With the five ways to save more money below, you will quickly notice that none of the tactics suggest you forgo that $4 cup of coffee you get once a week at Starbucks or try to cancel your $9 a month Netflix service. Unless you’re spending $10 a day — or over $3,500 a year — on Frappuccinos, these minor lifestyle changes aren’t going to launch you into the 1 percent club.
1. Negotiate Everything
When you call customer service for any large corporation, their goal is to keep you happy, unless you’re Comcast. Fortunately, other telecom providers regularly offer promotions for their cellphone and Internet services. My friend Gary Dek atGajizmo has been able to annually negotiate his AT&T DSL service to $35 from $65 a month.
Take our free
online course on:
Timing Your SpendingStart Now »View all Courses
He says the trick is to keep calling till you find a friendly customer service rep who is willing to look through their list of promotions and get you the one that saves the most money. Remember, for an hour of your time, you could save $360 a year or more depending on your service plan.
The same “negotiate everything” strategy can apply to buying a new car, finding a cheap cellphone plan, switching car insurance carriers or any monthly expense that could be draining your bank account. The higher the dollar amount or longer the commitment, the more time you should spend finding ways to save.
2. Lower Your Investment Fees and Commissions
Broker commissions, mutual fund loads and investment fees can significantly reduce your overall returns. Looking at these costs annually, you may think about ignoring them, but if you consider that your lost capital could have earned compounded returns over the course of 30 years, the numbers balloon quickly. For this reason, it is important to thoroughly research discount brokerage firmsbefore opening an account.
Even after you open an account with one of the best online brokers, beware of your financial adviser or account representative. Like anything else in life, you are accountable for your choices, so don’t let a sales pitch convince you of anything until you research the facts for yourself.
3. Avoid Debt, Unless It’s for an Appreciating Asset or Investment
One of the best reasons to stay debt free and save money is to have the capital for when investment opportunities present themselves. Buying real estate or equities five years ago would have resulted in huge investment gains, but most American households just didn’t have the cash available to take advantage of fallen prices.
As the American economy continues to thrive, don’t get too comfortable and confident by overspending on your next car purchase or home renovation. All great bull markets come to an end, and there will be another recession somewhere in the future. Be prepared. In the end, a 20 percent return on $500,000 is much greater than a 20 percent return on $250,000.
4. Don’t Mix Your Investments and Life Insurance
We all have that relative or friend who is a financial planner selling life insurance. He touts whole life insurance as a great investment with a guaranteed 4 percent rate of return. Unless you’re wealthy and have a large enough estate to trigger estate taxes, start running because permanent whole life insurance isn’t for you. Whole life policies cost 3 to 5 times more than term life policies, you won’t be able to afford the coverage you need, and your insurance agent is going to net thousands in commissions.
Instead of mixing insurance and investment products, buy the more popular and affordable term policy from one of the best life insurance companies. If you’re a healthy, non-smoking 35-year-old male, you can buy a 30-year, $500,000 term life policy for less than $500 a year in premiums. The 30-year policy will cover you into your retirement, past your children becoming financially independent, and give you plenty of time to create a nest egg.
In the meantime, your saved premiums can be invested in the stock market, which has yielded over 10 percent a year since 1980.
5. Research and Comparison Shop
Buyer’s remorse is one of the worst feelings a consumer can have, especially on a large purchase. The easiest solution is to avoid impulsive purchases and thoroughly research and comparison shop any big-ticket items. Always ask yourself these questions:
- Do I really need this or is it something I just want in the moment?
- If I bought it, how often would I use it?
- Does the price justify the benefits?
- Are their maintenance costs or recurring expenses associated with my purchase?
- How many hours of work would it take to pay off the expense?
The last question has always helped me put the price of something in perspective — if I converted my income into an hourly wage, how many hours would it take for me to pay off something? The psychological aspect of translating your hard work and time into the purchase process can help consumers avoid impulsive purchases.
However, if a product or service passes all these tests, then it’s time to immerse yourself in consumer guides, reviews, and ratings.
Anyone Can Achieve Financial Independence
Ultimately, I strongly believe anyone can achieve financial independence. The only difference between households who gradually become millionaires and others who fall short is the time, energy and patience invested in making important financial decisions.
If you are mindful of your budget, you won’t overspend. If you don’t overspend, you will have more cash to invest. When your investments are growing, you won’t withdraw the cash, forgo the gains and trigger taxes. Over time, you will find this process has put you in a position to retire comfortably.
John Schmoll is the founder of Frugal Rules, a finance blog that regularly discusses investing, budgeting and frugal living. He is a father, husband and veteran of the financial services industry who’s passionate about helping people find freedom through frugality. He also writes about wise ways to manage your money at WiseDollar.org.