Saving money isn't easy but if you approach it as a challenge and as something that you are doing for your future, then it can be enjoyable.
When I think about saving money, I always think about the Aesop Fable about "The Ant and the Grasshopper". The short version of the story is that in the Summertime the Ant toils and saves food for the winter while the Grasshopper plays and never saves anything. When the winter comes around, the Ant has food stores away but the Grasshopper is starving to death.
In our lives, the Winter is like retirement.. If we live frugally and save judiciously we can live comfortably in retirement.
So here are my 5 tips:
1) Brown bag it (better yet tupperware it)
For lunch alot people go out with their co-workers and on average spend $7 for lunch. I am a proponent of networking with your coworkers but you can seriously consider bringing lunch to work 3 times a week and go out with your coworkers twice a week. You can easily make lunch for $3 a day and in general this will probably be healthier than what you get outside. Saving $4 thrice a week would add up to $624 a year. Tupperwaring it would allow you to use reusable containers as opposed to brown bags that you end up throwing away. One caution, tried to avoid overly pungent foods so that you don't stink up the microwave in your office. You can sell it to your coworkers and/or boss that you are going to work thru lunch - and maybe you should as well..
2) Cancel your cable connection and get an antenna &/or roku instead.
Television is a relatively cheap form of entertainment, however you can most likely get alot of content for free over the airwaves. Buy a decent antenna from an electronics good store and see if you can get content over the air. Generally you can get NBC, CBS, Fox, ABC and PBS over the air. If you cannot get any content over the air, consider getting a Roku player and a NetFlix account or Amazon Prime account. If you average $100 for cable a month and use a Roku with one of the aforementioned services, you can save up to $1110 a year. I would suggest trying these services first and then cancelling your cable.
3) Cancel your gym membership and workout in the great outdoors
This one is a bit dicey, but gym memberships are expensive and people don't use them that often.. If you do use your gym alot (and be honest to yourself about this), then by all means don't follow this. If you do cancel your gym membership, look to workout in parks and running outdoors. In the winter, you can get a workout DVD and workout at home as well. Some people use the gym for the social aspects of working out with people. I suggest that this can be done in other settings as well but you need to be able to gauge this for yourself.
4) Prioritize paying off debts in order of interest cost (not rates)
I recently read the blog of a guy who went to Harvard and ended up paying off his debt in a really fast time frame. Pretty inspirational. The key is to do the math on how much you are paying in interest by loan each month. Once you do the math on how much interest you are paying on credit cards, student loans and car loans and you compare that to the money you can earn by putting cash in savings accounts, you will see that there is a huge imbalance between the 2. In savings accounts, you can generally get .5% interest nowadays. In comparison, the lowest interest rate you can get is student loans (subsidized) at 2.36%.. Then you have car loans which average 4.56% for new cars and 9.02% for used cars. Then you have credit cards which average around 15%. Finally there is the crazy phenomenon known as payday loans which have rates of 400% and more. OK so now that you have the facts, what do you need to do... Collect the following information on all the debt you owe: Principal you currently owe, Annual interest rate & Monthly Fees (if any). I have built a spreadsheet to allow you easily analyze the cost of your debt. Type those pieces of information into the highlighted columns here and it will tell you what the monthly cost of this debt is to you. (note this isn't the monthly bill as this represents the interest cost only and not the principal). Basically by having this debt, on a monthly basis you are losing a certain amount of money in interest. Once you have this information, you should tackle the biggest interest cost per month.. To do this, you will need to payoff the Principal you currently owe on the loan so it may take time to save this.
5) Stop paying ATM fees..
ATM's that are not your banks are a huge drain on resources. Often if you use another banks ATM, the bank whose ATM you are using charges you a fee and then your bank also charges you a fee.. This is ridiculous. For example, lets assume you use an ATM that isnt your banks and lets say you take out $20.. Let's say the bank whose ATM it is charges you $2.50 as a fee.. Let's also assume your bank charges you another $2.50 fee for this transaction. In effect, for using the ATM you are paying a 25% fee on the transaction. ($5/$20 * 100%). This is incredible and higher than annual interest rates on several items. So if your bank charges you to use ATMs on a per transaction basis, don't do it.. Find a bank that doesn't charge you for this or have the discipline to get cash from your own bank when you need it.. Banks are thriving with such fees these days and you as the consumer need to be savvy about any fees.
When I think about saving money, I always think about the Aesop Fable about "The Ant and the Grasshopper". The short version of the story is that in the Summertime the Ant toils and saves food for the winter while the Grasshopper plays and never saves anything. When the winter comes around, the Ant has food stores away but the Grasshopper is starving to death.
In our lives, the Winter is like retirement.. If we live frugally and save judiciously we can live comfortably in retirement.
So here are my 5 tips:
1) Brown bag it (better yet tupperware it)
For lunch alot people go out with their co-workers and on average spend $7 for lunch. I am a proponent of networking with your coworkers but you can seriously consider bringing lunch to work 3 times a week and go out with your coworkers twice a week. You can easily make lunch for $3 a day and in general this will probably be healthier than what you get outside. Saving $4 thrice a week would add up to $624 a year. Tupperwaring it would allow you to use reusable containers as opposed to brown bags that you end up throwing away. One caution, tried to avoid overly pungent foods so that you don't stink up the microwave in your office. You can sell it to your coworkers and/or boss that you are going to work thru lunch - and maybe you should as well..
2) Cancel your cable connection and get an antenna &/or roku instead.
Television is a relatively cheap form of entertainment, however you can most likely get alot of content for free over the airwaves. Buy a decent antenna from an electronics good store and see if you can get content over the air. Generally you can get NBC, CBS, Fox, ABC and PBS over the air. If you cannot get any content over the air, consider getting a Roku player and a NetFlix account or Amazon Prime account. If you average $100 for cable a month and use a Roku with one of the aforementioned services, you can save up to $1110 a year. I would suggest trying these services first and then cancelling your cable.
3) Cancel your gym membership and workout in the great outdoors
This one is a bit dicey, but gym memberships are expensive and people don't use them that often.. If you do use your gym alot (and be honest to yourself about this), then by all means don't follow this. If you do cancel your gym membership, look to workout in parks and running outdoors. In the winter, you can get a workout DVD and workout at home as well. Some people use the gym for the social aspects of working out with people. I suggest that this can be done in other settings as well but you need to be able to gauge this for yourself.
4) Prioritize paying off debts in order of interest cost (not rates)
I recently read the blog of a guy who went to Harvard and ended up paying off his debt in a really fast time frame. Pretty inspirational. The key is to do the math on how much you are paying in interest by loan each month. Once you do the math on how much interest you are paying on credit cards, student loans and car loans and you compare that to the money you can earn by putting cash in savings accounts, you will see that there is a huge imbalance between the 2. In savings accounts, you can generally get .5% interest nowadays. In comparison, the lowest interest rate you can get is student loans (subsidized) at 2.36%.. Then you have car loans which average 4.56% for new cars and 9.02% for used cars. Then you have credit cards which average around 15%. Finally there is the crazy phenomenon known as payday loans which have rates of 400% and more. OK so now that you have the facts, what do you need to do... Collect the following information on all the debt you owe: Principal you currently owe, Annual interest rate & Monthly Fees (if any). I have built a spreadsheet to allow you easily analyze the cost of your debt. Type those pieces of information into the highlighted columns here and it will tell you what the monthly cost of this debt is to you. (note this isn't the monthly bill as this represents the interest cost only and not the principal). Basically by having this debt, on a monthly basis you are losing a certain amount of money in interest. Once you have this information, you should tackle the biggest interest cost per month.. To do this, you will need to payoff the Principal you currently owe on the loan so it may take time to save this.
5) Stop paying ATM fees..
ATM's that are not your banks are a huge drain on resources. Often if you use another banks ATM, the bank whose ATM you are using charges you a fee and then your bank also charges you a fee.. This is ridiculous. For example, lets assume you use an ATM that isnt your banks and lets say you take out $20.. Let's say the bank whose ATM it is charges you $2.50 as a fee.. Let's also assume your bank charges you another $2.50 fee for this transaction. In effect, for using the ATM you are paying a 25% fee on the transaction. ($5/$20 * 100%). This is incredible and higher than annual interest rates on several items. So if your bank charges you to use ATMs on a per transaction basis, don't do it.. Find a bank that doesn't charge you for this or have the discipline to get cash from your own bank when you need it.. Banks are thriving with such fees these days and you as the consumer need to be savvy about any fees.
