Economizing, reducing expenses and saving money, comes naturally for a few people but not for many others. Dave Chilton in his book The Wealthy Barber Returns argues that it is unnatural and evolutionarily unwise to save for a tomorrow that may never come. He’s probably right.
Our society has largely removed us from survival-in-the-wild situations and placed us into a situation where the competition is for dollars, which can be saved and grown, rather than for food, which must be consumed before it rots and becomes useless.
Once you’ve made the decision to put some money aside for the future how do you start?
It’s always easiest to make money when you already have some. After all, the rich get richer. Savings have a way of ‘snow-balling.’ Things start slowly at first but, over time, they build and pick up speed.
But what if you don’t have any money? You’ll have to get some by doing some extra work or cutting some expense. Which method you use may be forced by circumstance or be a personal preference. My choice was to cut expenses. (I figured I already worked enough and most of the jobs that I worked at figured that they didn’t want to pay me over-time.)
Cutting expenses will feel unpleasant at first but look for something that you might be better off without. Vices are a good place to start. If you smoke or drink you already know that these things are bad for you in the long run. You don’t have to cut them out completely (‘cause they’re fun) but set yourself a limit. Ration yourself. Aim for, say, two thirds of your habitual consumption. When I started cutting expenses it started by cutting down trips to the bar and beer consumption.
If you don’t have vices, congratulations. Look for other places to cut expenses. Coffee shop drinks, restaurant lunches, extra drives to the store, entertainment expenses (movies, streaming services, book & magazine purchases), anything else you can think of. Spend less than you bring in. And be honest with yourself.
I’ve known people with money problems and people with weight problems. One of the things that I’ve seen in common with many of them is failure to accurately track their own behaviour. One might spend or eat without noting the action. When asked, they might deny that it happened or say that it’s so small an amount that it’s not worth worrying about.
It’s all worth worrying about. Especially if you have a problem with it. If you truly want what you claim to want, count everything. Don’t fake yourself out. It will only cause failure and stress.
Learn to do tasks that you might pay others to do. If you have a vehicle, learn to change your own oil. Learn to install your own winter tires. If you’re not a renter learn basic plumbing & electrical. Changing one light switch or unplugging one drain or changing one toilet valve can sale hundreds of dollars. None of these skills are hard to learn and once the neighbours know that you’re capable they may call on you. I get beer and food for small repairs all the time. Those both reduce my expenses, too.
You may choose to work more to increase your income. This is a good idea if it seems best to you. Just make sure that you save the extra income. On the rare occasions that I took extra work I would save half and spend the other half. This gave me both money in the bank and a small reward for the extra work. This may be a good plan for you to follow once you’re already living within your income.
If you have spare space in your home consider taking in a roommate or border. If you live by yourself consider moving in with a friend. Either of these is a big step that can produce, or expose, relationship problems so think carefully before you take the leap. With housing being a major expense, sharing costs can also produce major savings over an extended period.
I’m pretty easy going so I had roommates, until my mid 20’s, who helped pay the rent. When I was mid 30’s and bought my home I brought in borders who helped pay the mortgage. To me it felt like a Dire Straights song – Money for Nothing.
After a month of following one or more of the suggested approaches to economize/save you should have a few dollars. Even $20 is a start. $100 is better. More yet is better yet. You can use this money to start saving more.
Some of these ideas will seem simple, and they are. These are things that worked for me and should work for you too.
Everyone eats and supermarkets put things on sale on a rotation. Watch for specific items going on sale every 3 weeks, every 4 weeks, every 6 weeks, every 13 weeks, semi-annually and annually. Learn the rotation at your favourite store. If something non-perishable comes on sale buy enough of it to last until the next scheduled sale. Concentrate on shopping the sales. Learn to tell the difference between needs & wants. Try not to pay full price for anything that you need and never pay full price for things that you want.
Never pay full price for toilet paper, it’s on sale a lot and keeps indefinitely.
Use the money you saved to economize on your weekly purchases and remember to bank the money you save this way, too.
Never buy something just because it’s on sale. Make sure it’s something that you really need and will use. - Shortly after I left high school a friend of mine bought a truck tire...Because it was on sale. More than 50% off. It was a good deal for that truck tire. Unfortunately my friend didn’t have a truck. And the tire didn’t fit his car. And it’s really hard to re-sell a single tire....True story. The moral being that it’s not a good deal if you can’t use what you bought or if it goes to waste.
If you’re someone who makes a lot of short drives by yourself, get a bicycle (or use the one you’ve already got). Ride the bike for any trip less than 10Kms. You can frequently find a bike at a garage sale for less than the price of a tank of gas. I ride my bike between 500 & 2,000Kms a year. Even if you drive an economy car with today’s fuel prices you can save over $100 a year and be healthier, too.
Don’t use credit for any of your daily needs or any of your wants.
If you have debt, pay it off. Get that monkey off your back. Anything other than a mortgage needs to be gone as soon as you can make it go away. Don’t even think about investing in anything beyond a bank account until you’ve cleared all other debts.
Debt sucks the money out of your pockets. Interest gets added every month and that is just an over-payment for something that you bought in the past and may not even own anymore.
Paying off debt saves interest charges. Interest charges are a constant drain on your resources. It’s spending for nothing and it’s money that you might not have had to spend if you’d started with a little money in the bank...which you should have soon.
Concluding:
Set your mind straight and accept that saving feels unnatural to some people. Maybe it feels unnatural to you. That’s not a reason to not do it.
You can’t spend all the money you make and still have money. Once you’ve spent it it’s gone. Find a way to decrease your spending or increase your income, even if only temporarily. Get comfortable with having money sitting in the bank.
As soon as you’re a few bucks ahead start investing in yourself, your knowledge, your health and your groceries.
Work to get and maintain a bank balance of at least $500. A lot of people will say that you should aim to get $1,000 in the bank before moving on to the next step but I’m going to say that if you are used to being broke then $500 is good enough. Just work to maintain that bank balance. Emergencies happen and you’ll be glad you have it
Pay off any non-mortgage debt.
Once you get this far you are started on your way. There is still a long way to go but if you can make it this far you have proven to yourself that you are capable of controlling money and can have a financially better life than those whose money controls them.
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