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Money Saving Ideas - the biggest and best
Here are money saving ideas that I consider to be the best of the best. They're the biggest and best because they'll make a big dent in your spending.
A frugal living principle of mine is "you can only save the most where you spend the most".
There are hundreds of ideas everywhere for saving small amounts of money, but only a handful of ideas will really make a big difference in your bottom line. These are just those kind of ideas.
Saving money isn't just about spending less or more wisely, it often focuses on making better decisions that include not spending money at all. If you find it hard not to spend money, then perhaps you have some sort of spending addiction, and that needs to be addressed first and foremost.
The big money consumers in our lives are typically:
Housing
Transportation
Taxes
Insurance
Food
Utilities
Family
Discretionary purchases
Being frugal is a great idea, but some of us can only keep a few things "on the radar screen" at one time. If that's the case, then focus on the money saving ideas below, and you'll be in better financial shape much faster than you will with "clipping coupons" and the like.
After you've mastered some of these "big chunk" money saving ideas, then you can move on to implement all those hundreds of other money saving ideas you've heard about to save a dollar here and there. Use those hundred or so ideas to fine tune your approach to frugality.
Until then, let's look at the big money saving ideas that can help you keep way more money in your pocket. Here they are in no particular order:
Rent when interest rates are high. I remember 13% interest rates on mortgages. What a crock! That's a credit card rate, not a rate for interest on a mortgage.
I know that having a home is an investment, but when the interest payment on your investment starts to approach the cost of renting, then renting is one of the better money saving ideas. When interest rates drop, you can get back into the housing market.
Markets change, so just sit tight and let others get beat up in the marketplace. Remember that the rate of interest is often much more important than the cost of the home. It's the interest rates that have so much to do with your monthly payment.
Refinance when interest rates drop low enough. Careful on this one. Refinancing seems like one of the money saving ideas, but remember that it makes money for others that are handling the refinancing, so be certain that you are getting good return on investment.
A friend of mine wanted to refinance to save money. I did the math quickly in my head and advised against it. With the money she would have paid to refinance, she wouldn't have reached "break even" on the potential savings until year three.
Three years until break even, and paying others to wait that long doesn't seem like one of the better money saving ideas to me.
You'll need to see savings sooner than year three to make it worth your while to refinance. Remember, refinancing is just like financing a home in the first place. There are fees to pay for the loan, and your savings are offset by these fees.
Do the math and make certain you are seeing net savings in a year or so, otherwise it's not one of the best money saving ideas. This is especially true if you aren't going to stay in the house for more than another couple of years.
Move to a tax free state. Depending on your income, this might be the best of the money saving ideas. My move to Wyoming saved me about $8,000 each year over what I was paying California. Now, if you can save thousands each year, that savings can pay for a lot of necessities in life.
When I moved to Wyoming, it was like living free. I deposited my entire "California" paycheck in the bank and lived very well on just the "California tax money" that wasn't being taken out anymore.
My rent, phone, food and fuel was all paid for by that "tax money" that I wasn't giving up to California. It seemed like one of the better money saving ideas when I first thought about it, and it just kept looking better and better as I lived in the state, income tax free life.
This is one of the money saving ideas that you can implement in almost a dozen states including Florida, Texas, Washington, Wyoming and Tennessee. And, I'll bet that you can put that avoided "tax money" to much better use than any state government can.
Remember, tax evasion is illegal, but tax avoidance is perfectly legal, and one of the better money saving ideas because taxes are recurring and they are hefty. Keep in mind that where you live is all up to you.
Become the ultimate cheapskate by having a deliberate focus on frugal living.
Focus on total cost of transportation, not miles per gallon. Don't get caught up in how many miles per gallon your car gets. Focus instead on what you are paying for transportation.
Sure, miles per gallon and the cost of fuel influence your transportation costs, but when you buy a new hybrid that gets fantastic fuel economy, you're also paying:
higher license fees
higher insurance costs
monthly car payments
Do the math and you'll find that calculating your cost of transportation is one of the great money saving ideas.
A used car with no payments, liability insurance only, and cheap licensing fees might cost you less to operate all year long (fuel included) than what you would pay for just 3 or 4 car payments.
Consider why you are buying a highly fuel efficient car. Is it for higher fuel economy, lower operating costs or lower costs associated with getting you where you want to go?
The bottom line is what you spend each year on transportation, so an old not-so-efficient car that is paid for might be the right financial answer, if you aren't putting on tens of thousands of miles each year. I've implemented this and other money saving ideas for my personal transportation and they have saved me many thousands of dollars.
Say NO to those asking for money. Aren't you just about tired of seemingly everyone asking for your money? You don't ask for money, so why should others?
Not only is this one of the money saving ideas because you hang onto your money, but it will also help you keep from getting "taken" by the con artists that abound. Here is a quick list of tips:
Get on the "no call" lists.
Ask phone solicitors to take you off their call list.
Hang up on pushy solicitors.
Offer to perform a service for the organization instead of giving money. They won't accept your offer, and that will end the call.
Request a number where you can call back, then never call back.
If you're going to cave in, them tell them to call you back later. When they call back, have the courage to give them the "cold shoulder."
Speak gibberish or another language during the entire phone call.
Ask them to hold on for a moment, then go out and cut the grass or fix yourself a meal.
It's your money, so just say no to others that think it will change hands simply based on a request. You have your own hard financial battles to fight, and you don't need others taking away your ammunition.
Like many other things in life, one of the great money saving ideas is simply to say NO.
Move to a lower cost of living area. This is another of the best money saving ideas because it can greatly affect your cost of commuting, housing, and goods and services.
An associate of mine was enjoying a beer with me at a nice micro-brewery in Cheyenne. When the check came, it was $4.50 for two large mugs of hand-crafted beer. He looked at me in amazement and said that he expected to pay that for just one beer.
The prices of things vary greatly from one area to another. Do some research and figure out where the general cost of living is lower. It might be that it's time to relocate.
Also, recognize that there might only be a few things about a particular location that make it worth residing there. For example, a man I used to work with lived about 80 miles from the office. He never moved closer to work because his home was financed at a very low interest rate, while others with newer homes closer to work were paying about twice that amount.
His monthly house payment was so low that he chose not to move closer to the office. Instead he chose to pay for the commute. Fuel was much cheaper than the difference in house payments.
Grow your own vegetables. Most of us eat vegetables, so growing our own can be one of the best money saving ideas since it costs very little to do it, and the potential payoff is rather large.
We are fond of squash here at the homestead, and we estimate that in one summer, we harvest about 300 pounds of summer and winter squash. Anytime you can grow 300 pounds of food, with just a couple dozen seeds, that has to be a wonderful return on investment.
Okay, so you don't like squash. There are hundreds of other vegetables to choose from that grow just as easy as squash. And, you'll probably have much better luck growing them. We have a relatively harsh environment here, whereas most of the rest of the country has an environment that is much more conducive to growing vegetables.
In America, our food travels great distances to reach us. All this costs more money as the price of fuel rises. Grow your own, and you nearly eliminate the cost of produce.
Avoid discretionary spending. This means buy what you need and not what you don't. Americans buy lots of things that we don't need. We are fully engrossed in consumerism.
No other country on the planet even comes close to the range of things we buy and how much we buy.
There are many things that you would like to have, but if you really focus on what you require, you'll find that saving lots of money is easy when you stop making discretionary purchases.
Money saving ideas like this mean you stop buying, or at least carefully consider whether you need:
cigarettes
liquor, beer or wine
cable TV
satellite radio service
cell phone
new car
another car
meals out
new house
cabin at the lake
new furniture
new clothes
a set of collectible coins, stamps, or plates
a house keeper
landscape service
ski boat
magazine subscriptions
digital camera
another pet or two
...and the list goes on and on.
Be honest with yourself. Do you need more things, or are you trying to satisfy another need? Remember that love, happiness and fulfillment can't be purchased at any price.
The wonderful thing about these type of money saving ideas is the average person can save serious money following this frugal living approach - even with a modest income. Think of it like this:
You're at the office working like everyone else.
Salaries are based in part on what a company needs to pay to retain employees.
Part of the compensation assumes that there is a fair amount of discretionary spending going on, as well as normal living expenses.
In a perfect world, all the employees will earn the same amount of "mad money" for the same level of service to the company.
Now, if you practice frugal living, and the other employees don't, then a healthy part of your salary can go towards savings instead of discretionary expenses.
As an example, the first year of my career was spent without an automobile, while everyone else drove a car. I purchased a car for less than $1,000 at the beginning of year 2 and drove it for about 17 years.
No one else I knew did anything like that because much of their self-esteem was wrapped up in their automobile. And, much of their money was wrapped up there too.
Following this general approach, I was able to sock away plenty of savings in just a few years because my discretionary spending was very limited. Others didn't employ a frugal living approach, and they sat back and watched in amazement as I accomplished many of my financial goals.
I focused on saving money for things I truly valued, and it worked very well for me. There isn't any secret to it. You just have to be disciplined in your spending and savings habits, and remain focused on important goals you have set for yourself.
Stop debt before it starts. Debt is a form of enslavement to another. It's all right for some things like a home mortgage, but better off left alone when it comes to other things.
They say: "If you find yourself in a hole, the first thing to do is stop digging." I hope this is one of the money saving ideas that's easy to understand - don't start digging in the first place.
Debt is attractive because it is a bit abstract. Someone else handles all the money worry. You get your stuff right when you want it, and then make "easy payments" over time. Your things are purchased on plastic, so it doesn't seem like real money is being spent; it's more like simply a bunch of "numbers" on paper.
The problem is what's behind those "easy payments", and the amount of time we're talking about. People seldom stop to think and carefully consider any of this behind the scenes stuff until it is too late, and it has become a serious financial burden.
I pay off my credit card in full each month. It is a convenience for me, not a necessity. The credit card company would like me to pay the minimum balance and start paying them interest. I won't do that because I don't want to start digging myself a hole.
If you're paying about 20% annual interest rate on a credit card, that can add up to lots of money in addition to the original amount financed. And, that can add up to financial trouble for those that aren't looking ahead.
Let's look at an example.
One of my recent bills was about $2,500. (I know that seems like a lot of money, but I was making investments in my greenhouses, so it doesn't reflect my normal pattern of spending.) The minimum payment offered on my statement was $15. That's just a little over half a percent.
It's not realistic to look at those minimum payments as "easy payments" because they don't include the interest that keeps piling up each month. The interest on $2,500 at about 20% is more than $40 for the first month - that's almost three times the minimum payment offered.
Logically, wouldn't you expect that the minimum payment would at least cover the interest? Of course, and it will on the next bill. If I were to pay only the minimum during the first month, the next month they will want about $65 as a minimum.
Warning, here comes the enslavement part. If I paid about $65 a month on that $2,500 bill, AND NEVER CHARGED ANYTHING ELSE ON THE ACCOUNT, at 20% interest, the bill would be paid off in 5 years, and I would have paid about $4,000 to clear the account.
In this example, I would have paid the credit card company $1,500 to use their money for 5 years. If I paid cash, I could use that $1,500 for something else.
Have a bank account. This almost seems unnecessary to mention, but it is amazing how many people don't have a bank account. In Cheyenne, a town of about 60,000 people, it is estimated that about 10,000 adults don't have a bank account.
That's hard to believe.
Instead, many of these people go to check cashing services and pay a portion of their check to cash it. In Cheyenne, the figures I've seen range from 3% to 5% for payroll checks and 10% to cash a personal check. That's not on any list of money saving ideas I've ever seen. It looks a lot like a money making idea for the check cashing place. And, we're paying for it.
Now, if you look at state income tax rates, many are between 3% and 5%. That means cashing your check is like having state income tax taken out of your check in a state like Wyoming where we have no income tax. And, in other states, it's like paying double state income tax.
Why in the world would anyone want to do that?
Let's assume you make $25,000 a year ($12 per hour) and you cash your weekly check at a 3% fee. That's about $14.50 a week to cash your paycheck. In a year, that's $750 you pay to get the money that is owed to you.
Another way to look at that is over 60 hours of your labor (1 and 1/2 weeks of work) is wasted just because you don't have a bank to cash your check. Implement this money saving idea and save those wasted labor hours for you.
Think about it. You're paying someone to give you money that you already earned. They didn't earn it, but you're giving them part of your paycheck anyway. It is amazing to me that there are many of these check cashing businesses in Cheyenne.
They make a good living simply based on skimming money off the top of paychecks that people gladly bring to them to cash.
Get a bank account as a simple and recurring money saving idea. You'll save money because banks don't charge account holders for cashing checks. Besides, you need to be there at the bank anyway to deposit part of your check in savings.
So, there you have one of the double money saving ideas - don't pay to cash your check, and start saving more of it.
Pay off the mortgage. Okay, here is one of the real big money saving ideas. When you pay off your mortgage, you save tons of money over what you would have paid over its entire term. Many of us could do this if we really tried.
Let's look at a simple comparison between a 30 year loan and a 15 year loan to get a feel for the money savings we can realize with an early payoff.
Say you took out a $300,000 loan for 30 years at 6% interest. That's approximately $1,800 a month for a mortgage payment and nearly $350,000 in interest paid to the lender over the life of the loan.
If you took out the same loan amount with the same interest for only half as long (15 years), you'd pay about $2,500 a month, and you'd pay about $155,000 in interest to the lender over the life of the loan.
So, the price of paying off the loan in half the time is an additional $700 a month for 15 years, and you save about $192,000 in interest payments.
Here's another way to look at this; you're paying about 40% more each month, and you wind up with almost a 55% savings in interest payments.
What drives these numbers is the front-loading of the interest payments. Your payments during the first year of the 30 year loan are about 80% interest and 20% towards paying back what you borrowed. Your payments during the last year are about 3% interest and 97% towards paying back what you borrowed.
For the 15 year loan, your payments are about 58% interest during the first year because you're borrowing the same amount of money at the same interest rate, but you're not borrowing it for nearly as long. In the last year of the loan, you're paying about 3% interest, the same as you would for the 30 year loan.
It may seem impossible to pay off your home in half the time, but if you are a two income family, it isn't far fetched at all. If you think it is completely out of the question, then you're likely not practicing frugal living, and you're not living well within your means.
Paying off the mortgage at 15 years instead of 30 years will save you about $192,000 in interest, and you're debt free at that point. No housing expenses except insurance and taxes.
What you're trading is more money upfront each month, for a huge longer term savings that you realize in half the time. On the flip side, you would be spending less each month for twice as long, and you pay the lender much more in interest than what you borrowed - all for the privilege of extending your payment period out another 15 years.
Like other money saving ideas, this one should get us thinking about our approach to spending and investment. Instead of determining what kind of house we can afford based on monthly payments on a 30 year loan, many of us would be better off figuring out what we can afford based on monthly payments on a 15 year loan.
If we do this, our $1,800 a month payment only allows us to borrow $220,000. Perhaps that means we'll have to settle for less house or make a larger down payment on a larger home. As they say, everything has its price.
To me, this is one of the "no brainer" money saving ideas. Get your mortgage paid off early and keep all that interest savings in your pocket instead of giving it to the banks.
Disassociate yourself with human "tar babies". I'm going to take some heat for this, but it is among the most important of the money saving ideas, so I'll take my chances.
Do you have someone in your life that is high maintenance, puts you in the financial "hurt locker", or otherwise drains you financially?
If so, you're not alone; there are many like you across the country, and you're all in trouble. If you don't put a stop to it, you're going to be in big long-term trouble. Let's look at some examples based on my personal knowledge:
A friend that borrows money and never pays it back. You know these people from school - they were always "borrowing" a piece of paper or some other item that they should have had all along. They're just like a street beggar - give them something and they'll identify you as a resource for future begging.
A spouse that enters the marriage with clothes, car and a television, and not much else. You're the one providing the rest of the resources, and that includes the house and all the money necessary to run a household. They're a type of leech or parasite.
A "significant other" with a drug or gambling problem. You're feeding their addiction with hard earned cash, or they find money or other resources (of yours) to resell to support their irresponsible behavior.
A less than ambitious adult child who depends on you for rent, food and so forth. They usually have a sunny disposition because they don't have the worries and burden of gainful employment.
When faced with something similar, the best money saving idea is to alter your behavior to make it clear that their behavior isn't going to fly anymore. You need to:
Cut them off so they stop feeding on you.
Stop enabling them to be irresponsible.
Break off the relationship if necessary.
Let them crash and burn by themselves.
Short of that, you'll have a relationship based primarily on them targeting your resources. They'll be a monkey on your back for as long as they think they can stay balanced there.
If you continue to support them, you're only providing them with a crutch. Take away that enabling crutch and beat them over the head with it.
Once you do that, they won't come back for more. It's difficult to do, but a great money saving idea that benefits you and the dependent that you are enabling.
Remember, the first thing you're taught when it comes to saving a drowning person is not to let them get a hold of you. They'll climb all over you to keep themselves from drowning, and chances are that both of you will drown.
I've been down that financial road once, and I'm not doing that ever again. It wasn't pleasant, and it was all avoidable. If you're in this situation, then put this money saving idea to work for you, and take action to set yourself free.
Here is a key to decision-making in this area. Imagine with all your heart that what the irresponsible person in your life is doing, saying or imposing on you, is something that you are doing, saying or imposing on them. In other words, put yourself in their shoes and imagine that it's you and not them engaged in the activity.
Then, think about what "you have done" and see how you feel about yourself. If you feel fine, then what they're doing isn't in conflict with your values.
If you feel awful about what "you have done" then there is a tremendous distance between your values and their values. If you say "I would never ever do anything like that", then it's time to turn and walk away.
Again, I've been there, done that, and I ain't ever doing it again.
People only take advantage of you to the extent that you allow it. Wake up and realize that you own part of the blame, and stop allowing it to happen.
I feel so strongly about this topic that I wrote a separate page about tar babies.
So, there you have it. A big list of big money saving ideas to consider for your approach to frugal living. May the force be with you, and remember that you'll save the most generally where you spend the most.
