I have summarized 8 saving tips and tricks for you of which one is a bit broader. A while back I wrote a post on the topic with mostly same tips and tricks. Decided a separate page can be easier to find and is easier to update in case new tips will be shared later. I will end with a small reminder about the value and importance of compounding interest (have also dedicated a whole page to the topic). If you are interested in how to start investing just jump to page Start Investing. (Updated July 4 2021)
Let’s start with 8 saving tips and tricks.
1. Do a monthly budget
Yes, it is boring, takes time and might be annoying, yet to find where you can save a monthly budget is important. It will show you how much you earn net of taxes and what your costs consist of every month. You do not have to go into details as how many gallons or litre of Coca-Cola you drink. It can be allocated to groceries. Do it on a piece of paper or in an excel sheet (google sheets works very well). Before you can create the budget, you must know the actual numbers. Based on the actual costs you will create a budget to follow up and compare did you follow the budget or performed better than expected.
It does sound lame and boring, only geeks do budgets and other bad excuses have been thrown around. It is up to you, do you want to improve your financials or not. Make it a step-by-step process, start following one cost bucket and then expand.
2. Pay yourself first
The principal idea of paying yourself first is that you ensure a monthly saving. Yes, this does not cover everybody out there. Here the budget is of great help, to know how much you can set aside every month. It also forces you to ensure your spending does not exceed your budget.
Move it to a savings account, IRA (individual retirement account), 401K, Finnish OST (osakesäästötili, aktiesparkonto) or Swedish ISK (investeringssparkonto) or any other local savings or brokerage account you might have. Especially those that have a tax benefit are good in the long run. By opening a brokerage (savings) account you can start your journey. This way you can build up an extra pension, help your children or child save up for a home, better future or retire before your friends. Remember it takes time before you will start seeing any result, many years in fact. For me it took over 6 years of relentless saving to start seeing an impact. Even a small amount like $10 or 10€ will over time be a pleasant amount after 30 to 40 years. This is the difficult part, you have to save for a long time and 30 to 40 years if very difficult for many people and where most will fail.
Yet, most of us can save a little every month if we want to. If you are unable to save at the moment, then you should start fixing the situation.
3. Reduce small and impulse purchases
The small saving per month can come from daily small purchases, for example reduce the number of coffees bought. Instead of a triple macchiato super latte (or whatever you can get at Starbucks) take a regular coffee and put the difference in your savings account. Other small purchases can be soda, candy bars when you actually came to the store for some food, order a normal size meal instead of plus for additional $1 (McDonalds is really good in this category of getting people to buy more) as well as taking an Uber instead of walking 500 meters. In the grocery store when you get to the cashier do not be tempted to buy all the different snacks they have. Try to control your impulse purchases and never go grocery shopping hungry.
Why not do a challenge, save all receipts from one month and summarize the costs. Now you will see all small purchases and how much it is. Make it a challenge and set written goals that you tell your friends and family, say you set a goal of saving 5 000 in a index fund within two years. Tell your family and friends about it and every time you meet them tell them how far you have come. Over time increase the number and once you have saved a lot from the small purchases you will start seeing the difference.
4. Do you need all streaming services?
If you pay for Spotify, Netflix, Viaplay, HBO, Disney+ and many other on- demand or streaming services every month you might consider cancelling some. Ask yourself do you need all these streaming services? Are they that valuable to you? Could you use the time better? For example, do your monthly budget and see how much goes to streaming services. Ask yourself how many times has it made you happy? Say you can cancel one service that costs you $9 or 9€ a month, equivalent to $108 or 108€ a year. Now you have found almost a full amount that could monthly be saved in a cost-efficient ETF or mutual fund every month.
This might be contradicting as I own shares in ViacomCBS and AT&T which have subscription based services like Paramount+ and HBO Max.
5. Credit card optimization
Credit cards have huge late fees and interest on the overdue amount. Ensure you always pay off the full amount to reduce your total costs, a quarter saved here and there ends up to a big amount over time. Even Warren Buffett has stated that quarters end up to big piles on money. Credit cards also have different loyalty, cash back and reward systems which can be good if properly used. I recommend reading the small print in credit card contracts, I did it to ensure no extra costs and to know what I am committed to. In the small print late fees, interest and all other relevant information is mentioned which is important. Sometimes usage of credit cards is good as you might get discounts and other benefits which reduces your total costs including giving you 30 days or more time to pay the bill, this can improve compounding interest for you given you do it right and pay off the full bill once it comes. Take time to find which credit card is the best for you, a few hours spent looking and reading can reduce your credit card costs a lot.
Look at what option would be best for you, sometimes having a credit card is not the best option if you are struggling with your finances.
6. Reduce bank costs
Is the bank you currently have the best choice in form of costs and benefits? Do you use many different banks? Could all services be consolidated to one bank, if it could reduce the total costs? Do you pay for services you do not use?
There are a lot of question to be answered here and once you have taken time to give the answers you will most likely find a supplier who is the optimal for you. If you live with your spouse consolidating your finances to some extent can give you scale effects (make you a bigger customer who gets more benefits for a smaller fee) and more negotiation power. Changing bank might be an option even though it requires time and dedication from you. Remember, as with everything if you take time and dedicate you will get further than most people and you have the chance to improve your financials.
Bank costs covers mortgage costs if you have one, do you have an optimal interest rate on your mortgage? Can it be reduced? Call your bank and ask, try to get the rate down a bit as this might help you with the savings part. Look at it from the banks perspective, why would you call a customer and inform them their interest rate has decreased, this would most likely reduce your bonus payment and the banks income. But, if you get it reduced a bit, impact on a yearly basis might be what you need to save for an extra holiday or better retirement.
7. The art of Living Costs
Everybody wants a big house, expensive cars and go on luxurious holidays a few times a year, the art of luxurious life. I do not have that possibility without taking on huge amounts of debt. Debt for consumption or for cost increasing is the worst kind of debt you can have. Not only does it limit your future of wealth, it also locks you in a high risk bubble. Food is one big expense humans have, we need it to and it can be seen as one necessary source to gain income. Groceries do not have to be the finest meat or exotic and expensive fruits, yet the worst you can buy is processed food with little nutrition value. You can buy decent food with good nutrition value for a good price and keep your health. You might have to learn too cook for a whole week. The time spent making food for a week might be 2-4 hours per week which is not a high cost.
Living costs also cover expenses like cars and other extravagant stuff like cloths. Do you need the latest car model, latest iPhone or MacBook, current cloth trends and so on? Is this what determines the quality of life for you? I have an iPhone 5SE bought at a good price many years after it was launched. My computer is from 2017 and still going strong (let's hope it does not explode now that I mention it), not the newest, not the best out there, but fulfils all purposes. The latest 60-inch TV is not needed right? You can cope with a little older version, my is from 2009 and still in use from time to time. Here the ESG perspective comes in (especially environment) you can decide if companies produce sustainable products or just introduce small improvements every year.
Cloth can be bought at discounts when they are off season. That is how I buy my cloths, usually they are at 50% discount. I do buy mainly branded cloths and shoes that I know will last. As $100 or 100€ spent today that lasts 10 years is better than $20 or 20€ spent every year for 10 years.
8. Insurance costs
Insurance can be one of the biggest expenses we have besides housing (including mortgage). That is why it is important to choose a good and inexpensive insurance for you, if you focus all or most of your insurances to one insurance company you can often get a package deal that is cheaper. Car, fire (including a general house insurance), general and life insurance can in some situations be consolidated to one supplier with good benefits. If possible, try to see if your bank has an insurance company as partner which could reduce you total costs even further.
Saving tips and tricks summary
- Do a budget
- Pay yourself first
- Reduce small and impulse purchases
- Reduce monthly subscriptions
- Credit card optimization
- Reduce bank fees
- Check your living costs
- Optimize insurance costs
Do a budget and follow up on your expenses, this way you know where the small saving can be found and your wealth increased.
Disclaimer
The text are the authors opinions and opinions only. Any other use of is on readers own responsibility.
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