The top 5 ways I have saved money
Today we have a contribution from my good friend Glen Stephenson of HowToSaveMoney.guru. If you’re interested in contributing to Money Rebound please contact us.
Having lived a frugal lifestyle for quite a while now, there are lots of ways to save money that I have learned about in that time. The way I view money is that that every dollar I have now is a dollar less that I need to get me to retirement, and so that has lead to some internal reflection on what I want out of life and how I can best get there.
In short, I decided that the easiest way for me to achieve my long term goal was to save money. So that’s exactly what I did. Some of my money saving ideas came by chance, others I read about and even more were borne out of my desire to pay off my debt as quickly as possible.
So let’s get to it – here are the top 5 things that have made the biggest impact to my life and how I save money.
Tracking my expenses and being accountable
Tracking where my money is going is without a doubt the biggest thing that has helped me to become a better saver. Quite often I would think that I was saving really well, when in actual fact I was doing terribly.
The biggest thing that changed how I tracked my spending was when my wife and I worked as a team to track it. Having someone else involved in monitoring expenses helped to keep us both accountable, and it personally made me far more aware of making purchases that I didn’t need to make.
After only a month of tracking expenses and saving as a team – my wife and I managed to cut back on our expenses by almost a full 10%. Month on month that really adds up, and it has now saved us many thousands of dollars.
Do you know where my wife and I saved most of that 10% a month? It wasn’t on big ticket items like bills, but rather it was all the little things that we were buying. Things like coffee in the morning, a packet of chips when we went to the shops, or a muffin at morning tea time.
Pretty much all of it was food related, and all of it was under $5. At the time we were justifying these tiny purchases as only being a few dollars, but when you do it day after day it really starts to add up and cost serious money.
Setting meaningful goals is another important part of saving money. You need to have goals that are important to you and that you are motivated to achieve. I like to use the SMART methodology for goal setting as I find this helps to keep me focused on what is important in my life.
A really challenging goal that I set myself when I started out saving money, was to eliminate my mortgage debt before I was 30 years old. The goal was:
- Specific – Eliminate the mortgage
- Measureable – Before I turn 30
- Actionable – Yes, there are a number of things I can do to achieve this.
- Realistic – I thought so at the time, but I missed it by about 3 months.
- Time-bound – At the time I had 6.5 years to complete it.
My wife and I kept a detailed log of how we were going each and every month in a spreadsheet, and I printed out the graph of our progress and stuck it to the fridge so we could stay motivated.
While we didn’t quite make it, I do feel that having the goal helped us to achieve such a massive accomplishment.
Extra repayments in the mortgage
While I am talking about debt and mortgages, the biggest thing that I have saved money on throughout my life has been mortgage interest. The amount of money that would have accrued on my mortgage if I never made any additional repayments in the form of interest would have been gigantic.
I still remember getting hit with our first interest bill – it was crippling, but over time we found that every extra dollar we put into the loan really made a big difference, and week after week the total amount of interest that we were paying kept on sliding down until it was almost nothing. You might not think it, but even something as small as $10 or $20 a week can make a big dent in the overall interest you have to pay.
I don’t have the exact dollar figure, but we saved close to $300,000 in interest by paying off our mortgage early. That alone puts us $300,000 closer to retirement than we would have been if we only made the minimum repayments.
Understanding the differences between wants and needs
Finally, understanding that I didn’t actually need to buy the latest computer game, or go to see the latest movie was something that I struggled with at first. I always felt like I was missing out if I didn’t do what everyone else was doing, or if I didn’t have what everyone else had.
Now I know that most of the things I wanted were just that – wants, and I didn’t actually need any of it. Quite often I was only wanting things because others had them, once I stopped caring what other people did or had, I didn’t feel like I was missing out – it was actually really liberating and it helped us to keep our priorities in order.
Glen is the owner of How to Save Money, a personal finance website dedicated to helping people save money and find financial freedom. Glen recently paid off over $300,000 in mortgage debt within 7 years, and he wants to share his money saving tips with others to help them get on their way to financial freedom.