4 Tips to save like a Pro this year
This is a guest post from Pauline of InvestmentZen.com
I am sure you know the secret to a financially stable life. It’s not really a secret. Save, save and save some more. But easier said than done, right? With the average rate of saving for American households around 5%, it doesn’t seem like the majority puts that into action. So here are a few tips to help you save like a pro.
- Cut ruthlessly where it doesn’t matter
In order to save more money, you need to reduce your expenses. Think about it like a diet: you want to cut on the daily excess of calories, so you can enjoy a greasy burger or a decadent slice of chocolate cake once in a while. You won’t miss the extra butter on your morning toast, and you’ll enjoy the burger twice as much. It is the same when it comes to money.
Try making a list of things that really matter to you. They will be very personal, like:
- Going out
- Charitable giving
- Gourmet restaurants
- Having a housekeeper
And so on. Sadly, on an average income, you can’t have it all. When I was working my first job, my place was small, I was cooking 99% of my food from scratch, but I had a housekeeper and travelled internationally several times a year. I didn’t mind cutting some expenses in order to afford my splurges. So start cutting the things that do not really matter, like that magazine subscription you never read. You won’t miss it, and you’ll have some extra cash.
- Never pay retail for things you want
Expert savers don’t like to pay full price for things. They search for coupons, pay with reward credit cards to get free miles or cashback, and don’t mind getting gently used items instead of brand new things. Again, when it comes to things you don’t care too much about, or won’t be using regularly, you can get the generic brand, or the entry level product.
It is worth spending money for quality items you will use time and time again. Why have a sticky pan if you’re going to make eggs every morning? That is frustrating and unproductive. But you can look up local ads to find garage sales or people moving out and getting rid of their stuff at a discount.
- Want to splurge? Hustle for it
It is easy to go to a store, buy whatever you want, and let your future self handle the credit card bill. With double digit interest, it will not only take a long time to pay off, but also cost you a lot more than it should. If you can’t afford to pay for that big ticket item, it is time to get creative, and find ways to make extra money to pay cash for it.
Yes, even a car. Work an extra hour every day for £20, and by the end of the year you will have £4,800 more. There are plenty of nice second hand cars in that price range. And finding an extra hour every day is not so hard. It could also be a whole day on Saturdays. Whatever works for you. You can be a sports coach, walk dogs in your neighbourhood, babysit kids until their parents get home, tutor in a field you master,… the possibilities are endless. Or simply work overtime at your day job.
That extra money can be your fun money, allowing you little pleasures without affecting your savings rate.
- Master the art of free
Many things in life can be free. If you spend a little time thinking about ways to get what you want for free, you’ll find there is often a way. I have bartered language lessons, giving French and receiving Arabic. I have swapped my house and gotten a free holiday. I have grown vegetables and herbs in my garden. And even picked up furniture and random stuff in the streets. Freecycle is a great resource to ask for free things people are getting rid of. Sure, it might not be the exact blender you were dreaming of, but if it does the job who cares? Once more, it comes down to your values and priorities in life. Would you rather work for X hours, or get that thing for free instead? I know most of the time, I pick freedom over fancy things.
- Know your why
Why do you want to save money? For a holiday, to afford to go back to school or stay home with the kids and live off one income? So you don’t have to be a Walmart greeter at 65? Whatever your goal, saving is much easier when you know why you do it. Keep in mind for example that every time you save $50, that is one day you can spend at home with the kids. Or that if you invest £300 a month (just £10 per day) at 8% for 30 years, you will have £452,466 in your nest egg for retirement.
Saving money is not fun per se, but the peace of mind and freedom it provides are priceless. How do you save more money?