In the previous post, I wrote about frugal ideas I hate and that I think are a waste of time. Today, I’m concentrating on the “big wins,” as Ramit calls them. This is the stuff I’d file under “too valuable to ignore.” These big wins can save you hundreds of dollars right away and thousands in the long run. They’re not simply about saving a buck or two here and there, and they’re fairly practical rather than quirky or unconventional.
Here’s my list of powerful tactics that lead to big money wins.
1. Negotiate your salary. If you don’t even try to negotiate, you’re losing out. It’s easier than you think and just a little bit of effort can make a thousands of dollars in difference over your career. Plus, there’s very little at risk when you negotiate (the worst case is you get a “no”). Remember that negotiating your starting salary is most important. This is the number you’ll be working off of from then on, so don’t sacrifice when you’re hired and expect a big jump in salary later.
2. Investing early and adequately. You simply can’t replace the value compounding returns if you wait to invest until later. It’s extremely important to get your money invested as soon as you can. At age 25, I don’t worry about timing the markets since returns tend to average out nicely over the long term. When I reach retirement age, I expect I’ll have earned about 12% per year over 40 years based on the history of the stock market.
3. Tracking spending and budgeting. This one makes both lists! Even if you think you’re cutting back by being frugal, you’ll never know for sure if you don’t do some level of tracking. Budgeting is important, too, so you can make sure you’re hitting your financial goals by saving and investing consistently and effectively (and following #2 on the list).
4. Earn more outside your job. This is another example where time spent on earning more is much more valuable than clipping coupons and pinching pennies. Undoubtedly, you have at least some free time to devote earning money on the side. It can involve as little as five hours a week. Take some time to brainstorm some ideas of how you can earn money. It could be odd jobs, selling things, or providing your services to others. If you can’t get a job, there are other ways to make money, too. It’s really about finding a combination of using your skills and being resourceful and creative. Remember: you don’t need to be an expert. I’m a freelance writer on Adaptu, but I don’t have a Ph. D. in writing.
5. Cut the recurring bills. Ramit shows one reader’s 2-week savings from canceling his gym membership, switching banks, and moving to the best cell phone plans to saved $1,400 a year. This is about the same as giving up 250 lattes for the 12 months. Which is easier to you? Cable TV and/or Satellite is also an easy one to cut out. DirecTV can charge some hefty fees With free programming available, it makes no sense to shell out close to $100 a month on cable. If you concentrate on things you don’t consistently use that cost $10+ a month but get billed automatically, you’ll come up with some great savings with very little effort or change in your life.
6. For recurring bills you can’t eliminate, shop around. In about 20 minutes, you can research and switch to cheaper car insurance. There are tons of options out there, so don’t assume that your current plan is the best. If you save $400 in that 20 minutes, that’s an incredible hourly rate for your effort. This works for just about any industry that has multiple carriers: cable, cell phones, internet. Consider the alternatives when you have options, and this step becomes just as effective #5.
7. Pay off debt quickly. I’m sure this is something we all want to do but not everyone pays as much attention to it as they should. If you leave college with about $23,000 in student loans, like the average student, you’ll pay almost $9,000 in interest if you pay the minimum over 10 years. If you want to save big on interest, always pay more than the minimum payment on your loans. In the same scenario with $23,000 of debt, you’d cut your interest down to about $3,500 if you doubled your monthly payments. Paying off loans allows you to start investing sooner, giving you the ability to grow wealth instead of merely paying down your debt.
The bottom line: if you don’t focus on these things, you’ll easily wipe out your frugal savings you’ve made by concentrating on the small stuff. The best part about focusing on the “big wins” is that you don’t need to pick dozens of them to work on. Pick a few and you’re on your way to saving big.
Do you have any “big wins” that you’re going after?
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photo by: Sue Peacock