The best way to save money
Most of the time frugality advisers demonize the small things in life we enjoy, and ignore the BIG WINS where we can save and earn the most. Don’t get me wrong, I’m all about frugality but the truth is most people don’t actually SAVE the money they think they are “saving”. They just waste it somewhere else. What good is that doing for your investments? Sad but true. PEOPLE SUCK WITH MONEY. If you go to a retail establishment during a 20% off sale and spend a cool hundred bucks, you really think you saved 20 bucks? Hell no! No matter how you look at it, you left there with a hundred dollars less than you had when you went in. Savings = ZILCH. NADA. NONE. Trust me, I’ve heard the argument over and over ~ “well it was money I had to spend anyway.” And I get that. But facts are facts. You left with less than you had when you went in! With that being said, if you take the so-called 20 dollars you’re claiming you saved and put it in your IRA or savings account….. THEN YOU CAN SAY YOU ACTUALLY SAVED MONEY! HELL YEAH! That would actually be moving the needle! $aving George is definitely a “realist” website and believes in calling a spade a spade. Don’t bullshit yourself into thinking you’re actually SAVING MONEY when actually all you’re doing is rearranging your money!
If you want to save money without demonizing the small things in life you truly enjoy — like a daily coffee or breakfast sandwich— there are two things you need to focus on:
- Automating your finances – eliminate the stress of figuring out what to do with your savings! Determine what you want your savings rate to be and set it and forget it! I recommend at least 25% of your pay. If your goal is extreme early retirement, you better crank it up to 50% or more. At 5% YOU MAY NEVER RETIRE!
- Earning the Big Wins – it’s way easier to earn an extra $30 a day than to save $3/day. Do whatever you can to boost your income. Sell stuff on Ebay or Craig’s List or work some OT. But be sure to SAVE at least 25% of whatever comes into your household!
Without a doubt, those are the two biggest game changers when it comes to saving money — not clipping coupons or driving across town to find a cheaper gas station or whatever. Although it’s great if you actually invest the savings. But guess what? Statistics say YOU WON’T. So why do it?
When you automate your finances and focus on the Big Wins, you’ll see explosive growth in your savings and earnings almost instantly. And the best part: You can do all these things in a few hours and then you never have to think about them again. I have all my SAVINGS automated. Come hell or high water, each week my allotted money is automatically deposited! Whatever is left, I spend on my bills and anything else I want. Rearranging your money is fine and dandy if that’s what floats your boat…..myself, I’D RATHER ACTUALLY SAVE MY MONEY!
Here are 3 money saving BIG WINS that incorporate one or both of those aspects.
BIG WIN 1: Automate your finances
One reason we don’t regularly save money is due to the pain of putting money into our savings accounts each month. Why is that? You honestly think you can’t survive without it? Hmmmm…..I don’t agree. Anyone can save SOMETHING so go tell that to someone who might actually believe it. I don’t.
And so, just like that daily breakfast sandwich, we might put away money for savings once or twice — but if we have to make the decision EVERY paycheck, we’re setting ourselves up to fail. You end up WASTING every cent. To some, paying their bills makes them feel successful but I’m here to tell you to $AVE $AVE $AVE! Your future self will definitely thank you!
That’s why automated finances work so well. You can start to dominate your finances by having your system passively do the right thing for you. Instead of thinking about saving every day – set it and forget it. Learn to live on what’s left and NEVER look back. Watching your $avings grow is FUN! And guess what? You’ll never be BROKE again!
To do this, you need just one hour today to follow these steps:
Step 1: Set up your bills so they’re automatically paid on the first of the month.
Call your credit card, electric company, internet service provider, Netflix, whatever, and have them bill you on that date. This streamlines the process and allows you to know when exactly your bills need to be paid. There may be a couple of months of odd billing as your accounts adjust, but it will smooth itself out after that. This works great! And you always know for sure when they’re going to be paid. Take the guess work out of it.
Step 2: Contribute to your 401k
Before your paycheck even arrives into your checking account, make sure that you have your 401k plan set up with your employer and that you’re at least putting in enough money to collect the employer match. It basically means that for every (pre-tax!) dollar you contribute your company will also throw in five cents, ten cents, etc.).
This ensures that you’re taking full advantage of what is essentially free money from your employer. Let them help you save more money for retirement! This adds up QUICK and the power of compounding will massively help you over time!
Step 3: Automate your checking account
Once your paycheck actually arrives into your checking account, the money will now go into 3 different places:
- Roth IRA: Like your 401k, you’re going to want to max it out as much as possible. The amount you are allowed to contribute goes up occasionally. Currently you can contribute up to $5,500
- Credit card: Make automatic payments for recurring services like Netflix, and gym memberships using your credit card. Also, if you’re lucky enough to be maxing out your 401k and Roth IRA, you’re going to have plenty of guilt free spending money in here for things like the occasional night out or fun purchases you want to make.Log into your credit card’s website and set up automatic payments with your checking account so your credit card bill is paid off each month. You can rest assured that you will have enough money in your checking because you’ve already set up automatic payments with everything else.
- Misc. bills: These are for bills that can’t be paid off with a credit card such as rent, electric, water, and gas.
Set it up so that your checking account automatically sends funds to these three areas on your bank’s website.
BIG WIN #2: Negotiate your bills
Once you have your finances automated, the next step is to negotiate for lower prices on your bills.
That’s right. With just a few one-time, 5-minute phone calls, you can save HUNDREDS a month on bills for your:
- Car insurance
- Cell phone plan
- Gym membership (less likely but still possible)
- Credit card
It’s simple too — there are only 3 things you need to do to negotiate with these companies on fees and rates:
- Call them up.
- Tell them, “I’m a great customer, and I’d hate to have to leave because of a simple money issue.”
- Ask, “What can you do for me to lower my rates?”
BIG WIN #3: Prepay your debt to save thousands
If you have student loans, you can actually save thousands of dollars each year — by spending more each month.
“Uh, damn it. How can I possibly save more by spending more?”
Well let’s say you have a $10,000 student loan, at a 6.8% interest rate and a 10-year repayment period.
If you go with the standard monthly payment, you’ll pay around $115/month.
But check out how much you can save per year if you paid just $100 more each month:
Even prepaying $20 more per month can save you HUGE amounts of money.If you can prepay even a small amount more per month, the benefits can be significant. See for yourself by calculating your savings using this calculator.
So you have all the savings basics nailed down — automated your finances, lowered your bills…what do you do next?
First off, congratulations!
You’re ahead of 90% of your peers when it comes to your personal finance. But that doesn’t mean you should get complacent.
In fact, from here I’d suggest doing two things:
- Set up a 10-year savings strategy
- Focus on Big Wins
10-year savings strategy
This is the next level of saving — the one that’ll take you from amateur penny-pincher to PROFESSIONAL SAVER. Once you’ve gotten the basics taken care of, you can now start implementing a 10-year strategy. I’m currently at this stage.
This involves asking people ten years older than you what they wish they’d saved for — and start saving for it. Most will say retirement.
This sounds obvious, but it actually requires admitting that — despite your superior financial acumen — you’re still going to have the same expenses as everyone else.
$aving is so important! I hope you can implement some of these strategies TODAY to secure your future and future emergencies that will surely happen.
Thanks for reading,