How to Save Money Effectively

ways to save money effectively

No random tips, no frustration, and no cutbacks on your lifestyle. Just highly effective ways to save money here and now. Get insights and workable game plans on how to save your money today. 

Regardless of where you are at currently in life, you need to know that saving more money to improve your financial health is possible! If you are already putting some of the money saving guidelines below to work, good for you. If you are looking for ways to get started on a wealth accumulation mindset, this article will help you take that first step. Sometimes, taking this first step is painful, but I guarantee it will pay off in many joyful dividends in the near future.

Save Without Cutting Back On Your Lifestyle

While there are tons of good advice on how to be a secret cheapskate or penny pincher, a lot of them require you to cut back on your lifestyle.

Two extreme examples on the web:

  • Save Money by Flushing Less: weird-ways-save-money
  • Save Money by Avoiding Starbucks:

save money on starbucks

While the advice above are well-meaning, they are not good for you for two reasons:

1. Not Good for Your Well-Being. Not having that Starbucks coffee/espresso/latte in the morning may save you $4 a day, but denying yourself of that sweet treat or caffeine boost will cause you to feel stressed throughout the day. Most likely, you will need to rely on your inner willpower to overcome your urges and guilt.

2. Becoming like Scrooge. While penny-pinching may save you that few extra bucks, it may lead you to become increasingly consumed with money. In the long term, this can lead to effects such as developing a poor reputation among your friends and associates. After all, people are attracted to and like to hang out with generous people.

More importantly, how does saving another $4 per day add to your net worth? Even if you save another $4 per day (or $120 per month), how do you invest it, and what bank account do you put it into?

The good news is, you can easily save money consistently – much more than $120 per month – without the daily guilt and risks to your social reputation!

Begin With Your Mindset

Saving money is the first step towards building a lifetime of wealth. With money in the bank, you can put them to work by investing sustainably and watching them grow. While not all important, money can give you the freedom to do the things that you want in the future e.g. pursuing that MBA, college tuition fees for your kids, making the downpayment on your dream house, wedding expenses, freedom to quit your job if you don’t enjoy it etc.

If you want to save money without forgoing the little things in life (e.g. lattes, ice cream) that you really enjoy, here are 3 mindsets you need to adopt right now:

Money Saving Hack #1: Save Automatically

An old adage to saving money goes.. “pay yourself first”. One reason why we often fall short of our savings goals is how we forget to put money in our savings accounts every month. It’s usually okay if we miss putting away money once or twice – but if we forget too often, we are setting ourselves up for a dwindling bank account.

That’s why I recommend automating your personal finances and saving schedule. Instead of hoping to save money, you can start to be in control of your finances by setting up your system to do it for your passively.

To do this, you just need to put money into 3 places when your paycheck arrives:

save money automatically

Step 1: Savings & Sub-Savings Accounts: Here, you should have a main savings account optimized for interest savings. For long-term goals like a planned vacation, downpayment on a house, or wedding expenses, many banks provide the option to create smaller sub-accounts, which are perfect for goal setting.

Step 2: Credit Card Expenses: Automate paying for recurring services like insurance, Netflix, gym memberships, and telco expenses using your credit card. Set up automatic payments using your credit card’s website so your bill is paid promptly every month. You can now be happy knowing you have enough money in your checking account because your expenses have been paid automatically.

Step 3: Misc. Bills: These are bills that cannot be paid off with a credit card. Some examples include rental and utilities such as electric, gas, and water.

Related content that will help you save and make more money:

Money Saving Hack #2: Negotiate Your Bills

Once you have your savings and payments schedule automated, negotiate for lower bill payments on recurring expenses.

Hold on, is that even possible? Yes, it is!

With a little ingenuity and 5-minute phone calls, you can save hundreds of dollars on bills such as:

  • Credit Card and Rebates
  • Telco plan
  • Gym membership
  • Car insurance
  • Travel insurance
  • Air tickets and miles

While it may not always work, it’s very simple and worth a shot every few months!

Here, I list 3 steps you need to negotiate with those companies on fees and rates:

  1. Call them up. Be confident.
  2. Gently explain to them, “I am one of your longest and most loyal customers, and I think you can probably afford to show me some goodwill.”
  3. Ask, “What can you do for me today to lower my rates or incentivize my spending?”

Of course, you will need to adjust these methods to the company you are calling.

I have personally tried this method several times over the past 4 years, and consider it very effective.

Money Saving Hack #3: Prepaying to Save Hundreds

Like your bills, debts such as college tuition loans and rentals can be negotiated to help you save money. While prepaying suggests you have to spend in order to save, it actually helps you reduce your expenses if you manage it well.

Student Loans 

pay student loan

Let’s take for example your $10,000 student loan, at a 5% interest rate and a 10-year repayment period. If you go with the standard monthly payment, you will pay $106.07 per month. Part of this goes to the bank for interest payments.

What this means is, if you can afford it and pay slightly more per month, you will find yourself paying less total interest. Check out how much you can save per year if you paid slightly more money each month:

Monthly PaymentsTotal Interest PaidSavings
$106$2,728$0
$150$1,738$990
$200$1,236$1,492

Even if you pay only $44 more each month, you will save at least $990 in total interest! 

Check out how to optimize your interest savings with this loan calculator.

Negotiating Rental Reductions

Yes, I know most of us sign at least 6-month, 1-year or even 2-year contracts on our rent. Like your bills, your rent can be negotiated and lowered! Here’s how you can get your landlord to agree to this:

Step 1: Ask yourself, “What is my target rent reduction?”

As with most things, always begin with the end in mind – whether it is a price or percentage you want to reduce.

When you know what you want, you can communicate it effectively to your landlord, and also explain why they should accept a rent reduction.

Step 2: What do you offer in return? 

You can’t simply tell your landlord, “I want $100 off my rent next month!” and expect them to readily agree. Always offer something in return. As with most agreements, landlords will happily reduce rents for:

  • Prepaying 3 months rent in advance
  • Offering to extend the termination notice from 1 month to 2 or 3 months
  • Signing an extended lease

If you can give your landlord what they secretly hope for, your chances of reducing your rent will skyrocket!

Step 3: Practice negotiating 

If you are not thick skinned like me or new to negotiating, don’t approach your landlord until you practice with a friend.

Negotiation is a skill that gets you ahead in life. Like any skill, you need the practice to get good at it. I recommend negotiating your credit card bills and air miles first before getting started on this.

What are some actionable things you do to save money? Please leave a comment so we can learn from you! 

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2 Comments

  1. I agree with you.. saving money is really about systems and putting aside money to save every month without fail… penny pinching and forgoing little things doesn’t work..

  2. We do a bit of those things you mentioned… I don’t mind spending on things we find value in, of course it is different for everyone.

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