The first step toward frugal heating is recognizing that you are your own natural heat source. If you cover yourself enough to stop your natural body warmth escaping into the cold air, you'll stay warm. Difficulties arise when you have to crawl out from under your warm blankets into a cold house.
If you live in a place where the outside temperatures are often very cold, you already know that keeping that house up to a bearable level of coldness is worth whatever its price may be, and you probably know more than I do about heating devices.
I live in a place where, most of the time, the outside temperatures are bearable. Not cozy, but you can save a lot of money by adjusting your metabolism to feel reasonably comfortable with temperatures in the chilly-but-not-freezing-cold range.
People who lived in the Northern States and Canada used to be famous for forcing themselves to adjust to cold weather fast. The first morning they woke up feeling chilly, in August, they supposedly told themselves to toughen up and dived into the nearest source of cold running water, where they splashed about until they felt blood heat tingling in their fingers and toes. Then they came up on the bank and moved about vigorously until they felt relatively comfortable. After than they were supposedly perfectly cool with crusts of snow forming on whatever they wore in the way of winter gear, which for hunters and warriors often wasn't much. And they revered their elders, because, for this and many other reasons, they didn't have many elders.
You don't have to begin by showing off a level of toughness your heart may not be up to. The first morning you wake up feeling chilly, in August, all you have to do is get up and not turn on the heat, but put on an extra layer or two of clothes and move about vigorously. Shed layers as you warm up. Subsequent mornings will be colder, and each time you wake up feeling cold, you will add some extra clothes and move about vigorously. You can train yourself to feel that the air inside the refrigerator compartment, as distinct from the freezer compartment, is bearably chilly; that frosty mornings are cardigan mornings, suit-jacket mornings.
The benefit of adjusting to cold temperatures is that you can postpone using any expensive heating devices for months after everyone else is overheating their house and complaining about the bills. At least you can do this if nobody in your house is ill. When people are bedfast or are using medication that interferes with natural thermoregulation, you will just have to be one of the people who try to maintain summer temperatures in winter and pay for it.
Eventually water will freeze outside, and you'll have to have some heat inside. What heating system you choose will depend on your household.
From year to year people publish articles about which heating system is most frugal. If your neighborhood has both gas and electric services, the companies are likely to take turns offering a better deal, every few years. Propane, methanol (Coleman Fuel), kerosene, heating oil, even wood or coal may be the most cost-effective fuel one year or another. Unless you own a woodlot and harvest your own cast-off tree branches for fuel, sellers will work to make one fuel source seem much better than the others with enough variation that you might change every five or ten years. If you save the devices that burn each kind of heating energy, you'll be able to switch among them with relatively little need to buy new devices--only fresh fuel.
What is essential is that you burn the right fuel for the device you're burning it in. Fuel that burns hotter than the intended fuel for your device may literally burn up your device (and probably part of the house with it). Fuel that requires more ventilation may not burn at all. Anything that burns will leave some residues that pollute the air; exhaust vents, including chimney tops, need filters. A dirty filter can start a fire, so don't use a device if you're not going to be able to change its filters.
Your lifestyle may also affect your heating options. A room where you work on computers should be sealed off away from an open wood or coal fire, because smoke will destroy the computers. A room where children or animals scamper about should not be heated by liquids that might be spilled, or by heaters that become hot enough to burn their skin.
I have a woodlot and wood-burning stoves. I also live with computers, so I don't rely on the source of heat that's almost completely free of charge for me. I spend most of the winter in the room with the Internet-free computer--computers, actually, there being four of them, but they're not all running at the same time. It has electric heat. I don't trust 1500-watt electric heaters in an old wooden house; a 1000-watt heater produces unwelcome power surges. People who have formed a habit of using bigger heaters don't imagine that a 250-watt heater would keep me warm, but in most weather it does. I sit as near to it as possible and keep moving when I move out of its range.
A 250-watt heater won't heat the whole house but it will deliver enough warm air to heat-damage your skin if you stay too close to it. Do not leave an electric heater running at night. I've fallen asleep with one running and woke up with those ugly red marks outlining the major bloodvessels in the part of the body nearest the heat. The marks on the skin are temporary but there's no guarantee about damage to the bloodvessels. If paper or fabric is nearer to the heater than you are, of course, instead of scorch marks you could wake up with a fire.
I like to keep a 750-watt heater handy, too, for those rare days when the outside temperature stays in the single digits, Fahrenheit, all day and the 250-watt heater just isn't enough. By positioning myself in between the two I stay pretty cozy.
Of course, whatever heating device you use is going to be more expensive than you yourself are as your primary heat source. When displaying hand-knitted work for sale I show off a bit by wrapping up in whatever combination of hand-knitted sweater, blanket, cap, and shawl the temperature indicates. All four are enough to keep me warm at temperatures down to 15 degrees Fahrenheit.
If you want to stay warm in emergency conditions--when a winter storm knocks out all the electricity, your lease forbids you to burn anything else, and the winter storm also keeps temperatures below freezing for a week on end--you too will need layers of warm, insulating fabric to conserve body heat.
Gore-Tex is amazing stuff. It's also controversial. It does fray, over time, and shed tiny particles that some say will circulate inside your body and cause cancer. People have to make their own decisions about this kind of thing.
Another insulating fabric to consider for winter is natural wool. The more natural--not soaked in chemicals that purport to make it "hypoallergenic" or "washable," preferably not even dyed, and if possible hand-washed--the better. Many people think they are allergic to wool. Most of those people show no skin reaction to wool itself. They are allergic to the chemicals whose residues linger in wool--or not even technically "allergic," but simply sensitive to the acid many companies use to wash the dirt out of freshly shorn wool.) English sailors sang about the bold, tough, foolhardy man who "wore no shirt upon his back, but wool unto his skin," but you can put wool next to your skin to stimulate your natural self-heating processes, in cold weather. Wool socks and mittens will help restore circulation to the hands and feet, if you need help with that, and keep them warm.
Cotton socks and sweats feel great in mildly cold weather but aren't the most effective survival wear if you need to spend a lot of time in air temperatures far below freezing. If you must drive across Saskatchewan in midwinter, Gore-Text and wool are worth packing, even if you never use either one in the States.
That cheap acrylic yarn the big-chain stores sell, designed for crocheting more than knitting? Fashion has scorned it as a material for winter gear or even blankets, really, since about 1975, but frugal people shouldn't. It's hypoallergenic, durable--or should we say hard to get rid of?--colorfast, easy to clean, and very very warm. You don't want a sweater, much less a crocheted blanket, made of Red Heart Super Saver in a room heated to 75 degrees Fahrenheit. You do want those things if the room temperature is 40 degrees Fahrenheit or less. If you want to make your little electric heater or your last half-bottle of propane last, knit and crochet a full wardrobe from this type of yarn. You don't have to wear it in town but it will keep you cozy at night.
Last winter we had weather the mind does not normally associate with Virginia--entire days when the temperature stayed below zero degrees Fahrenheit. I had a 750-watt heater behind me, a 250-watt heater in front of me, a Mexican cotton blanket over whatever bit of cotton I had on below the waist, and a hand-knitted acrylic sweater over a cotton shirt or house gown. With that set-up, even when I went out to use the Internet on a screen porch, sometimes a passing breeze felt cold but I was fairly comfortable through the Big Deep Freeze.
It's good to prepare for weather colder than that, and I have. I have Gore-Tex only inside the boots I wear for walking in snow, not for routine use. I have several more layers of knitting. I have candles, and firewood...but even in a cold winter, I didn't need more than 1000 watts of electricity, divided between two outlets, and one sweater.
You will, of course, add heating options as your household requires. If you don't have a deep cellar or cave that maintains earth temperature, you will need to bring animals indoors in very cold weather. If you live with children or sick patients...you know the drill. As a target, I'd suggest having a different heating device for each room. If one becomes unavailable (the electrical power line breaks, the cost of Coleman Fuel quintuples, you use up your supply of propane) you can move to a different room and the next most frugal source of heat.
Whatever stoves you may use, safety always needs to be taken seriously. New stoves and furnaces come with detailed lists of instructions. Old wool and coal burners found at antique sales don't. Know what you're getting. Wood stoves should stand a few feet away from walls, on an insulating "pad" to protect the floor. Coal stoves need even more space and, before burning coal, you should find out which vents need to be opened or closed to prevent gases from building up. Vents and chimneys should always be cleaned before lighting a stove in autumn and at least once a month during frequent use.
In addition to insulating yourself to conserve your natural heat, you will also want to insulate your home. Storm doors and windows keep a lot of warm air inside the house. Insulation stuffed between the panels of walls, floors, and ceilings do, too. You can knit, crochet, or quilt a draft blocker for every crack you feel when you look for drafts in early autumn. Rugs on the floor also help. If you like to knit or crochet, you might want to make "tapestries" for the walls! (If you knit them in plain neutral colors and then weave in colored figures, you can change the scene from time to time.) Covers on fireplaces and chimney vents, when they are not in use, can keep lots of warm air from going up the chimney. Some people even buy or make extra heavy winter curtains to drape over windows.
Frugal winter meals take advantage of the need to heat the house in any case. If you have a deep freezer, and especially if you have a wood stove with an oven compartment, cold days are a good time to bake breads and cook slow-simmering bean and grain dishes to freeze for summer use. They will be easier to thaw and reheat if frozen in individual serving portions.
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