Have you ever wondered on – how to save money? A saying goes – ‘a penny saved is a penny made’; have you spent some time to give this a thought?
We were thinking about this the other day and felt like we probably give less attention to internalize and truly understand the meaning behind the phrases like this.
As simple as it may sound, it does makes sense when you save some money; you don’t have to worry about making that amount of money.
As an example, we discontinued the Netflix subscription of $8.99/month when we completed all episodes of Stranger Things (P.S. once season 4 comes up we will rejoin to watch this season). We have an amazon prime which offers free prime videos. We were saving $8.99/month worth of payment (of course this isn’t much, but it is something).
Over past five months; we have already saved $45+ amount of money that we would have otherwise had to make from another source.
Does saving mean that you have to stop eating or drinking to have some money on your bank? No, it means that cut your expenses where you could and live within your means.
We know some people will say Netflix subscription isn’t something they would think about discontinuing and we don’t blame them. If you can cut your expenses somewhere else, you should cut it from *somewhere else*. You already got the jest by now.
So, let’s get into 11 habits that you could develop to save money:
1) Start Saving Automatically
From your paycheck, automatically deduct certain percentage of your income to go into savings account. This way, you never get tempted to use the money that you would have saved.
Or even better automatically deduct an amount of your paycheck to go the brokerage account from where you would buy your mutual funds and keep on buying mutual funds. Let, compound interest do its magic over the years of investment.
2) Create and Plan a Budget
Create a monthly budget. Apart from unforeseen circumstances; you should pretty much be able to take care of your budget. There is 50-20-30 rule which mentions that 50% of your paycheck should go to paying for your basic necessities like home, food, electricity, internet, phone bills, etc; 20% should go to your savings as mentioned in step 1 and 30% should go to your entertainment.
We would rather switch the 20% and 30% part from this 50-20-30 rule in which we would invest 30% of the income and 20% would go to the entertainment. Over the years, you could get a lot of money from your investment and savings.
3) Don’t fall for debt
Most people have home mortgage- and that is okay; but don’t fall for other debts. Does that mean you shouldn’t have credit cards? No, in fact take advantage of perks those credit cards provide. Some of them provide cash back on your purchase, some travel perks. But, make sure to pay off full amount by the end of the month so that you don’t pay interest on those amounts.
If possible, avoid taking loans on cars. New cars depreciate quite a bit on value as soon as it comes out of the dealership doors. Try buying a used car; with low mileage and decent condition and try it buy it by cash. Car is one liabilities that would decrease in value over time. You don’t want to pay premium value for the car when actually its value is going down year by year (we may have sounded more like Robert Kiyosaki of rich dad poor dad here).
4) Refinance your Mortgage
With mortgage rates on historic lows and the recession looming, now is the great time to refinance your mortgage if you have an interest rate > 4% for a 30 year loan. You could lower your loan term or even keep the current term but get the lower mortgage rates.
This would lower your monthly payment and overall loan term payment. Money saved on mortgage could range to hundreds of dollars a month or thousands of dollars over the life of the loan.
5) Go for quality over quantity
We have learnt this lesson a hard way. We used to buy cheap shoes that would last 2-3 months and we were spending $19- $25 on them. Later, we went for a brand like Nike and paid $50 -$75 for a pair of shoes.
These shoes were comfortable, light and also lasted couple of years as opposed to the cheaper ones. Obviously, Nike had better return on investment. So, go for quality. It may cost a bit more initially but over the long run quality prevails.
6) Get cheaper Cell phone plans
We can’t reiterate this point more. We are a big fan of MVNOs. Providers like Mint, Visible provide similar phone plans with almost 50% or less price as compared to big providers like T-Mobile, Verizon, ATT or Sprint. It is definitely worth to checkout these options as it will lower your monthly phone plan bills by a decent amount.
7) Carpool to School or Work
It’s always a good idea to share the ride- both for your pockets and the environment. If possible, find a colleague or friend that goes to your school or work and share the ride with them.
8) Use coupons while shopping
To your google chrome browser, add extension like Honey. This would automatically search coupons and apply for your product in the current page when you buy stuff online. Also, coupons could be found on newspapers and ads sent to your home. Take advantage of these when you go shopping.
9) Use the public library
If you want to rent out books or movies or even keep your kids busy with new books every other week; your local public library is the place to be. You don’t have to buy books or movies every time. You can easily rent out these materials from library for FREE; so do check them out.
10) Buy Generic
Whereas sometimes it makes sense to choose quality over quantity, it doesn’t always mean that branded products are higher in quality than generic brands.
For example, we used to buy CVS brand formula for the kids as opposed to Enfamil brand. The formula content on both brands were the same. CVS brand however was 50% cheaper than Enfamil brand and CVS normally provide coupons on their brands as well.
11) Eat in
Eating outside on average cost somewhere between $10 – $20 with tips per meal. It is always a healthier and cheaper option to cook at home.