We’ve all heard the expression “live within your means” or “spend less, save and invest the rest”. These simple yet, challenging guidelines have laid the foundation of our financial plan to achieve financial independence (FI). While all these may sound great, effectively increasing the gap between your income and expenses requires discipline, dedication and a heck of a lot of teamwork. But where do you begin? … income, expenses, both?
To me, the answer is pretty simple … BOTH; however, I’m a big proponent of focusing on your expenses first so you can understand your spending habits. Once you identify and act on the big ticket items you should start to see pretty substantial savings that will encourage you to search for additional optimization opportunities and/or start thinking about what to do on the income side of the equation.
Having said that, let me share 12 money-saving tips that have helped me lower my expenses and make some extra income.
1. Bring Lunch to Work
Thanks to my awesome and beautiful wife, I could easily say I bring lunch to work 4-5 days a week. In the downtown Denver area, the average cost for lunch in 2017 is around $13 (including a drink). Taxes would bring this number up to $14.07 and with a 20% tip to a total of $16.89. This number may not seem significant but to me is quite a lot. In 2017, there are a total of 250 working days so assuming you get a month off (20 working days) that leaves 220 working days that if multiplied by $16.89 yields $3,716. If you don’t care about this kind of money what the hell are you doing reading a personal finance blog … sarcastic joke sorry 🙂
2. Enjoy Free Coffee at the Office
Sometimes we tend to take for granted some of the perks we get at work. In my case, we have self-serving coffee and hot tea on every floor in our building. Both are actually pretty well-known brands that taste remarkably good. In spite of that, I see my fellow co-workers going downstairs and walking down the street to Starbucks or Dazbog coffee. Don’t get me wrong, I don’t think there’s anything wrong with that but the numbers start to add up. Assuming a regular cup of coffee at ~$3.5-$4.00, you’d be spending $22.73-$25.98/week or $1,000.24-$1,143.12/year (including taxes at 8.25% and a 20% tip).
3. Wash your Cars at Home
A drive-thru car wash usually found at a gas station charges ~$10.00 just for cleaning the outside of your vehicle. If you go to one of these fancy places that are staffed with folks then the number gets higher. I’ve never used the latter but gave up on the drive-thru. The reason was simple, 1) I was never pleased with how my cars came out and 2) on top of that having to pay for for something I was not happy with. This led to my decision to take actions on my own. Today, I do full service to both our vehicles and the cost is mainly my time and water. I know it may not be a lot of money but assuming I wash my cars once per month (which I normally do) I have savings in the order of $120/year (not including water costs). The most important thing is that I get to work out and enjoy the product of my hard labor.
4. Minimize Use of House Cleaning Services
In Colorado, house cleaning services normally range between $25-35/hour. Assuming you have a decent sized house and kids that can turn the place upside down then you might be looking at ~4 hours or $100-$140/visit. If you setup a weekly appointment you’ll be spending $400-$560/month or $4,800-$6,720 per year!. Forget it, that’s just way too much money. I’ll be honest with you, we have a lady that gives us a hand every now and then (started when my wife got pregnant) but it’s usually $100 every couple of months.
5. Learn Handyman Work
By no means I consider myself a handyman; however, I refuse to pay for things I have little risk of messing up. I tend to pick my battles based on the cost of labor being too high and also making sure I don’t have to spend money on specialized tools. In some cases where I haven’t had the right tools for the job, I’ve borrowed them from friends without any issues. For the most part my projects have been simple: painting (~$1,000), installing wall speakers (7@ $$75 each), tv wall mounts (3@ $100 each), closet ($1,500), exterior x-mas lighting ($250) custom shelves (2@ $750 each) and custom fireplace mantle ($350). All these projects would have cost me ~$5,425!. The only thing I can say is … go ahead and get an electric drill and watch youtube!
6. Cut the Cable
I recently posted an article about 5 decisions that led to $3,500+ in annual savings. One of those decisions was to get rid of cable. Initially, my wife was uncomfortable with the idea but after more than 6 months I can tell you that we are still alive and love being able to save ~ $64/month or $768/year.
7. Increase Insurance Deductible
This might be tricky for some people as it enters the arena of risk management and having peace of mind. On my post about 5 decisions that led to $3,500+ in annual savings I also discuss how I increased my deductible on cars and primary residence to save $446/year.
8. Sell Unused Stuff
Who hasn’t sold something on Craigslist? … I have; however, have you heard about Letgo or OfferUp? well, these are two great websites that make buying and selling way easier than Craigslist. Take a picture, add a few words, pick your $$ and post it. The service is free (unless you want your products to show at the top), you can see reviews from buyers and sellers and chat to agree on the transaction. I haven’t had any issues in terms of scams and always meet at a public place. I’ve been using OfferUp since 2015 and so far I’ve made $2,144.
9. Fill out Surveys
I’m not a big fan of spending my time answering surveys and watching videos on platforms like Swagbucks or InboxDollars; however, every now and then I’ll get an email from my internet and/or cell phone provider to answer quick surveys that reward me with a $25 gift card. There are many websites that pay you for completing tasks so as long as you think your time is worth the effort feel free to go for it. In my particular case, I choose my battles and go for easy wins.
10. Avoid “On Sale” signs
We try not to fall under the temptation of buying items that are “on sale”. I think it’s great to take advantage of deals (especially if included on your list of needs) but just because you see that sign it doesn’t mean you have to go it. If you believe you’re beating down the house then let me remind you the house always wins. What we normally do is identify things we need and try to stick to our game plan when going to a particular store. This requires teamwork and focus so you can get in and get out :).
11. Ask for Discounts as Appropriate
The other day we were at at-home (the store) because we needed to get an umbrella for our patio. We noticed there was a sign that said 50% off. You’re probably thinking … dude, you just mentioned one should avoid “on sale” signs … and that is correct; however, in this case, we went to the store looking for that specific item which happened to be on sale.
As you may imagine we were thrilled to see we would be getting what we needed at a discount. To our surprise when we got to the cashier the lady said the discount was on very specific umbrellas (the ugly ones of course). At this point we had two options, buy at full price or leave.
We had done our research and knew we weren’t going to get it at a lower price anywhere else. Instead of taking off, I asked the lady if there was something she could do for us. Before finishing my sentence she said … well, I can give you a 10% off. Of course, this brought a smile to my face.
The moral of the story boils down to a very well known saying … If you don’t ask you don’t get.
12. Avoid Credit Card Fees
This tip might not lower your expenses or increase your income but could bring back money to your pocket. We pay almost everything with our credit card and use automation to pay them in full at the end of the month to avoid interest and fees. In some cases, there have been situations where I’ve made mistakes that triggered bank fees (even with overdraft protection which I totally recommend activating). As a result, the bank has usually charged a $25 fee.
Pay attention to what I’m about to say. Your brick and mortar bank that usually pays 0.01% APY will charge you $25 in one shot. Does that seem right to you? If you think about it how much money do you need to have in that account to make $25/year? the answer is simple, $250,000. Having that kind of money is a big accomplishment so if you do, then good for you. Hopefully, you don’t have it in a bank that pays 0.01% APY.
Anyways, the point is that it’s not fair to charge someone $25 especially when you have an excellent track record with the bank. This has happened to me a couple of times but I react fairly quick calling the bank to get the fees reversed. So far, I’ve been successful but the trick is staying on top of it and calling them right away.
- There are opportunities for cost reduction all around us. All you need to do is understand your expenses and reflect on adjustments you might be in a position to make.
- Don’t become attached to material things especially if you have no use for them. That’s money waiting for you that could be recouped fairly easy.
- Some of these suggestions might make some people uncomfortable. Take it one step at a time and allow yourself to adapt.
- These tips work for us and allow increasing the gap between our income and expenses; however, you need to have a strategy to efficiently save and invest that difference otherwise as soon as you see the extra $$$ you’ll blow it.
- You’ll notice I did not include increasing your income via dividend paying stocks or real estate investing. My purpose was to keep these tips as simple as possible without entering the arena of investing.
I know there’s a lot of awesome tips out there so what do you do for increasing the gap between your income and your expenses?
Until next time … JJ