth will change long term if you saved more and paid down debt sooner. It will give you some realistic sense of the power of compound interest in terms that relate to your specific situation. Start simple... pick your top 10 recent non-essential purchases and calculate how much that would be worth if you had invested that money in the stock market earning 8% over the next thirty years. Then visualize your present self sneaking up to your future self and stealing that much money right out of your own wallet.  When I did that, it really resonated with me and made me think about how every dollar I spent on something non-essential was a kick to the crotch of poor old future me." As others have said getting on a written budget before each month starts is the most important part. Also, I'm a big fan of cash budgets as well. They aren't for everyone and they take a little getting used to, but once you get used to them you'll never want to go back.  In a cash budget you take whatever you have budgeted for the month for each category and withdraw the amount needed from the bank. These go into an envelope for each category, i.e. food, clothes, entertainment, etc. If a 3 weeks into the month you run out of money in that envelope you are done spending money in that category. For example, if it's the food envelope and you run out it's time for you to start eating leftovers and whatever you've got in the pantry. You lose out on advantages like points gained on credit cards and whatnot but statistically people that spend cash spend much less overall and you get some enforced self control that you otherwise might not have. I agree with the first poster- the first step is to measure your spending and put it down into raw numbers. Once you have the raw numbers, you will feel a natural inclination to improve on those numbers. Set yourself a daily target for cash / incidental expenses. It doesnt have to be a crazy target - just something you can achieve easily. Mark a 'tick' mark next to every day on the calendar that you meet that target (or spend less than the target). Gradually the momentum from the past few 'ticks' will automatically compel you to want to tick off the next day.  At the end of each week, lower the target a little. You'll find that when you start measuring your expenditure, you become more aware of how you might be wasting money. All too often we just go out and buy stuff we don't need without really thinking about it. "I would highly recommend the Dave Ramsey book ""The Total Money Makeover"".  I read it about 5 years ago and my financial situation has slowly but steadily been improving ever since." For many folks these days, not having a credit card is just not practical. Personally, I do quite a bit of shopping online for things not available locally. Cash is not an option in these cases and I don't want to give out my debit card number. So, a strategy is this: use a credit card for a purchase. Then immediately, or within a couple days, pay the credit card with that amount. Sounds simple but it takes a little effort to do it. This strategy gives you the convenience of a credit card and decreases the interest enormously. Track your expenses. Find out where your money is going, and target areas where you can reduce expenses. Some examples: I was spending a lot on food, buying too much packaged food, and eating out too much. So I started cooking from scratch more and eating out less. Now, even though I buy expensive organic produce, imported cheese, and grass-fed beef, I'm spending half of what I used to spend on food. It could be better. I could cut back on meat and eat out even less. I'm working on it. I was buying a ton of books and random impulsive crap off of Amazon. So I no longer let myself buy things right away. I put stuff on my wish list if I want it, and every couple of months I go on there and buy myself a couple of things off my wishlist. I usually end up realizing that some of the stuff on there isn't something I want that badly after all, so I just delete it from my wishlist. I replaced my 11-year-old Jeep SUV with an 11-year-old Saturn sedan that gets twice the gas mileage. That saves me almost $200/month in gasoline costs alone. I had cable internet through Comcast, even though I don't have a TV. So I went from a $70/month cable bill to a $35/month DSL bill, which cut my internet costs in half. I have an iPhone and my bill for that is $85/month. That's insane, with how little I talk on the phone and send text messages. Once it goes out of contract, I plan to replace it with a cheap phone, possibly a pre-paid. That should cut my phone expenses in half, or even less. I'll keep my iPhone, and just use it when wifi is available (which is almost everywhere these days). "For the most part, saving money usually depends upon having a budget and being able to stick to it. The toughest part of budgeting is usually setting it up (how much do I need for X) and sticking to it each month. In regards to sticking to it, there is software that you can use that helps figure out how much you are spending and how much you have left in a given category and they all pretty much do the same thing: track your spending and how much you have left in the category. If you are good with spreadsheets you might prefer that route (cost: free) but software that you can buy usually has value in that it can also generate reports that help you spot trends that you might not see in the spreadsheet. Sticking to a budget can be tough and a lot of what people have said already is good advice, but one thing that helps for me is having ""play money"" that can be used for whatever I want. In general this should be a fairly nominal amount ($20 or $40 a week) but it is enough that if you see a new book you want or what to go out for lunch one day you can do it without impacting the overall budget in some way. Likewise, having bigger savings goals can also be useful in that if times get tough it is easier to stop putting $100 a month to the side for a vacation than it is to cut back your grocery budget." Use software that calculates your net worth and track it over time. I track my personal finances in Mint, and I love checking my net worth every week. It's turned into a kind of competition with myself...  It's like keeping track of how fast you run a 5k, or how many pounds of weight you've lost. It helps you determine if you are making progress, and if you, it's positive reinforcement that you are doing the right things. "Lots of good answers here about budgeting and other ideas.  Here's a couple more: Think about offense and defense.  Offense is how much money you make.  Are you making enough to survive on?  Is there a way you could bring in more income?  Defense is what you do with your money.  Do you have expensive habits?  Do you have problems with impulse spending?  Do you live in an expensive area with a high cost-of-living?  Think about some of these areas and pick one to attack first. If it is the defense side that is causing you problems (you did mention trying to live on less), consider reading Your Money or Your Life by Joe Dominguez and Vicki Robin.  There's a really good summary of it on the authors' site.  The basic idea of the mechanical part of the book is that you figure out how much you're truly making per hour, and then evaluate your expenses based on how many hours of your ""life energy"" you are using for that expense.  Then you evaluate whether you think that's a fair trade or not.  There's a lot more to it than that, but it's an interesting way to get a different perspective on your spending habits, and may be enough to entice you to change those habits."
The first thing you need to do is to set yourself a budget. Total all your money coming in (from jobs, allowances, etc.) and all your money going out (including rent, utilities, loan repayments, food, other essential and the luxuries).  If your money coming in is more than your money going out, then you are onto a positive start. If on the other hand your money going out is more than the money coming in, then you are at the beginning of big trouble. You will have to do at least one of 2 things, either increase your income or reduce your expenses or both. You will have to go through all your expenses (money going out) and cut back on the luxuries, try to get cheaper alternatives for some of your essential, and get a second job or increase your hours at your current job. The aim is to always have more money coming in than the money you spend. The second thing to do is to pay off any outstanding debts by paying more than the minimum amounts and then have some savings goals. You said you wanted to save for a car - that is one saving goal. Another saving goal could be to set up a 6 month emergency fund (enough money in a separate account to be able to survive at least 6 months in case something happened, such as you lost your job or you suddenly got sick). Next you could look at getting a higher education so you can go out and get higher paying jobs. When you do get a higher paying job, the secret is not to spend all your extra money coming in on luxuries, you should treat yourself but do not go overboard. Increase the amounts you save and learn how to invest so you can get your savings to work harder for you. Building a sound financial future for yourself takes a lot of hard work and discipline, but once you do get started and change the way you do things you will find that it doesn't take long for things to start getting easier. The one thing you do have going for you is time; you are starting early and have time on your side. I use to think there was something wrong with me because I always hated spending money.  This hatred of spending resulted in me always saving quite a bit of my income. Since I don't enjoy spending it, why am I making and saving it (besides for an emergency fund)?  I've come to the realization that I enjoy my free time more than I enjoy making lots of money.  So I go to work for something to do - and pay the bills - but I am no longer trying to advance my career, or be the best at my profession, or climb some corporate ladder, or be some superstar.  In fact, I'm considering a career change where I would make half of what I'm making now. What's my point?  If having a lot of savings depresses you and you don't enjoy spending it then consider reducing your income. "I see you have posted other questions regarding household budgets.  This is a huge first step.  Once you see what is coming in, then list everything that goes out regularly...and then try to break down what is leftover into spending, household maintenance, gifts, haircuts, whatever...it becomes very obvious if you have x to spend and you spend 3x. I budget a certain amount of discretionary money for both my husband and myself to spend each month.  All of our basic expenses are covered under other categories, but I found out long ago that we each need some money to blow on Starbucks, DVD's, books, etc without having to defend or explain it.  If we spend too much, it digs into the next month's amount, or if we are careful, we get to carry it over. I can impulse shop guilt free because it's budgeted in. Long story short, if you set up a budget and have an amount budgeted for most reasonable expenses, and see what is left over...it becomes harder to ""unwittingly"" overspend.  When you are paying attention to your money, and start looking carefully at how you are spending it, you'll notice." "Others have commented on the various studies. If, as JoeTaxpayer says, this one particular study he mentions does not really exist, there are plenty of others. (And in that case: Did someone blatantly lie to prove a bogus point? Or did someone just get the name of the organization that did the study wrong, like it was really somebody called ""B&D"", they read it as ""D&B"" because they'd heard of Dun & Bradstreet but not of whoever B&D is. Of course if they got the organization wrong maybe they got important details of the study wrong. Whatever.)  But let me add one logical point that I think is irrefutable: If you always buy with cash, there is no way that you can spend more than you have. When you run out of cash, you have no choice but to stop spending. But when you buy with a credit card, you can easily spend more than you have money in the bank to pay. Even if it is true that most credit card users are responsible, there will always be some who are not, and credit cards make it easy to get in trouble.  I speak from experience. I once learned that my wife had run up $20,000 in credit card debt without my knowledge. When she divorced me, I got stuck with the credit card debt. To this day I have no idea what she spent the money on. And I've known several people over the years who have gone bankrupt with credit card debt. Even if you're responsible, it's easy to lose track with credit cards. If you use cash, when you take out your wallet to buy something you can quickly see whether there's a lot of money left or not so much. With credit, you can forget that you made the big purchase. More likely, you can fail to add up the modest purchases. It's easy to say, ""Oh, that's just $100, I can cover that."" But then there's $100 here and $100 there and it can add up. (Or depending on your income level, maybe it's $10 here and $10 there and it's out of hand, or maybe it's $10,000.) It's easier today when you can go on-line and check the balance on your credit card. But even at that, well just this past month when I got one bill I was surprised at how big it was. I went through the items and they were all legitimate, they just ... added up. Don't cry for me, I could afford it. But I had failed to pay attention to what I was spending and I let things get a little out of hand. I'm a pretty responsible person and I don't do that often. I can easily imagine someone paying less attention and getting into serious trouble." "I have the same problem. The people above are right to an extent. You have to be more disciplined. But there is no reason why you can't get there in stages. If you try to do too much too fast you'll just give up. You need to find a system that removes some of the passive barriers affecting you.  You need to think what in particular is overwhelming you. For me it was sitting down at the end of the month to write it all down. Writing it all down at the end of the week or even each day didn't work either because it was too much and I had forgotten what stuff was. I'm like you.  The bank account is a record so why do I have to retype it or worse, hand write it out? Bleh. What I ended up doing was divide my expenses into four categories: food (to include all medical) shelter, transportation, spending -- with the first three being needs and the last being wants.  Eating out is spending. I have four checking accounts with four debit cards. I saved up some money. I put a paycheck's worth of money in each because I didn't know how much I spent each month in each category, but knew I didn't spend an entire paycheck in any one category per month. Voila.  No more work. At the store you just put things in the basket by category. At Target you pay for the food and toothpaste with the medical card and the DVD with the spending card. The cashiers don't care that you pay separately. And if you are buying so much crap that separating items by category is a problem, why the heck are you buying so much crap? At the end of the month you will now have a record of how much you spend on transportation, housing (electricity would be paid online from this account for example), medical and fun. That's all anyone needs to help you get started. You can then see if your housing is 35% or less (or whatever percentage you feel is right). The person trying to help the author above is right. A Target charge doesn't indicate whether you bought some oil for the car or cold medicine or a lock for the cabinet door that broke. But when you pay for each of these things under the right account, you do know how the money is allocated.  Doing it this way requires little discipline. Before you put the item in the basket, you just ask yourself, is this a want or a need (which is something you should be doing anyway). If it's a need, is it for my car, house, or body. The house is what I use if i can't figure it out (like paying for the renewal of my professional license).  that's it! You have to stand at the register for longer but so what.  If you are spending all your salary and you stop when you have no more money (assuming you've run through all of your savings, which you will soon if you don't change), then you have no more money to spend. So if you are honest when you put things in the basket(need vs want), you are going to run out of spending money real quick. Your spending money account will be empty but you will still have food money. Set your debit card up so that it denies your charge if you dont have enough money.  Once you realize how much you truly spend for needs in each category, yoy will only put that much in each account. Therefore, You can't use the house card to just ""borrow"" from it till next month. If you do, you won't be able to pay your bills. If you have so little discipline that you knowingly spend your bill money, then there is a deeper issue going on than just finding the right budgeting/cash flow system for you.  Something is seriously wrong and you need to seek professional help. When someone is trying to help you, the first step is to determine what category you are spending too much in. Then when you realize it's the house category, for example, you will need to figure out why you are spending so much in that category. A bank statement wont tell you that. So you can do what we did. On every receipt --before you walk out of the store-- write down what each purchase is on the receipt. Then you can hand over the receipts to whoever is helping you.  Most items are easily recognizable on the receipt so you wont have to write everything down.  you should be doing this for insurance purposes anyway.   Again, if your receipt is so blooming long that this is onerous, probably everything you just spent is not a need and maybe you need to turn right around and return stuff. Maybe you need to go to the store more often so there are only a few purchases on each receipt. Groceries are groceries.  You don't need to detail that out. For Ikea when you have to purchase pieces to a set, we get a separate receipts for each.  So the brackets and shelving for the bedroom will be on one receipt and the brackets and shelving for the other room will be on another receipt. Even at the store I cant figure out what all the little pieces are! But really, if you are making a decent enough salary, then you are probably spending too much on wants and are calling the items needs.  So really your problem is correctly identifying needs from wants. Define a NEED. YOU. Make up your own definition of need Dwell on it.  Let it become meaningful for you.  Oranges are a need. Chocolate is not (no, really it's not! Lol!).  So when you are putting the stuff in the basket, you dont even have to think about whether it's a need or not after a while.  Wants go in the child seat if at all possible (to keep the number of items smaller).  When you are ready to check out, add up the items roughly in the want pile. Ask yourself if you really want all that stuff. Then put some stuff back! At this point ask yourself is the 8 hours I will have to work to pay for this worth it? Am I really going to use it? Will using the item make me happy? Or is it the actual buying of the item that makes me feel powerful? Where will I put it? How much time will I need to maintain it? Then put some stuff back! Get some good goals, a kayaking trip or whatever. Ask yourself if the item is worth delaying the trip. How will I feel later? Will I have buyers remorse? If so, put it back! These are controls you can put into place that don't take a lot of discipline. Writing the items down on the receipt is a more advanced step you can take later.  If you are with friends, go first so that you can write down the items while they are checking out. If you are private and don't want to share your method with your friends, go to the bathroom and in the stall write it down while they wait. Writing the items on the receipt while in the store is sort of a trigger mechanism for remembering to do so.  That pulling out of the card triggers your memory to get out your pen or ask the cashier for one. The side benefit is catching someone using a cloned copy of your card.  In the medical account if you see an Exxon charge, you know it's not yours.  Also, while that one account is shut down, you have three others to rely on in the meantime.  My spouse hated fumbling for the right card. They all look the same. Color code your cards. We have blue cross blue shield so it feels natural to have the food/medical account with a blue sticker (just buy a little circle sticker and place it on the edge so half is on the front and half is on the back -- nowhere near the strip). I've never been given a hard time about it. Our car is red so the car card is red, etc.  If you think four cards is a lot to carry, ask yourself if you would rather carry four cards or keep track of every little thing?  Good luck. I know you will find a system that works for you if you keep trying." Developing self-discipline in his spending habits is a prerequisite for dealing with a (sometimes low) variable income.  While it might feel like a roller coaster ride going from boom to bust, develop steady frugal spending habits will ease a lot of that pressure. Looks like you don't want to participate in the consumerist rush but feel that you just have to do that too. First of all, you don't have to do what you don't want. Then there're researches showing that joy from a compulsive purchase only lasts for a short period of time and then you are left with a relatively useless item in your house. So it's one thing if you really wanted that cool full-electronic sewing machine (or whatever DIY item you might want) to be able to repair all the stuff and craft all the nice things you wanted, but it's another thing if you look at the item and can't decide whether you really need it. The latter scenario is you struggling with the consumerism rush. If you feel really happy and can save half of what you earn just save the difference - it won't hurt. Having a good sum of money saved is really helpful in many scenarios. "There are several tactics you might employ to help the situation.  You have two options, one is to increase your income, the other is to reduce your expenditure.  Paying off debt will also help but that may not apply to you. Most people find it easier to reduce expenditure, so I will explain that first of all. Then make sure you track your actual expenditure agains the budget, check it daily and make sure it is accurate, if you spend some money you didn't budget for then mark that down and make sure you budget for it going forward. Most people are surprised at how much they are actually spending, especially on trivial things like coffee, lunch at work etc.  You will then find you can start to reduce this expenditure, maybe by bringing lunch to work, skipping coffee every other day etc. By doing a budget you can reduce your expenditure and hopefully have some money left over to save - put a line in your budget marked savings (ideally on the day you get paid so you don't spend it)! If you ned to save $x by Y date then work out how much that works out in a month and put that into your budget, if you haven't got enough spare to do that then onto stage 2 With regards to increasing income, the obvious way is to do some overtime at work - can you do that? Alternatively you can get a part-time job, maybe a hobby that pays money?  I personally enjoy building web-sites as a hobby and I get about $20 a month from advertising on those, it's not much but it adds up over time. Finally how to actually save, what methods are there? Lots of options here, personally I buy shares with my savings, making sure I pick stocks that are currently cheap - this is quite risky and may not suit you but it works for me as I don't sell the shares until I actually need the money. Other options are regular savings accounts that pay a bonus after you've had the money in for (usually) 12 months etc.  They tend to pay a bonus at the end so you are incentivised to not touch your cash but you can get it out if you really need it. You can also work out how much ""spare"" cash you have monthly and then give yourself an ""allowance"" each month that you can spend on impulse items, but make sure you stick to that. Good luck!" "You ask a few different, though not unrelated, questions. Everywhere you turn today, you hear   people talk about how much they need   to save or how important it is to find   a good deal on things ""in this   economy"". They use phrases like ""now   more than ever"" and ""in these   uncertain times"". It seems to be a lot   of doom and gloom. Some of this is marketing spiel.  You may notice that when the economy goes south the number of ads for the cheaper alternatives goes north.  (e.g. hair clippers, discount grocery stores, discount just about anything)  Truth is, we should always be looking for ways to save money on goods and services we purchase.  The question is, what is acceptable to you for your desired lifestyle.  (And, is that desired lifestyle reasonable for your income, age and personal situation.)  Generally speaking, the harder times are the more we find discounted/cheaper alternatives acceptable.   Is there really a good reason that   people should be saving more than   spending right now? How much you are putting away is a personal matter.  I can still remember my dad griping whenever he couldn't save half of his paycheck.  That said, putting away half your paycheck may lead to a rather austere lifestyle.  This, of course, depends on the size of your paycheck and your desired lifestyle.  You could be raking it, living simply and potentially put away more than half your income with relative ease. If you have a stable job, and a decent cash reserve, is it anymore ""dangerous"" to make a large purchase now than it was seven years ago? Who knows?  Honestly, no one.  Predicting the future is a fool's errand.  (If you are interested in reading more on this view point, I suggest The Black Swan.) You mention the correct approach in this question.  Ensure that you have liquid assets (cash or cash equivalents, i.e. money that you can draw on immediately and isn't credit) which covers at least 3-6 months of your necessary expenses (rent/mortgage, bills, car payments, food).  (There is no reason that you couldn't try to increase this to 1 year, especially ""in this economy."") You should also strive to have money available for emergencies that don't necessarily include loss of income.  Of course, make sure you're putting away for retirement, as appropriate for your retirement goals.  After that should come discretionary items, including investing, entertainment, the large purchase you mentioned, etc.   You should never use money that you may need immediately (5-10 years) for investing.  This doesn't necessarily include the large purchase you are contemplating.  For example, if you are considering purchasing a home, the down-payment may be one of the items for which you need money in the ""immediate"" future. Is it really only because of unemployment numbers? This is probably the big one that is the focus of everyone's attention.  That said, the human attention span is limited.  We have a natural need to simplify things.  This is one of the reasons that we tend to focus on a few, hopefully important, things.  However, the unemployment numbers are not that the only thing of concern.  Credit is still pretty hard to come by these days.  The overall economy is still hurting, even if we are technically no longer in a recession.  There are also concerns about U.S. government borrowing, consumer spending, recent trucking numbers, etc.  (It may not be obvious, but trucking is used as a barometer of economic activity.  If there aren't as many trucks carting goods across the country, it probably means that there is less economic activity.)  The headline number these days is unemployment, as most census workers have now been returned to the pool. To answer the overall question, we should always be saving money, in good times or in bad.  Be that by squeezing more value out of our purchases or by putting some money away.  We should always try to reduce our risks, by having an emergency ""cash"" cushion.  We should always be saving for retirement.  Truth be told, it is probably more important to put money away in good times, before the hardships hit." "I spend hours researching two comparable products to try to save $3. Me too! I have also argued for hours with customer support to get $5/month off a bill (that's $60/year!), and I feel guilty every time I eat out or do something remotely luxurious, like getting fries with my $1 McChicken. Geez, even when I play video games, I hate spending the in-game currency. For me, it's obsessive-compulsive traits that cause it, but please note that I'm not claiming @Eddie has them. Just speaking for myself here, but I hope it helps. I still struggle with my miserliness, but I can share what works for me and what doesn't. I don't think I'm valuing my time nearly as much as I should. Me neither, but knowing that doesn't help; it makes it worse. For me, putting a dollar amount on how much I value my time does not work because that just complicates the problem and amplifies how much time I spend solving that multi-variable optimization problem. Consider trying to convince Monk not to avoid germs in order to build antibodies; it just makes him think more about germs, raising anxiety and making easy decisions (use a handkerchief to touch doorknobs) into a hard decision (should I touch it or should I not?). It also amplifies the regret whenever you finally make a certain choice (""what if I did the calculation wrong?"" or ""what if I'm going to get sick tomorrow because I touched that doorknob?""). Making the problem more complicated isn't the solution. So how to make it simpler? Make the decision ahead of time! For me, budgets are the key to reducing the anxiety associated with financial decision making. Every six months or so, my wife and I spend hours deciding how much to spend per month on things. We can really take our time analyzing it because we only have to do it occasionally. Once we set $50/month for restaurants, I no longer have to feel like a loser every time we eat out -- similarly for discretionary spending and everything else. TBH, I'm not sure exactly why it works -- why I don't regret the dollar amounts we put on every budget -- but it really does help. I join my coworkers for lunch on Fridays because I already decided that was okay. At that point, I can focus my OC-tendencies on eating every last gram of organic matter on my plate. Without directly touching the ketchup bottle, of course. :) Again, just speaking for myself, but having budgets has done wonders for my stress level with respect to finances. For me, budgets are less about restricting my spending and more about permitting me to spend! It's not perfect, but it helps. (Not that it's relevant, but I reworded this answer about 20 times and only hit 'Post' with great effort to suppress the need to keep editing it! I'll be refreshing every 30 seconds for updates.)" Also make a menu and make a shopping list from that.  It will help you control how much you buy, and help to enforce only buying what you need.  You don't need to limit your menu, but buying what you need in appropriate quantities will help.  Don't forget to add snacking and desserts to your menu. "The answer is, there are a lot of answers! It always seems so daunting to start saving when you're living paycheck to paycheck and anticipate more bills on the way (kids are expensive!!). Start small, and make it automatic if you can. If you can take $25 out of every paycheck and put it into a savings account, and do this automatically using your bank's Bill Pay system, that will go a long way. It's about setting up a new habit for yourself, and increasing as you can. One way I've heard it phrased is ""Pay yourself first"".  Don't set unrealistic expectations for yourself, either. You need to start building a savings account to cover emergencies, not just future purchases. If something happens and you can't get a paycheck for a week, a month, 2 months, how will you pay your bills? Set up a savings account just for that purpose and don't touch it unless it's a true emergency. There are several banks out there that will let you set up multiple savings accounts and mark them for specific purposes, like CapitalOne's 360 accounts. Set one up for the emergency account that gets your automatic per-paycheck deposit, then set up another one for ""fun money"" or ""new home fund"" or whatever else you want to save up for.  Starting the savings process is hard, no doubt about it. You need to learn how to budget with the money you have after ""paying yourself first"". But the important part is to stick with it. Consider your savings account as another ""mandatory"" utility. You have to pay it $25/mo or risk...I don't know...a smack on the back of the head. If you wait until the end of the month to see what you have left after everything else, you'll find you don't have anything left. If you can set it up through your bank so when you get your paycheck it automatically puts $25 into a savings account, then you'll never have that $25 burning a hole in your pocket. If your paychecks aren't direct deposit, and you're physically cashing them when you receive them, then tell the bank teller to put $25 into your savings account.  You can do it! Make sure your wife is on board and you communicate the importance of setting up a savings account and work together to make it happen. Be patient, and realize that $25 may seem like a trivial amount to put away now, but after 24 paychecks (1 year depending on pay schedule), that's $600! (Plus interest but rates are too low now to worth noting that)." We all buy stuff from time to time that only satisfies us for a short time. I was able to locate a few expenses that fall under that category. I see a lot answers that focus on not getting these things. I'm going to tell you how to at least attempt to have your cake and eat it too. If you can get these things without paying for them, or by paying pennies on the dollar for them, you'll no longer want to buy them at full price. Begin by making a list of the items you can't stop thinking about.  Go to your local library and look for relevant items that are on your list. If they are not yet available, request that the library purchase them, and reserve them for when the items come in.  Yes, libraries are usually tax-supported, but to give back, if you can't afford to contribute to the Library immediately, you can still promote their fund-raising or book/media-drive efforts. If you don't mind buying things that may be second hand, thrift stores and garage or yard sales can have anything. The ones near you may have one or two items on your list of things you were looking for - for pennies on the dollar.  Other items might be things you can share with friends. Borrow or swap things until you get bored of them. If you don't have a network of friends with shared interests, there may be a local freecycle or relevant meetup group you can join.  The key here is to try to contribute more than you take (and you probably have things you don't need that you can start with trading), and don't keep careful score. The upshot is you'll not only save money but make friends while doing it. You can sometimes have your cake and eat it too. These recommendations can get you the short-term happiness you were looking for, without spending the money. And when the happiness is gone, you won't feel like you need to hang on to the item indefinitely - you can pass it on for others to enjoy. "Trying to figure out how much money you have available each day sounds like you're making this more complicated than it needs to be. Unless you're extremely tight and you're trying to squeeze by day by day, asking ""do I have enough cash to buy food for today?"" and so on, you're doing too much work. Here's what I do. I make a list of all my bills. Some are a fixed amount every month, like the mortgage and insurance premiums. Others are variable, like electric and heating bills, but still pretty predictable.  Most bills are monthly, but I have a few that come less frequently, like water bills in my area come every 3 months and I have to pay property taxes twice a year. For these you have to calculate how much they cost each month. Like for the water bill, it's once every 3 months so I divide a typical bill by 3. Always round up or estimate a little high to be safe. Groceries are a little tricky because I don't buy groceries on any regular schedule, and sometimes I buy a whole bunch at once and other times just a few things. When groceries were a bigger share of my income, I kept track of what I spent for a couple of months to figure out an average per month. (Today I'm a little richer and I just think of groceries as coming from my spending money.) I allocate a percentage of my income for contributions to church and charities and count this just like bills. It's a good idea to put aside something for savings and/or paying down any outstanding loans every month. Then I add these up to say okay, here's how much I need each month to pay the bills. Subtract that from my monthly income and that's what I have for spending money. I get paid twice a month so I generally pay bills when I get paid. For most bills the due date is far enough ahead that I can wait the maximum half a month to pay it. (Worst case the bill comes the day after I pay the bills from this paycheck.)  Then I keep enough money in my checking account to, (a) Cover any bills until the next paycheck and allow for the particularly large bills; and (b) provide some cushion in case I make a mistake -- forget to record a check or make an arithmetic error or whatever; and (c) provide some cushion for short-term unexpected expenses. To be safe, (a) should be the total of your bills for a month, or as close to that as you can manage. (b) should be a couple of hundred dollars if you can manage it, more if you make a lot of mistakes. If you've calculated your expenses properly and only spend the difference, keeping enough money in the bank should fall out naturally. I think it's a lot easier to try to manage your money on a monthly basis than on a daily basis. Most of us don't spend money every day, and we spend wildly different amounts from day to day. Most days I probably spend zero, but then one day I'll buy a new TV or computer and spend hundreds.  Update in response to question What I do in real life is this: To calculate my available cash to spend, I simply take the balance in my checking account -- assuming that all checks and electronic payments have cleared. My mortgage is deducted from my checking every month so I post that to my checking a month in advance. I pay a lot of things with automatic charges to a credit card these days, so my credit card bills are large and can't be ignored. So subtract my credit card balances. Subtract my reserve amount. What's left is how much I can afford to spend. So for example: Say I look at the balance in my checkbook today and it's, say, $3000. That's the balance after any checks and other transactions have cleared, and after subtracting my next mortgage payment. Then I subtract what I owe on credit cards. Let's say that was $1,200. So that leaves $1,800. I try to keep a reserve of $1,500. That's plenty to pay my routine monthly bills and leave a healthy reserve. So subtract another $1,500 leaves $300. That's how much I can spend. I could keep track of this with a spreadsheet or a database but what would that gain? The amount in my checking account is actual money. Any spreadsheet could accumulate errors and get farther and farther from accurate values. I use a spreadsheet to figure out how much spending money I should have each month, but that's just to use as a guideline. If it came to, say, $100, I wouldn't make grandiose plans about buying a new Mercedes. If it came to $5,000 a month than buying a fancy new car might be realistic. It also tells me how much I can spend without having to carefully check balances and add it up. These days I have a fair amount of spending money so when, for example, I recently decided I wanted to buy some software that cost $100 I just bought it with barely a second thought. When my spending money was more like $100 a month, lunch at a fast food place was a big event that I planned weeks in advance. (Obviously, I hope, don't get stupid about ""small amounts"". If you can easily afford $100 for an impulse purchase, that doesn't mean that you can afford $100 five times a day every day.) Two caveats: 1. It helps to have a limited number of credit cards so you can keep the balances under control. I have two credit cards I use for almost everything, so I only have two balances to keep track of. I used to have more and it got confusing, it was easy to lose track of how much I really owed, which is a set up for getting in trouble." "According to your numbers, you just stated that you spend approximately $1500 in discretionary expenditures per month, yet are unable to save. I fully realize that living in a big city is usually expensive, but on your (presumably after-tax) salary, I think you can easily save a substantial portion of your income. As others have already noted, enforcing saving of a significant portion of your discretionary income is the most obvious step.  It's easy to say, but I suspect that if you are like most people who have difficulty saving, the psychological impact of quitting your previous spending habits ""cold turkey"" is likely to be very harsh, all the more so if you have an active social life.  You may find yourself becoming depressed or resentful at ""having"" to save.  You may lose motivation to work as hard because you might think that you're putting away all this money for the distant future, whereas you are young now and want to enjoy life while you can. It is in this context, then, that I looked at your other financial obligations.  Paying $1300/month to your parents is a lot.  It's over 20% of your after-tax salary.  You do not specify the reasons for doing this other than a vague sense of familial duty, but my recommendation is to see if this could be reduced somewhat.  If you can bring it down to $1000/month, that $300 would go into your savings, and you would psychologically feel a lot better about putting, say, $600 of your own discretionary income into savings as well.  Now you have, all told, about $1000/month of savings without severely curtailing your extra expenditures. But I would start with that $1500/month of luxury spending first.  And yes, you do need to view it as luxury spending.  The proper frame of mind is to compare your financial situation to someone who is truly unable to save because their entire income is spent on actual necessities:  food and shelter; their effective tax rate is 0% because they earn too little; and they usually find themselves in debt because they cannot make ends meet.  Now look back at that $1500/month.  Can you honestly say that you cannot afford to cut that spending?"