Simple Saving
A lot of my friends have asked me for money management advice, especially after coming back from a two-month trip through Europe. How did we afford it? This post will be the first of several on money management and is without a doubt the easiest to implement. Through focusing on small, simple changes you can create a huge surplus (call it a bonus!) at the end of the year. It may also have the biggest impact on your future- whether through taking vacations or in investment and retirement. Outlined below are easy ways to save over $600 this year, $20 this week, and $40 this month. What’s $20 a week though...right? Read on to find out!
1. The next time you’re at the bar, have 1 (one!) drink, not 3. If you go out to have a drink with friends once a week after work chances are you’re having more than a drink. If you like craft beer, you’re probably spending between $4.50 and $7 per drink, and that doesn’t include tip. For the sake of argument, let’s say each delicious micro-brew you’re knocking back is $6. If you have three of these, you’re paying $21 (with tip)- spending over one hour’s pay by the end of the night. If you cut that back to actually having a drink for a total of $7 with tip, you can save $14 a week. Without putting that into any sort of investment vehicle, this translates into over $700 per year. Those couple of skipped drinks could grow into upwards of $100K toward retirement if you invest it or put an additional $700/year into your 401(k) over your working years. $700 in savings is a fairly conservative estimate- play with the numbers to see how much you actually spend if you are going out three or four times per week, or if you are a fan of those fancy $9-$12 cocktails.
2. Kick your coffee shop habit. This is assuming that you go once per day and spend an average of $4 on a sinfully sweet or perfectly-foamed cappuccino delicacy. Instead, opt to drink the coffee from work or purchase a coffee maker. I use a 1-quart French press each morning with freshly ground beans and go through a pound of beans ($8-12) in just under a month. Along with saving money, you can pick up a fun hobby by purchasing from local roasters or experimenting with different brewing methods. And, that $20 savings a week turns into over $1000 at the end of the year. Do you really want to spend over $1000 this year...on coffee?
3. Ditch cable. The “Standard TV” package from Time Warner is one of the cheapest available, for $40 a month- and that doesn’t include DVR (DVR options start at $65/mo). This ends up costing $480 a year, before taxes and additional fees. That’s money to use for student loans, rent, or to invest (along with your newly freed time) into something like that coding or photography class you’ve been meaning to take.
4. Examine your cell phone plan at least once per year. Before my fiance and I lived together, we talked on the phone nearly an hour per day. After moving in together, I realized that my phone usage went down to about 200 minutes a month. On top of that, I had been paying for 3GB of high-speed data per month and realized that I was using a little over 1GB per month. I switched plans to save $10 a month and now only spend $35/mo (plus tax and fees) on my cell phone bill through Virgin Mobile. If you have a traditional wireless carrier, consider getting your phone unlocked and taking it to a no-contract carrier such as T-Mobile. Several friends of mine have already saved $50/month ($600/year) by switching carriers. T-Mobile and Virgin have also recently stopped counting the usage of certain music-streaming apps such as Pandora against your overall data usage making this a great time to look into changing plans or carriers.
If you read through all of the above and thought, “None of this applies to me,” give it some consideration. There may be something similar that is silently sucking your money away. Or you may find that your bar habit (2 or 3 times a week) or premium cable package (how many channels do you watch anyway?) could be costing you much, much more than I have outlined here. There are also simple ways to tweak your social hour habits: go to bars that offer deals during happy hour to get 2-for-1 specials or treat yourself once a week at your favorite coffee shop, using the time to read a book or chat with a friend instead of unceremoniously guzzling that $4 concoction on your way to work.
Now, do you want to spend this newly-freed cash or invest it? I would recommend both: pop some into your 401(k) or an IRA and spend the rest on an experiential good like travelling or continuing your education. The key is to make sure that the money is actually going into something other than your regular checking or savings account. Putting additional money into your 401(k) at work should only take a few minutes and an easy form from someone in HR. You may even be able to do it online. Some banks and credit unions offer checking and savings accounts that allow you to set up automatic transfers from one account to another on a monthly basis. If you can set up an additional savings or checking account to receive these deposits, do it! Nothing beats being able to see that your “Travel” account has grown to over $1000 in under a year!