3 Money Saving Tips That Will Leave Extra Cash In Your Pocket
With stacks of monthly bills on top of monthly bills, long-term debt accruing insane amounts of interest, and banking up our savings for future long-term goals, it is no wonder that not many of us can find the necessary funds to do what we really enjoy. Well let me tell you this, you don’t need to live in a family of royalty to do what you please. These 3 money-saving tips will help you get your finances on track!
Here are a few money saving tips I’ve learned from reading books and watching finance videos that I would like to share with you all. I recommend you to pick up your own personal finance books. These books are one of the best investments you can make in yourself! Trust me, pick up at least one for yourself and see how much you can benefit from it. The best thing is, these books won’t cost you a $20,000 like college tuition would.
Money Saving Tip #1. Live Below Your Means
I really like this saying. What it means to me is to live at a comfort level that brings joy and happiness, but at the same time being humble enough to where I can live without the extra, flashy and useless junk. No more expensive clothes, no more food takeouts/delivery and no more expensive phone plans.
You can say I’m frugal or cheap, but to me, the extra things don’t bring happiness. I see no added value with the extra crap. In fact, to me, I see it as a loss because I am losing the opportunity to use the money for something better (opportunity cost).
Example: A sweater cost $100. Do I need this sweater? Do I have enough sweaters at home? I don’t need it, but I WANT it. Before you buy it, you should always ask yourself these questions.
- What is the “opportunity cost” on this sweater? Can I do something with that $100 and use it for something else that will be better than just a sweater?
- What if I invested that $100 in the stock market instead? Paying a dividend at x%. I can buy stocks that will give me the ability to make more money.
So “theoretically” in this example, The total cost on the sweater is…
$100 (Sweater price) + $X (dividend payments) + $X (Capital Gains on the stock) = More than just $100
Understand the concept of opportunity cost before you make any impulse or irrational purchases. Because for me, I am not going to buy the unnecessary things to impress my friends or family members (Keeping Up with the Joneses). Instead, I would rather save up and spend on things I know will make me genuinely happy.
Money Saving Tip #2. The Little Things Adds Up
If you lost $2, would you be upset? Probably Not.
What if you lost $730? Well damn. what kind of question is that? Of course, I would!
Many of us flush hundreds of dollars down the drain every year and the sad thing is, we don’t even know it. Every day, small purchases are so minor that we tend to just let it go, but in the end, they add up into a giant hole in our wallet.
Let’s say your morning routine is a nice hot cup of coffee from your nearest corner store. Without a drop of freshly brewed coffee, your morning would be ruined and you’re nothing but a grumpy, irritated demon.
$2 per coffee x 365 days = $730/year
That $2 today may seem small, but if you look at how much you’ve spent in one year it makes a huge difference!
The calculation is based on only one coffee a day and with the assumption that you drink the plain old-school regular coffee. If you’re the type to get the venti grande espresso shot mocha triple caramel frappuccino with low-fat whip cream drizzled with caramel, well then good luck to you, my friend.
Having a few every now and then isn’t going to hurt your wallet, but when you’re constantly buying day in and day out, that small $2 will eventually add up.
And to add insult to injury, don’t forget about the opportunity cost of the money you could’ve use that $730 for instead!
Can You Live Without These Small Purchases?
With small purchases like these, it’s better to ask yourself if you really need these purchases?
- No? Stop buying these small insignificant things.
- Yes? Find better and more cost-saving alternatives.
Consider brewing them at home. Don’t go overboard by buying the fanciest and most high-tech coffee maker. I currently drink instant coffee mixes because I don’t want to spend hundreds of dollars on a coffee maker. I’m not picky about my coffee so this method is just fine with me.
Junk food and munchies:
Instead, eat quality and nutritionally dense food that will actually benefit you. If you’re like my girlfriend who “needs” snacks, then at least purchase them from the grocery store. The nearest corner store heavily spikes up their prices. There’s a reason why they’re called convenience stores because the convenience is reflected in the prices.
Credit Card Fees:
Pay your credit card bills on time. If you can’t buy the goods in full and in cash, then you shouldn’t be purchasing it on your card. These are the type of compound interests that you don’t want to get in bed with.
Credit cards carry ridiculously high-interest rates (mine is about 19.99%). The average return for a good index fund is averaged to be around 7-9%. That’s a big difference!
I’m not saying to not use credit cards; there are a lot of benefits to them if you use them right. Using a credit card will allow you to take advantage of promotions, build your credit score and redeem credit card points for either cash back or travel rewards. Don’t fall victim by being trapped in a hole by these credit card companies. It is extremely easy to fall in and believe me, it will be a nightmare to get yourself back out once the hole gets deeper.
- Should You Get A Credit Card? READ THIS before getting a credit card.
- How is credit card interest actually calculated?
- What is a grace period for credit cards? and why is it so important?
- Are you a Canadian student? Use this credit card for FREE groceries!
- Currently in credit card debt? Use this method to get rid of it!
Stop paying for TV! (Who does anymore, anyway? Instead, there are other subscription-based services at a cheaper price. Better yet, cut out that crap and watch videos online for free. If you really need Netflix, then talk your friend into letting you use their account.
Do you actually go to the gym? Be honest with yourself. Don’t waste your money spending monthly fees on a membership that you don’t use. If you do go to the gym then consider downgrading your membership. Sometimes all you need are dumbells and barbells instead of the fancy tanning and massage services.
These are some of the expenses that you can downgrade or cut out from your budget to save money. If you want more money saving tips then subscribe to receive a free BUDGETING template and more money saving tips!
CHECK OUT: 20 SUPER EASY WAYS to save more money!
Money Saving Tip #3. Learn to Budget!
The last thing you need to know out of these money saving tips is to budget, budget, and budget.
When you receive your pay cheque, how do you distribute what amounts go to what? Don’t be one of those people, “I like to spoil myself first because I deserve it. I want to live my life so my paycheque goes towards my wants first”.
NOOOOO! Don’t do that! You are setting yourself up for failure! You have it completely backward. Yes, you are right, you should spoil yourself a bit, but you need to know your priorities first. Pay off any monthly reoccurring expenses. Phone, electricity, gas, etc. It’s going to suck if you have your electricity cut off.
Always pay for your necessities first before paying for your wants. If you want more details on what is considered a necessity and how much you should allocate to this chunk, check out my budgeting blog posts.
- Don’t know what to do with your money? Follow Dave Ramsey’s 7 Baby Steps to help you become financially successful
- Try the 50/30/20 Budgeting Rule to help allocate your money.
- 5 Budgeting Tips to a Kickass Budget
So, to recap again on my 3 money saving tips,
- Live Below Your Means – Be humble and only purchase goods and services for which will bring you happiness. Do not indulge yourself in the luxury stuff just to impress your friends.
- Small purchases add up – One of the easiest ways to start building your savings isn’t to stop buying the expensive luxury stuff, but actually to cut out the small tiny purchases. These purchases are unnecessary and may have better and cheaper alternatives.
- Learn to budget and save – Restricting yourself from buying useless junk is a big part in your finances, but you need to know how to budget your spending. Know your priorities and how to pay them back.
Do you have any other tips to help others save money? Leave a comment down below to add to these 3 money saving tips!