Seth's Tips On Saving

I just spent the last 30 minutes reading through posts I have made on this blog that include the word "saving" to make sure I haven't written this before.

I haven't. But I had to read a lot of stuff. Man I write too much sometimes. Ah well. Some of the stuff I read I was actually impressed by (meaning I can't believe I could have written something like that). In all honesty I feel like my writing has gone way down hill since early 2008 from what some of the posts I just read.

I should have written this post 6 months ago. Maybe a year ago. Maybe then if someone could change their mentality on their finances (just from reading my blog! Yeah right!) they would have had a head start on what has finally been defined as a "recession".

I save a lot. I always have. I really don't know why. It's almost become a sort of Catholic guilt sort of thing. For example - do not submit to temptation and by doing so you find salvation? I use a question mark there because I'm not sure. But for me, saving is definitely a challenge. And every time I complete that challenge it makes me feel a little bit better about things. About how I'm doing.

How much am I saving you might ask? Over 20% of what I earn. To be exact, 23%. I figure by saving so much I should easily be able to reach my retirement goals.

But this isn't about retirement. It's about saving.

So if you're having trouble saving maybe some of my tips can help.

-The most important question I ever ask of myself when buying anything or paying for anything is this: Do I really need this? Or do I want this?

This question alone has probably saved me thousands of dollars since I began earning my own money. Because it's typically not the big ticket items that I spend money on. It's the every day expenses. For example, today I had an appointment outside of work during the lunch hour. Sure, I was starving. Yes, I was surrounded by strip mall food goodness. Yes, McDonald's value menu is probably the least expensive meal I could eat right now outside of the house. But there was food waiting for me at home. Free food. Leftovers.

And as I was driving by those golden arches, I looked over and felt good about my decision. Not only did I not needlessly spend $3 on food that wasn't healthy for me, I also avoided wasting leftover food that was waiting for me in the fridge. Because everyone knows if something sits in the fridge for long enough, it isn't long before it ends up in the trash (or in the deep back corner buried under something until you clean out your fridge. Gross).

This question solves any material desire for me almost immediately. Do I need a new car? Absolutely not. Do I need new shoes? Probably not for another 6 months at the earliest. Do I need a new pair of jeans?

Yes.

I did.

So here was how I came about that answer:

The last pair of jeans I purchased was in 2004. I bought them for a little over $30. Over the past 5 years I've probably worn them at least twice a week (this takes in to account not wearing them over the summer months). Over 5 years that's roughly about 500 times I wore them. $30 divided by 500 times the jeans were worn equals six cents per use. Do you think about your clothes this way? Because you should. I hate hearing women reference their expensive name brand clothes as an "investment". Would your Jimmy Choos that you bought for $400 get worn even 100 times before you got tired of them?

And I understand that people definitely want to use their money to buy things they want too. So do I. But before I do I always wait at least a week. And I'm talking about more expensive items ($50 or more for me). Not the cookie every now and then (although those can add up too). The reason I wait a week is because I want to see if my feelings are still the same about whatever I'm wanting to purchase a week from when I first wanted it. In fact, I think the longest I ever waited to purchase something was 3 months. It took me that long to decide the money was worth it. Not only will your decision be solid if you give yourself time - you'll more than likely avoid a lot of buyer's remorse that comes with impulse buys. Also, I've found that by giving yourself time I tend to fall out of want for a specific product. It's just not as desireable after some time - but if it is for you then by all means go for it.

Also, by taking time before you purchase you'll give yourself the ability to shop around. See what other retailers are offering it for. Check ebay or craigslist to see if you can find it used (if you don't mind that). Check Amazon. See if you can find a discount code or a coupon for what you want. And when you know you've found the best price go back to your original retailer that was selling the item and barter. Haggle. Tell them to price match your best price and beat the other guys by 10%. Stores are hurting right now and a lot of them are willing to make deals to move inventory.

I can't count how many times - and this is hard for a lot of people - I've complained about a service or product and been given a break. My last oil change took a 25% cut in cost because the guy running the cashier asked me how their service was and I said, "Great, but a little expensive". Didn't like the movie you just walked out of or the dinner you just ate? Free movie passes or a dessert on the house should be on their way as long as you speak to someone in a position to make that happen for you. You work hard for your money, it shouldn't be wasted on things you don't - or didn't enjoy.

Another tip I have is to make saving automatic. I know that other financial gurus have recommended this, but I have something to add to it: Struggle with your saving being automatic. Automatic saving should not be easy. It should be like having to pay one of your major bills every month. Like the rent or the mortgage or possibly even the credit card bill. First of all - take advantage of your company's 401K. If your company matches any sort of percentage of your income you are throwing away free money by not contributing. Second, set up your automatic transfers and make the transfers in to something you can't just easily take out of. A roth IRA is a good place to put your money. CDs. Online savings accounts that don't have ATM withdrawal availability. Think about how much spending money you have every month (hopefully you have some) and take a huge chunk of it and set it up on automatic withdrawal. The first few months it may be hard getting used to, but if you have the proper discipline your spending habits will adjust so it isn't that much of a struggle.

If there's no struggle at all though, then you aren't saving enough. If it's too hard then cut back a little bit on the savings. But don't succumb to stopping the savings completely or withdrawing from the savings accounts. Check your savings account quarterly (or even less) to avoid the temptation. Hopefully you're like me and the larger your accounts get the less you want to take any money from them.

Cut Costs. Working at a couple banks during my college years really helped to develop my understanding of personal finances. Why? Because I would deal with people every day who didn't know what they were doing with their money. And because of their idiocy they were charged fee after fee after fee until they contacted me to let me know how great they thought our company was. What nice people. But you know what? 99% of the time it wasn't the banks fault. It was theirs.

I used to talk to people who would complain to me about the overdraft fees that kept hitting their account. And every time I would see at least one of these charges on either their credit card or bank account:

-Starbucks/McDonalds/Tully's charges for $3+ every morning.
-Higher than average cell phone bill
-Higher than average cable provider bill
-Lunch receipts Monday through Friday
-Restaurant/Bar tabs every other night
-Large retail store charges every weekend/every couple of days
-Large car payment/insurance payment
-Charges at the hairdresser, salon or spa
-Charges for vacations - hotels, flights.

And I just used to sigh and just shake my head at these people. If you have ZERO dollars to your name, or even worse in many of their cases less than zero, why were you doing any of this? Something that used to make me so angry is that they would be calling me about a $30 fee that we charged them which they incurred after they were charged $120 from their cable provider.

I used to want to scream, "You don't have any money! Where do you get off getting the premium platinum package from Comcast?! Does having all of the movie channels/sports channels and other channels that you probably never watch - are those worth the extra $90 that you're paying?!"

But I never did. A fool and his money...

I pride myself on cutting costs. The wife cuts my hair every month (savings of $20/month). I don't drink coffee. ($60/month). I go out for lunch once a month. ($100/month). I work from home so I fill up on gas once a month and have very little insurance coverage. ($150/month). I go for free entertainment - basketball at the local gym or taking the dog to the dog park. I go to happy hour if I want to drink or eat to save on the full price of merriment. (At least $100/month). And sure, those charges may not seem like much, but over an entire year or even lifetime they definitely add up. Every dollar counts.

I could go on about where I cut costs in my life, but I think with what is happening in this economy, hopefully most people will start to get the idea.

It's never too late to start, and if you're already doing right by your accounts well then keep on pushing. I'll be right here continuuing to save if you need any motivation.