Often, to save money, people have been told about the ‘Latte factor’. If you could just cut out a $5 coffee per day and invest that money, you could have untold riches at retirement. This concept may be well and good and actually does have some merit, however, what if you were just to take more control over your finances…how would that change your financial future?
Here are some thoughts on changing the way you can approach certain money matters which may end up making a big difference in the money you have left at the end of a month a year or at retirement.
1. Create an emergency fund
Open a separate bank account where you deposit small amounts on a regular basis to the point where you have 6 months of living expenses. This is your security if you are out of work for up to 6 months.
If you regularly get behind the 8 ball from unforeseen events — like car repairs, vet bills or even a $1,000 bar tab — then a chunk of cash will keep you from going into debt. If you enjoy a period of relative calm, then you can save some real money.
2. Everyone is emotional about money
When it comes to money, everyone gets a little testy. For example, it is common for people work very hard and pay extra payments to pay off their mortgages when in actual fact, from a financial, money making perspective, keeping a mortgage and investing that money instead could make more financial sense. For example; If you’re paying 4% on your mortgage you could make more over the course of a year if you put that money into an index fund making an 8% return. Yet the feeling of being “debt free” can make you overlook the possible savings.
3. Think net worth, not bank balances
This is simple…the more assets you have and the less debt, the higher your net worth. Investing in income generating real estate, certain stocks and the like will make your net worth higher than leaving cash in your bank account (which will actually lose money over time based on the factor of inflation)
4. Question your expenses
Go through your monthly expenses one by one and ask yourself if you need to spend $19.99 a month on a cable package? Are you really using that gym membership? Can you save a few bucks on your wireless bill?
5. Haggle on everything
Most of us are loath to negotiate if we can help it, however, in many cases, if you’d just ask for a discount, you often can get it. If you are purchasing a lot of items from one store (yes, even a retail store in the mall), ask to see the manager for a volume discount…you’d be surprised what may happen. Also, negotiate your mortgage rates and don’t be afraid to haggle on your rent before you move in. Whatever discount you get will be multiplied across months or years.
6. It’s not savings until it goes into a savings account
Now that you are negotiating everything, you have successfully managed to save $150 off your monthly bills. Are you really “saving” that money? If you’re putting that $150 more into your savings account every month, you could still use it (by accident). It may be better to open a separate account (perhaps your security account) and put the savings into that.
7. Sell your old junk on Craigslist
Personal finance isn’t just about saving money. You can earn more each month by selling stuff you don’t use on Craigslist. Try to sell 2 or 3 items a month.
8. Buy some stuff second-hand
If Goodwill or Value Village isn’t your thing, good deals can also be found on all kinds of items on eBay and Craigslist. Someone is always selling good stuff for cheap.
9. Figure out your limits
Ask yourself, what could you cut back on? Eating out? Clothes? Many consumer expenditures are in actual fact: optional. Think twice before purchasing something and for an expensive item like a new TV or whatever, take at least 2 weeks after you have seen the product to make your final decision on whether to purchase. Often you may change your mind and are glad you did.
10. Buy everything with credit cards to earn points
If you can get bonuses for using your credit card for purchases you would make anyway, hey, why not? Just make sure the annual credit card fee isn’t more expensive than the value from the points you are receiving.
11. Google “coupon” along with whatever you’re planning to buy
This is especially a good idea if you’re in the market for a big-ticket item, like a TV. There are many coupon sites out there. Check them out and you will be surprised at the money that can be saved.
12. Google everything you plan to spend money on
These days, you can find anything online and there’s a good chance that it’s cheaper than the price you’ve been quoted. You will also have the power to negotiate from a place of knowledge when you can prove the item is available for a better price somewhere else.
Let the 2015 savings begin!