Ways to Save Money
Posted on September 16, 2008
Filed Under Free Financial Course |
(This is a continuation of: How to Save Money).
Monitoring Spending - The Cash Method (estimated savings - $20)
One way to monitor your spending is to use only cash. Determine how much cash you need during the week for groceries, gas, etc, and then put away your debit and credit cards. Carry a notepad around with you and jot down where you are spending your money. This will allow you to see where all your money is going.
By using cash for everything, you can easily monitor when you are running out of money. Unfortunately, so many people only use debit or credit cards to purchase items; they simply do not know when they have spent too much. This exercise will help you to further analyze your spending habits and where you will be able to save money each month.
Decrease Fixed Expenses
The cash method will not help you save on many of the fixed expenses that you have such as car insurance, rent or mortgage payments, homeowners insurance, life insurance, or other expenses. However, with a little effort, you can lower these cost as well. For example, you can often get a better car insurance rate or lower mortgage payment.
Reduce Car Insurance expenditures (estimated savings - $20 per month)
The one fixed payment that we highly recommend you take a look at reducing right away is your car insurance. Many times we get a car insurance policy and never take a look at it again for a number of years. This is not a good idea. Insurance companies are always competing on price, and you may be able to decrease your cost by simply switching carriers.
When getting your insurance quote, you may also want to consider raising your deductible. The higher you raise your deductible, the lower your monthly payments will be. The deductible is the amount that you would have to pay out of pocket before your insurance coverage would kick it. However, the amount of savings that you could accumulate by simply requesting a higher deductible could make it well worth it.
You can often save $50 per month or more just by switching insurance and/or increasing your deductible. With the internet, you can get a quote in less than 15 minutes that will help you determine if this is a feasible option. Many internet sites provide this service for free.
If you have not received a car insurance quote in the past six months, we recommend that you receive an online quote. This is one of our Keyblast Bonuses that you can implement immediately and begin saving money right away. Within a few minutes you could know if you will be able to save anywhere from $20-$50 per month.
Go to Net Quote for a car insurance quote. This service will allow you to get the best rates available from all the major insurance carriers.
You may also be paying too much on your mortgage payment. We will discuss reducing mortgage and other debt payments in detail in lessons 4 and 5.Just from implementing the simple Keyblast Bonuses mentioned above, you may be able to save as much as $155 per month or even more. These are very simple items that can be implemented right away; so we strongly suggest that you do so. In fact, $155 each month over 30 years is $541,719! (Using the average market return of 12%). Not too bad for just a few minutes of work. Some of you will be able to save MUCH more. This $155 is a VERY conservative effort, and only applies to the average household income level of $48,201. So, in other words, if you make more money than this, you should most certainly be able to save more.
Set a Savings Goal
Now that you have reviewed your budget and determined ways to reduce your spending each month; it’s time to set a savings goal. Setting a goal is very important because it gives you a sense of control. You will be able to see that you truly are on the path to achieving your financial dreams. As you consistently save and invest, you will be able to grow your personal wealth.
For example, let’s say that you were able to reduce your car insurance, and you used the cash method to save a total of $150, $250, or $500 each month. The calculations below show the growth of this money compounded monthly at an annual rate of 12% over 30 years.
- $150 per month at 12% = $524,244.62
- $250 per month at 12% = $873,741.03
- $500 per month at 12% = $1,747,482.07
The point is, if you are able to save even $150 per month, you can build up a nice little nest egg. If you can save $500 per month you can retire with well over $1 million. You may already be aware of this, but in order to make it work, you must establish a plan.
In lesson 6 we will talk in more detail about where to invest your money. However, for now get into the habit of putting your money at least into a basic savings account at your local bank.
So, what is your savings goal per month? Take 2 minutes and write down your goal.
Review
Overall, analyze your ENTIRE budget to find ways where you can save even more money.
- Eat out one less time each month (estimated savings - $35/month).
- Bring your lunch to work or school (estimated savings - $20 per month).
- Create a shopping list and stick to it when you get groceries, and use coupons (estimated savings - $40 per month).
- Use generic brands
- Lower your utility bills (estimated savings - $20 per month)
- Monitoring Spending - The Cash Method (estimated savings - $20)
- Reduce Car Insurance expenditures (estimated savings - $20 per month). Get a free quote from Net Quote.
- Reduce Homeowners insurance payment. Get a quote from Net Quote and/or 2Insure4Less.
- Set a Savings Goal. Write it down.
If you implement these simple steps, the average household should be able to save at least $155 per month.
Continue on with the next lesson about: Debt Reduction.