Ever got the advice that you must live a frugal lifestyle to save money. Well, I have seen a lot of content on the internet that talks about weird ways to save money, like these
or even this
Yes, these are some of the weird advice I have seen on the internet which is hilarious. Now, I am not saying that you should not save money but you need not be extremely frugal to save money.
Saving money is essential and is the cornerstone of living a rich life. As saving allows us to invest and grow our money so we can afford things we want in the future (like downpayment for a home, wedding expenses, tuition for kids,etc.).
When you normally think of saving, you focus on being frugal, cutting down on things you want. You consider yourself being on a financial diet where you’re only working to deny yourself things.
You might be spending $3 or $4 on Starbucks every morning, and even most frugality experts will tell you to cut it down so you may save $500-$600 a year.
Congrats, you’ve successfully cut down your spending by $600 and are richer by $600, right!? Unfortunately, that’s the case only if you physically put aside $3 or $4 every day, and invest your money? Wait, how to invest it? This adds extra work and stress to an already stressful life. In the process, you also face frustration and guilt being unable to buy your favorite latte which is never fun. The fact is it’s a lot easier to earn $20 a day than to save $3 a day.
Not everyone can be frugal, and this article is especially for those who are looking for ways to save money but don’t want to be frugal and don’t want to demonize the small things they enjoy in the life.
You can save a lot more than $600 by just having some good financial habits and without being frugal. Don’t believe me? Let’s see how you can save money without being frugal:
SAVE MONEY #1: Switch or Negotiate your Bills
You can save hundreds of dollars on a lot of bills like:
- Cell phone bills
- Credit Card fee
- Cable or Satellite TV
- Car insurance
A 5-minute call to your provider can save you thousands of dollars a year. It’s pretty easy too, you just need to do these 4 things to negotiate with companies on fees and rates:
- Gather Competitors offers.
- Call your provider.
- Tell them, “I am a loyal customer, I’d hate to switch to the competitor (cite the information you found)”
- Ask “What can they do to make you continue with them?”
Adjust your script for whatever company you call accordingly. Now, you might ask why they would reduce fees or rates? It’s simple, they need you, you have other options and can always switch over. These smart tips will help you save money on groceries.
It is a competitive world and in every industry, there is high competition and everyone is looking to steal each other’s customers. So, most companies try their best to retain a customer. (by giving a discount or slashing fee or rates)
SAVE MONEY #2 Review your Subscriptions:
Subscriptions and Memberships can save you a great deal of money every year. More often a lot of subscriptions are just a waste of your money. Wait! my friend, I am not saying you to cancel all your subscriptions and be frugal, I am just asking you to review your subscriptions each month.
Most of us have automated our subscription services and it’s really convenient. Automated subscription indeed makes the task easy but the fact is here automation works for companies, not you.
Have you reviewed your monthly subscription services and canceled those not needed in near past. Probably not! But how many times you didn’t buy something you liked when you went shopping. Probably a lot!
It’s important that you cut on subscriptions you don’t need or don’t get value for. The basic tenet here is to cancel all the auto-renewal of subscriptions and buy when you need them.
- Instead of paying for Netflix, Hulu, as well as amazon prime to get tons of content you’ll never watch, pay only for shows you watch on prime and cancel rest which you don’t need.
- Keep a list of all the subscription services as it is easy to forget which services you are registered for.
- Check your card statements to know what subscriptions you are getting charged for. Like I had Hulu for six months but I never watched.
- You can subscribe to any service when you want but make sure to cancel it if you are not gonna use it after a month.
All this forces you to wisely spend money. So, if after canceling a subscription you find that you are spending enough to justify the subscription, buy it again if not you saved yourself a lot of money.
Even for keeping fit you don’t need to splurge on expensive gym memberships, instead, opt for inexpensive options like planet fitness or you can opt for a day pass each time if you want to splurge on the gym.
SAVE MONEY #3: Spend more on Debt: Prepay Your Debt
You might be wondering how can I save more by spending more on the debt. Fact is you can actually save a good amount of money by prepaying your debt.
Suppose you have a Car loan of $15000 at a rate of 7.1% and 10 year repayment period. Standard payment comes to $175 per month.
Now, if you pay $100 more each month, Let’s see how much money you can save :
Even paying $50 extra each month can save a HUGE amount of money.
Check your savings using this calculator if you prepay any amount of money.
SAVE MONEY #4: Savings And Investments
Save more and spend on things which bring value to you. Similar to reviewing your subscriptions, review before purchase whether you really need it or does it justify the value it brings compared to cost. It will help you spend wisely and automatically increase your savings. Analyze your spendings and earnings and make sure that you save at least 15% of your monthly earnings.
Even a K-12 teacher could have a savings of more than $1.5 million at retirement if he is saving 15% of his paycheck and investing it wisely. It’s important to spend less, earn more as without it even higher earnings won’t make you rich. A wise man once said, “There is never an end to Greed.”
Now, when you have savings what do you do with it? Of course get the most out of it, no brainer. Put your money to a fee-free high yielding savings account, instead of regular savings account. Even though the difference is not much, but still they are better than regular accounts. When interest rates go up, yields will also go up.
Also, make investments wisely and stop paying high transaction and fund management fees from your hard earned money. As per Warren Buffet, low-cost index funds perform better than most funds and they charge minimal fees.
SAVE MONEY #5: Automate your Finances
Now, before Warren Buffett was a top earner, he learned how to be an ace saver, saving the equivalent of $80,000 in today’s money while paying the tuition and expenses of college.
Most people have just one checking account in which they credit their salary to and from which they spend money and just save whatever is left in the account. This shifts your priorities backward i.e spend first, save later.
Automate your finances and instead of thinking to save every day – set once and forget it.
You just need one hour today to do this and follow these steps:
Step 1: Open Two Savings and one checking account:
Have your paycheck deposited into the first savings account, let’s call it paycheck account. Let’s call the second savings to account the Opportunity account. Now, the automatic transfer will put 15% of your paycheck in the opportunity account.
Step 2: Set up your bill payments:
Automate the transfer of remaining amount (85%) to your checkings account. Call your internet service provider, credit card provider, electricity provider, any biller and have them bill you on 2nd of the month (assuming, you get paid on 1st) or next day to any date you get paid on to your checkings account. This streamlines the process as you pay the bills at the start of the month and need not worry about it later.
Step 3: Put money in Roth IRA and 401(k)
Make sure you have 401(k) set with the employer and put in enough money in both Roth IRA and 401(k) to maximize your benefits. 401(k) basically means free money from your employer.
Step 4: Automating your checking account
Once your funds arrive in checking accounts, your funds go to three places,
- Roth IRA: The max you can contribute to Roth IRA currently is $5500.
- Credit Card: Go to credit card’s website and set auto payments with your checking account so your bill is paid each month.
- Misc Bills: These are bills you don’t pay from credit card like rent, gas etc.
Set up auto payments on your bank’s website in both Paycheck as well as Checkings account, so funds get automatically transferred.
Now, since all your bills are paid off at the start of the month, you can spend the remaining money as you wish without worrying about bills. And even after that you save some money even $100, invest it. You can do this as you know that all your bills and expenses have been taken care of. If an unexpected bill appears, take the money from your opportunity account only. Don’t take from any other account or you’ll unbalance your budget.
Congrats, now you are ahead of 90% of peers when it comes to managing personal finance. We appreciate your suggestions and comments. And don’t forget to share it!