The following is a guest post by Kathryn Vercillo from Money Saving Blog, which gives away free discount codes and voucher codes. She writes about personal finance, living frugally and saving money. I have added a few of my thoughts after the post.
Most people say that they want to save more money but many are unwilling to actually make any big sacrifices in their lives to create real savings. If you want to simply reduce your spending and save a little bit here and there then the small-steps approach is fine. However, if you want to truly save a lot of money then you need to make some big sacrifices in order to reduce spending. The good news is that these sacrifices can be made in a way that actually adds to your life instead of taking away from it.
1. Your Home. The thing that we spend the most money on is usually our homes. A good chunk of our monthly income goes to our rent or mortgage, utilities and the upkeep of the house. Most people don’t want to give anything up in this area because of the feeling that your home is your castle (or at least your safe haven from the world). However, big savings can be obtained if you sacrifice in this area. Sacrifice could mean moving to a smaller place or a cheaper geographical area, renting out an unused room or even giving up your home all together in exchange for long-term house-sitting gigs and other home-owning opportunities. Focus on the positive things that this adds to your life – sharing your life with new people, reducing the house chores and saving money at the same time.
2. Your Car. Cars cost a lot of money. There are monthly payments until it’s paid off, repair costs, insurance fees, gas prices … and you can save a lot of money if you make the lifestyle switch and give up your car. Walking, riding a bike and using public transportation aren’t as bad as they seem when you first start doing them. In fact, these methods of transportation allow you to exercise more, meet new people and slow down a bit in your life. It’s not an easy sacrifice to make but you gain a lot from doing so.
3. Your Vices. Our individual vices tend to be a big area of waste. For some people, this is a serious problem in terms of gambling or throwing money at strippers. For most of us it’s the soda pop or the cigarettes that we know are probably bad for us but we buy them anyway. It’s not easy to give up our vices but doing so improves our quality of life and it also almost always saves us money.
4. Your Luxuries. This is the one area that most people do already sacrifice a bit in. We’ve stopped traveling so much. We don’t buy designer brands. But there are probably some smaller luxuries in your life that you’re still enjoying – the fancy cheese at the grocery store or dining out instead of eating at home, the theatre tickets we get every year … by listing all of the things that are truly luxuries in our lives instead of necessities and giving up all but our most favorite we can save a lot of money and really give some meaning to those luxuries we opt to keep.
5. Your Time. Of everything that we must sacrifice to save money, time is the one most of us are absolutely stubborn about not wanting to give up. We value our free time and our time with family and we already resent the many hours of time we give up to do jobs that pay our bills. However, we can sacrifice time in a more positive way and save money in the meantime. One example is through using a barter system to trade our own services for the services and products that we need. By bartering our time doing things that we enjoy, we spend our time wisely and create a community around us while we save money.
None of these sacrifices are easy to make. All of them require will power, lifestyle changes and some serious thought as to whether the sacrifice is truly worth the savings that you will gain. If you approach each of these sacrifices creatively then you can easily use them to add not only money to your life but also to give a new level of richness to your life.
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My thoughts:
1. Yes, certainly a home is a big expense. However, the way home prices are today, buying a home seems to offer a great opportunity -- a once in a lifetime chance -- to get a great deal on what could eventually be a quickly rising asset. That's why it's the #1 thing to buy before the economy improves.
2. Ha! A car is #2 on the list of things to buy before the economy improves. That said, I wouldn't go out and get one unless you're thinking of buying one anyway in the next year or two. We will most likely get a new car for me next year anyway, and even so we're still not 100% sold on buying now.
3. If you're wondering what vices cost you, check out Money Saving Tip: Cut Out Those Vices.
4. I've softened a bit on this point lately and have noted that we don't need to save every last penny. In fact, you may want to splurge a bit on yourself.
5. Another idea is to sacrifice our time to make some extra money.
This said, if you HAVE to save money, these are certainly some places to look, primarily because they are such a large part of the average person's spending. In addition, I'd also suggest you consider these money saving tips.
My view is get the 'best deal' you can on #1, go 'cheap' on #2, and cut #3 activities down to the frequency they become luxuries (a vice is usually (not always) just a luxury done to so much excess that it becomes a necessity which no longer brings pleasure but just stops pain). After you have a huge emergency fund, use the massive savings from this to get MORE of #4 (your daily reward) & #5 (which includes less working hours as you get older and building a 401K for an earlier retirement).
Posted by: Strick | April 23, 2009 at 12:06 PM
"a once in a lifetime chance -- to get a great deal on what could eventually be a quickly rising asset"
Housing is dead for many years, just wait till inflation rears its head and mortgage rates spike.
Posted by: Pop | April 23, 2009 at 12:47 PM
Car expenses is one I hate! a car can easily cost you more than $500+ per month if its fully paid if leased or financed it can reach $1000 very quickly. I buy used 6-9 yr old Japanese cars, give me a civic or corrola and i am happy they last very long without major issues, parts are cheap and cheap on gas.
Posted by: Personal Finance | April 23, 2009 at 01:35 PM
A lot of advice like this is too one-size-fits-all. Take category #4: if you've been laid off, yes, you should slash this category to the bone. If there's some big urgent expense you're facing (or some big luxury you're yearning for), again, it might make sense. But if you're doing okay, this relentless hunt to seek out and eliminate things that give you pleasure in life seems ill-advised, especially given that this article acknowledges that many have already made some cuts in this area, so what they have left is what they are likely to get significant enjoyment out of. You're not a bad, unthrifty person if you go to the theater once a year (!!!) or buy a ten-dollar block of cheese once in a while.
I've tended to scoff at people who call the advocates of frugality killjoys (especially because I know just how much it sucks when you have a lot of debt), but lately I'm less sure. There seems to be a lot of envy of people who still can afford a few things and a rush to turn everyone into drones who work the maximum hours with their heads down and save every dime.
Posted by: Sarah | April 23, 2009 at 02:03 PM
These are all of the things I have remaining to cut in order to pay off my debt faster but I can't seem to comprimise. Seems to match up almost perfectly with the 5 above.
1. cheaper rent (~200-300/month)
2. cut cable ~155/month
3. sell my car (net the difference of selling/replacement price ~6-10k depending) then +~200/month
4. quit drinking alcohol(~130/month)
I can't bring myself to cut any of those even though that is all that's left to get to the end goal faster. Otherwise I'd say my budget is pretty barebones. If I could follow through on about 2 of these I'd probably cut my repayment down from 5 years to about 4.25 years (~35,000 difference).
Posted by: Angie | April 23, 2009 at 03:07 PM
Overall, a good list!
Posted by: Eugene Krabs | April 23, 2009 at 03:14 PM
Man I wish I could get out from under my house right now.
I'm considering selling it at a loss & just paying off my debt and saving...
*sigh*...frustrated
Posted by: Matt Jabs | April 23, 2009 at 04:42 PM
You might as well be a real estate agent! House prices in many parts of the country, including coastal northern California where I live, are nowhere near a bargain and continue to be grossly out-of-line with local rents and incomes. A drop of 15-20% after a run-up of 200-300% over the past decade is no bargain. Right now there are millions of unoccupied homes, and plenty of people looking to get rid of them--but can't. Banks are intentionally holding back the foreclosures. Housing busts typically last six years or so, and we're barely in year 3, and this bust was anything but typical.
Posted by: Mark | April 24, 2009 at 03:55 PM
Everything can be distilled to one basic concept. BEING ABLE TO DISTINGUISH BETWEEN NEEDS AND WANTS. "NEEDS" are those things that help keep us alive and healthy. "WANTS" are everything else. We NEED 5 things - food, clothing, shelter, transportation, medical care. What we choose to spend on each is a WANT. Do we live in a mansion or a cabin? Do we drive a Yugo or a BMW. Do we eat bread and water, or croissants and Perrier? Do we shop at Goodwill or Nordstroms? We WANT most things we think we NEED.
Posted by: Jimmy37 | May 05, 2009 at 10:04 AM
I believe that saving is not about making sacrifices, but about having your money go to the things that matter most to you.
Would you rather sacrifice your retirement in order to drive a shiny new BMW? I bet you don't. Therefore, the first thing you need to do, to start saving, is to list your values, your priorities in life, and your personal objectives. And then, send money towards them. If this exercise is done correctly, and repeated at least once a year, then it's not so difficult.
Again, it's not about making sacrifices, but to focus on what matters most.
Posted by: PlaneaTusFinanzas.com | July 10, 2009 at 07:21 PM
@PlaneaTusFinanzas.com
Tell that to the people I work with who are all at their first job out of college, drive brand new cars, and always eat out for lunch.
Some people are just blind to saving money. Maybe it's a cultural thing, maybe it's how they were raised.
Not everyone has the same priorities and I agree that people should list what's important before they start cutting things out.
Posted by: Keith | September 02, 2009 at 12:48 PM