If you want to achieve financial freedom or independence or whatever you call it, you need to get into the habit of living well within your means. That means finding ways to save money. Saving needn’t mean living a minimalist lifestyle (though some people actually enjoy it…nothing wrong with this). It also doesn’t mean you have to be miserable. After all, money lets you live life comfortably and enjoyably.
What it does mean is developing a new set of habits to replace your current habits. For instance, do you believe you’re a slave to money? Money is the root of all evil? And that money tore your family apart? If so, you might be interested in learning more about these myths with your free copy of 7 Money Myths Preventing You From Financial Freedom.
Whether you shop online or at a brick-and-mortar store, there are plenty of ways to save money. I love the thrill of finding good deals or saving money here and there. To me, it’s one big game. Do you remember those kinds of video games where you assign points to specific categories or build up a character a particular way (agility vs damage vs speed)? To me, the money is almost like a game.
After all, I never see the concrete equivalent of it every paycheck. It’s just a magical number that appears in my online banking statements. That’s how I suggest you look at money, as a game. When you gamify money, it’s much more fun. Here are just some of the ways I get more points. Ermh, I mean save money.
Gas
Before you head to a gas station, pull up gasbuddy.com and enter your zip code, along with your octane type. You can easily save a bunch of money doing this. Gasbuddy.com relies on the power of regular users like you and me to report the most up-to-date price of gasoline.
And while you’re at it, if you’re willing to stray a little further from the freeway gas prices tend to be a whole lot cheaper.
If you drive an all-electric vehicle, then wait until off-peak hours before charging your vehicle. Off-peak hours are typically after 6 pm and on the weekends. The price per kilowatt is generally lower than if you use electricity during peak hours, when demand is highest.
Online Shopping
Before you buy that item, always do a quick Google search for coupon codes for the vendor. For several minutes’ worth of work, you can easily save some money. Many vendors issue coupon codes to entice new customers to join their ecosystem. If you’ve never shopped from this particular vendor, chances are high you’ll find a coupon code which will give you a discount.
Install a Chrome extension called WikiBuy. This extension examines your web browsing, and if you happen to be doing some online shopping it will automatically scan the web for better deals. The way WikiBuy makes money is by commission, taking a percent of the sales created as a result of you clicking on one of their suggested lower-priced options.
Rewards Cards
Another way to save is through your credit cards, particularly if you do quite a bit of shopping. Some offer rewards points and others offer cash back.
Which one you use depends on whether you like doing math. In general, rewards points require you to do more math. For example, some rewards cards give you 3 points for every dollar spend on groceries, 2 points on gasoline, and point on everything else. Cashback cards, on the other hand, tend to be on the simpler side, giving you a flat rate on most things (of course there are exceptions).
Learn the rules of both games and decide which is best for you. If you don’t mind having multiple credit card, then get a rewards card and a cashback card. Depending on what you’re buying, use the card most appropriate to situation that will garner the most points.
Invest Your Excessive Cash
If you’re on this site, hopefully you have excess cash lying around.
First of all, you should have enough money in the bank to cover 3 to 12 months of expenses should you lose your job for whatever reason (layoffs, medical reasons). We’ll call this your emergency fund or your cash reserves. How many months you want is entirely up to you. Because I work in the Silicon Valley and am getting older, I have to have more money in my emergency fund as I worry about age discrimination in hiring.
Just having an emergency fund instantly gives you peace of mind from life’s unexpected surprises. It could be things like losing your job, an unexpected car repair, or a medical emergency.
What that amount is depends on your lifestyle. It’s easy to calculate. Just add together all your expenses, such as childcare, car payment, rent/mortgage, medical expenses, groceries, gas, utilities, entertainment, and eating out. Of course, some of these aren’t absolutely necessary. They can be excluded in your total expense calculation. For example, you probably wouldn’t be eating out every day if you find yourself jobless. This is the amount you need every month should you lose your primary (and for most people) sole source of income.
Now, invest the rest. What you invest in depends on your comfort level. Personally, I prefer stocks over real estate because the assets are liquid. With real estate, it’s harder to liquidate your assets should you need them.
Invest Your Money in a High-Yield Savings Account
Consider investing this emergency fund in a high-yield savings accounts. The interest rate is generally higher than the savings account with your bank. Make sure the assets are easily accessible. My advice is to leave this money alone and avoid drawing from it.
There’s another practical reason why, and it’s the banks limiting your access to it. For example, some banks limit the number of checks you can write to just 6 checks every month. So, you’ll want to still keep your regular bank account around where direct deposits from your paychecks go so that you may continue using money from that account.
Of course, you should always be keeping an eye on your financial situation. This is far from a one-time, set-it-and-forget-about-it thing. You may need to the amount in your high-yield savings account. For example, life changes and you may find yourself needing more money per month to cover your expenses.
Consider Using a Financial Adviser
A financial adviser is different from a financial broker. An adviser has to make decisions and trades based on your best interest. A broker, on the other hand, does not have this legal obligation. He can make a series of trades just to generate a commission on your stocks in order to fatten his wallet.
So, an adviser acts more like your attorney, watching out for your best interest.
I use Personal Capital to manage my investments because I don’t have the time to watch the markets and make real-time changes. Nor do I want do. Hell, I have a hard enough time releasing my money energy blocks. The fact that I was able to finally invest my money after 10 long years of inaction is a big step for me.
Besides paying them to manage my wealth, I also like their net worth tracking tool. I aggregate all my accounts, such as my employer’s 401(k), my banks, loans, etc, into Personal Capital. It tells me what my net worth is, along with my liabilities and my spending. With so many accounts, it’s easy to lose track of what’s going on. Personal Capital lets me see these accounts in one convenient location.
I log on every day with my phone and track my net worth. It’s fun and I turn it into a game, asking myself what I can do to get more points.
Invest in Your Employer’s 401(k)
If you’re fortunate enough to have an employer who not only provides you with a 401(k) plan but also matching contributions, then I hope at the very least you’re matching your employer’s contributions. Otherwise, you’re just walking away from free money.
While you’re at it, you may also want to invest the maximum amount to take the biggest pretax advantage you can. That way, you get a bigger tax refund, which is also money on the table. Of course, you’re also saving more for retirement, which means you’ll have more in retirement.
No one ever complains about saving too much. What they do complain about is not saving enough.
Most people’s spending tend to rise as their income rises. Oftentimes they spend more than what they bring home. This is called Parkinson’s Law. So, if you want to achieve financial independence or freedom or whatever you want to call it, you have to violate Parkinson’s Law.
Conclusion
Saving is hard for a lot of people, especially because they are used to a certain lifestyle. To save often means a dramatic change in lifestyle. In means lowering the frequency of eating out, not buying a $5 cup of coffee every day, planning your trips carefully so that you use as little gas as possible. looking for savings and deals when shopping, and having the discipline to delay gratification. If you’re looking for a way to save money and achieve a positive cashflow, I invite you to check out my program here.