Why Saving is the Most Important Step
Starting from best mutual fund of the year to alternative source of income , most of the people who are starting on the path to financial freedom forget about the most important factor among all.
Its called your savings and your ability to spend less than what you earn. If you don’t save enough, it doesn’t matter what investment vehicle you choose, you are going to fall short on your targets. Here are some money saving ideas you can implement in you day-to-day life to increase your savings.
1. Stop Smoking
I know ,I know, Its not easy to quit blah blah. You know what…quit whining. Just do a simple calculation and you will realize how much money is going down the gutter. If you smoke one pack a day, that will amount to $165 every month, roughly $2000 in a year and if you just quit , you might be able to live a little longer and save unimaginable amount of dollars in medical costs.
Note: If you invest $165 every month compounded at 8% annually over a period of 20 years, it will become extra $95,257.94.
This is considering you won’t increase the number of cigarettes you smoke to get your fix over years and government won’t increase the taxes on sin products. We all know both won’t happen and your little dirty habit will keep costing you more and more every year.
2. Pack your Lunch
One of the easiest way to save money on everyday basis. If you spends $6 everyday in buying lunch at office, most probably you can prepare a delicious and healthy meal at home within $3 budget. Look at percentage term, you’re saving 50% of your lunch money if you decide to bring your lunch to office.
Note: You can easily save 50-60$ every month , which translate to $720 every year.
3. Pay Yourself First
Pay yourself first is one of the cornerstone principle of personal finance and retirement planning. What it actually means is automatically moving certain some of money every month as soon as you receive your paycheck.
Note: $500 invested every month compounded at 8% annually for 20 years will become $288,660 .
This way you’re forcing yourself to save money instead of just saving whatever is left at the end of month which is usually not enough to fund your retirement. Some people prefer to do it every alternate week or some people do it at the start of every month. Whether it is $200 or $500, it doesn’t matter as focus is on doing it on regularly.
4. Switch Your Cellphone Provider
If you’re using prepaid plans offered by AT & T, you can easily switch over to low-cost service provide like Cricket. Most of the Prepaid plans offered by Cricket are cheaper compared to AT & T. Cricket offers variety of plans in the range of 25-60$ per month per line range before any discount. It is one of the best option for people who are looking to save some money for multi/family lines.
Note: You can easily save 25-35$ every month, which translate to $360 every year.
5. Start Washing Your Car
Honestly what it takes to wash your car? Soap and some water and every time you visit a car wash, you end up paying somewhere between 10-15$. Instead of just going to the car wash, you can do the same at home. People usually visit three-four times every month.
Note: You can easily save 30-40$ every month , which translate to $420 every year.
6. Avoid Starbucks
According to Acorn, 41 Percentage of nearly 2000 Millennial–individual born between early 1980s through the early 2000– surveyed are spending more money on their morning coffee compared to their retirement plan. I hate to break it to you but if you are in that category, forget about today , you will never have enough money to invest in future as well.
Note: You can easily save 50-60$ every month , which translate to $660 every year.
7. Cut the Cable
Who likes getting dumber and dumber everyday and pay for it too. Thats what I think cable television has become. Seriously, stop watching crap all day. If not for the money, do it if you value your time. Most probability its costing you 30-40$ monthly and at least 50 hours of your personal time. Even if you are paid minimum wages, thats 400$ worth of saving if you value your time. You can use the free time to upgrade your skills or focus it on creating passive income streams.
Note: Point 2 ,4, 5, 6 and 7 will save us around 200$ every month ,$200 invested every month compounded at 8% annually for 20 years will become $115,464.15.
8. Stop Paying Interest
If you’re one of those people who put everything on your credit card and pay minimum amount every month, you have to leave everything and fix this habit first. You will never be able to save enough if you keep on paying 24-36% APR on your credit cards. If you have multiple loans running, its better to consolidate and comes up with debt pay-off plan.
One of the best thing you can do is stop wasting money on interest. As a rule of thumb, apart from paying housing loan ,in most of the cases any other type of debt is not good for your financial health.
9. Stop Shopping at Convenience Stores
If something is convenient,it is usually going to cost you more. Always plan your monthly groceries and shop from Walmart/target in bulk. 24*7 convenience stores shouldn’t be your go to for groceries shopping.
10. Wait Untill the Price Drop to Buys
Separate your needs from your want. You don’t have to spend 1000$ to get the latest iPhone or 8K Samsung television which worth couple of thousand of dollars. Instead of buying something the day it comes out, if you could just wait for few months,usually the price drops. This technique works very well when it comes to electronic item.
Similar strategy can be utilized when buying for seasonal cloths. You buy woolens in summer and vice-versa. If you’re someone who is on budget, keeping up with Kardashians will not help you in your financial journey.
I’ve found that the less stuff I own, the less my stuff owns me.Nathan W. Morris