When we’re growing up, there are some core lessons that our parents bestow upon us like always look both ways before crossing the street, don’t leave the stove unattended and of course, always save your money. If you’re reading this right now I am going to assume you’ve mastered the first two but the third may still be up for debate which is why I want to share 5 simple ways to save more money that I know will have your pockets filling up in no time!
Method #1: Mastering Your Domain
Do you know what you and your wealthy neighbor have in common? No, it’s not the size of your bank accounts, just yet that is, but it’s the fact that you both need a place to live as fellow human beings. In fact, if we consult Maslow’s Hierarchy of Needs, we see that shelter is part of a human’s most basic physiological needs. Unfortunately, though, most of us these days have really overblown what it means to have shelter and as such housing has become one of the biggest hurdles to most people’s saving efforts.
You see, whenever I talk about saving money I talk about scrutinizing your big 3 expenses of housing, transportation and food as these expenses typically make up roughly 60% of your budget with housing being the largest cost of the bunch. At 30% of your total annual expenditures, getting your housing costs right will make or break your finances. Unfortunately, for most people, this cost is often mishandled.
As you’re probably aware, in the present day we live in, we all want things to be newer, faster and bigger and this sentiment is definitely not lost on our dwellings. Presently, new home sizes average over 2,600 square feet, up over 1000 feet from just four decades ago. But, this increase in home size is justified by bigger families right? Not quite. In fact, in the last 40 years, the number of people living in the home has decreased from 3 persons down to 2.5 persons. With some quick math, we can see that 40 years ago, one person typically required 533 square feet to live whereas today people are enjoying more than double that room with over 1000 square feet to themselves.
Now, maybe people have gotten bigger over the last half century or perhaps they just need more room for all the shit they buy but there’s no doubting the fact that increases in home size is costing people a fortune. In the US, the median price for each square foot of home is $123. With homes being 1000 square feet larger these days that’s over $100,000 in the purchase price of a home which if you own a home you’ll know also comes with additional property taxes, repairs and a larger commission check when you go to sell your home down the road.
So what’s the solution? Just like getting a Big Mac at 2AM after a night out — just don’t do it! When buying a home, buy based on your actual living needs, not based on how much you can show off that mega mansion that will keep you house poor until your last waking breath. Alternatively, if you’re already in a living situation where you own or rent, start to track how much of your home you actually use and ask yourself if the space you have is warranted. Dialing down your living space by moving or renting out a room may be what the saving doctor ordered!
Method #2: Move Cheaply
Have you ever taken someone home from the bar and had immediate regret the next morning? It’s as if it seemed like a good idea at the time however when you realized what you were doing you knew you were in trouble. Well, sadly, this same sentiment often happens when we buy a nice car and submit ourselves to the overly burdensome transportation costs that come with it.
Now, I will be the first to admit that I love nice cars. The thought of owning a brand new sports car gets me excited and I can easily see why so many people are enticed to buy them. However, once I get over my initial moment of excitement and my logical, accountant brain kicks in, it dawns on me that I will likely never own an expensive car simply out of principle. And what is that principle? Cars are a waste of money!
You see when people are considering buying a car, they typically have an idea of how much it would cost them to buy new over used. What they do is they calculate the after-tax cost of each car and assess if the difference in price is worth that new car smell. Unfortunately, the realization that a new car is on average going to cost them $17,000 more than a used one is where most people’s analysis ends.
Sadly, this is just scratching the surface of the cost iceberg. With a new car comes more depreciation, higher cost for repairs, higher insurance premiums and the list goes on. If you’re serious about saving money, you need to get serious about how you move.
Now, I am not going to sit here and tell you to bike everywhere because that’s not realistic for 99% of people, even though most people could stand to get a bit more exercise. What I suggest is that people opt for a quality used car to sidestep as much sticker shock and depreciation costs as they can while also having access to lower insurance costs which are already criminally high to begin with. With ridiculously high car costs out of the way, saving more money will become easier than you ever thought possible!
Method #3: Have Cheap Fun
Do you remember how much fun you used to have going to the park and playing on the play structure with your friends? I mean, other than falling off the monkey bars or getting stuck halfway down the slide, these moments from our childhood were pure fun. Sadly, as adults we often lose the ability to find enjoyment in the simpler things in life and as such our cost of having fun rises significantly. For instance, having your friends over to watch a movie turns into a $300 night out at the club or going on a picnic becomes going to Vegas for the weekend. It’s as if as we age, we put a price tag on fun; however when we do that, we are significantly impacting our ability to save money.
Presently, the average American spends over $3,000 on entertainment costs which equates to about $250 a month. For some people, this amount is a drop in the bucket but for others, this $250 could be the difference between getting deeper in consumer debt or finally starting to dig themselves out of it.
Now, I am obviously not going to recommend never spending another cent on having fun. Some of my most cherished moments to date have required some sort of financial outlay however what I want you to do is be more cognizant as to how you can enjoy yourself without breaking the bank.
For myself personally, I’ve found that some of my least expensive activities are also the most enriching. For instance, instead of going out to the club and spending hundreds of dollars, having my friends over to watch a movie or going for a walk allows me to get that social time I need without the financial outlay (or the hangover!). Once you realize that you can have your cake and eat it too by combining fun and saving, I know that you’ll get hooked on having fun on the cheap!
Method #4: Avoid Interest
I don’t know if you’ve seen it recently but there are millions of people around the world who are consciously burning their money but unlike what you’re imagining, there are no matches or lighters involved. You see, in almost all circumstances, paying interest is like lighting your cash on fire, because you’re parting with your hard earned cash and are getting nothing in return. Now, notice I said, in almost all circumstances, because paying interest on debts like business loans or a mortgage can make sense but when it comes to high-interest debts, you need to proceed with caution!
I can already feel Dave Ramsey grinning ear to ear as I am about to say that you need to be avoiding credit card debts as much as possible if you want to have a fighting chance of saving money in the tough economic world we live in today. With the average credit card rate being upwards of 18%, most people who end up in the credit card debt spiral are handing over hundreds of dollars a month in unnecessary fees. It’s like going into work for a day just to make your creditors richer than they already are — it makes no sense!
Just to be clear, I am not anti-credit card. I own and use multiple credit cards on a regular basis but I always ensure they get paid off on time and in full. How do I do that? Simple, I never spend more on my cards than I have in my bank (thanks Mom and Dad for that hot tip!). In fact, if you have the financial aptitude, credit cards can be an amazing financial tool that will allow you to build credit, rack up points and even gain buyer protection over your purchases.
Now, if you are starting your quest for more savings from a debt deficit then here’s the approach you can take to become debt free as quickly as possible. First, organize your debts from those with the highest to lowest interest rates. Next, funnel as much money onto the debt with the highest interest rate first and then work your way down in descending order. This debt elimination strategy is often referred to as the debt avalanche method and is proven to be the most cost effective way to eliminate debt. If you’re wondering, doing this should be prioritized over saving and/or investing. The return you’ll get from reducing an 18% credit card is greater than the return you’ll get from most investments and certainly any savings account plan!
Method #5: Earn More Money
You know the saying, “the best offence is a good defense”? Well, when it comes to saving money, the opposite is true in that “the best defense is a good offense” because making more money, as long as you don’t spend it all that is, will do more for your savings efforts than all the other tips in this video combined! How do I know this? Because it’s worked for me and that’s why I know it will work for you as well.
You see, as I mentioned earlier, one of the things most young people learn growing up is that you need to save your money. I was no different and my parents drilled into my head the importance of frugality and saving money. Unfortunately, they left out the part about how to actually gain access to more cash that I could save (and invest) and over time I began to feel as if my savings efforts were not yielding the fruit I wanted them to. For instance, when I first started my career and was making $40,000 a year, it didn’t matter how much I pinched every penny, simply put, it’s hard to save any significant amount of money on that level of income. Fast forward 5 years and three things in my life have changed. First, I can no longer go out drinking without suffering excruciating hangovers. Second, I finally look like I’m 25 — it only took until 30 to get there. Finally, as my income has tripled since I first started my career, my ability to save more money has risen exponentially.
You see, if you can make more money and keep lifestyle creep at bay then saving money becomes a breeze. So the question is, how do you go about making more money? Most people struggle in this regard and for many years I did too. I solely relied on my 9 to 5 to make money and then after getting one too many lackluster raises it dawned on me that my job was never going to make me rich — at best I would only be able to keep up with inflation. When I had what I call my “income epiphany” I knew I needed to build new streams of income. First, I started with freelancing. Then I moved onto my YouTube channels and most recently I’ve been bullish about writing articles on Medium. Each stream puts more money in my pocket and as long as I manage it well then saving more becomes inevitable. Therefore, if you want to save more, make more — it’s simple and it works!