Who wouldn’t like to have a little extra cash in their bank account at the end of the month? While you probably can’t walk into your office and demand a pay raise, there are a few ways to save money and give yourself that raise instead. Making a few simple cutbacks could save you hundreds of dollars every year.
It’s important to take a hard look at your finances to decide where to make some cutbacks and keep more money in your pockets. None of these ways are going to turn your life upside down. Most are pretty simple changes, but they can significantly impact your finances.
Create a Budget
Finance experts everywhere talk about budgeting as a major method to improving your financial situation, especially if you’re a compulsive spender.
A budget is a spending goal for a set period. A simple budget might be “spend less than $1,000 this month.” A more complex budget has categories for things like gas, food, entertainment, rent, insurance, clothing, and more specific subcategories.
Companies use budgets to make sure they reach profitability. You should be profitable too. As the treasurer of my life, I make sure I spend less than I earn and meet my savings and spending goals. I use a budget for both of those.
For more information on creating the best budget for your finances, check out my Complete Beginner’s Guide to Budgeting here.
Cut the Cord
One money-saving technique that has become popular in the last several years is to cut the cable bill. Ditching the cable company has never been easier, thanks to devices like Roku, Apple TV, and streaming services. Instead of paying $150 monthly for cable, you can spend less than $15 monthly for Netflix or Hulu.
You can still get your favorite shows at a fraction of the cost. With all of the streaming options out there, you won’t miss your old cable service, but you will love the hundreds of extra dollars in your pocket at the end of the year.
Save Money on Everyday Expenses
An easy way to save money is to practice comparative shopping on everyday expenses. Most people do a lot of research and comparisons when making large purchases, like a car or a TV, but it shouldn’t end there. You can easily save when you compare utilities, prescriptions, groceries, and other household items.
Save money on utilities.
If you have never thought about who supplies your energy, it is time to determine whether your current supplier gives you as good a deal as the nearest competitor. Prices and discounts for energy supplies fluctuate throughout the year as various companies grapple with each other for a market share. If you’re keen-eyed and aware of the best deals available, you can grab a bargain rate for your energy that will save you heaps of cash over time.
Calculate how much you could save on your energy costs by taking your current energy costs (in dollars per kilowatt hour) and subtracting the price of a cheaper tariff. Take the resulting number and multiply it by the amount you spend each month on energy, and you’ll have the savings you could make just by switching suppliers.
Many of the best deals available are offered online, so if you’re looking to save money on your energy bills but you’re not checking comparison websites regularly, you could be missing out.
Save money on prescriptions.
Many people perceive that generics don’t work as well as the name brand. That is simply not the case. Also, it can be a costly assumption to have since generic drugs tend to cost significantly less than their name-brand counterparts.
Why are they cheaper? The name-brand company that researches and develops a new medication gets a trademark (name) and patent (drug makeup) for a certain length of time. Once that time is up, other companies can market the same drug under the same strict safety standards of the name brand, just under a different name. That saves them tons of money on research and development to sell it for less.
You can also utilize prescription discount services like GoodRx to dramatically cut the cost of most medications.
Save money on groceries
While the ingredients in food products will not be exactly the same, most generic foods are similar enough to name-brand products to be worth the cost savings.
Likewise, you can save by purchasing the generic version of home goods, such as trash bags, dish detergent, cleaning products and chemicals, and so on. The products are much cheaper and are just as good as their expensive counterpart.
While you may only save a few dollars each trip to the store, those savings add up quickly over time.
Don’t Fall for Sales
Some people in the world get really excited when things are on sale. “What a deal! Think of how much money I can save,” they might say. But do you?
The idea of a sale is simple. Stores try to unload products on you by marking them at a lower price, giving the impression that you are saving money when you purchase them.
Do not be deceived by sale marketing techniques. If you intend to buy the product anyway, then sales can be a great way to save a few bucks. But if not, you just wasted money on something that you probably didn’t want or need in the first place.
Take a Hard Look at Your Insurance
You can save money in several ways with just about every insurance plan you have. One easy way is to bundle all of your plans with one company. Almost every single insurance company on the market offers bundle savings—the more plans you have with that company, the more you’ll save.
If you have your life, auto, and homeowners insurance with different companies, call your agent and ask about holding all of them with the same company. It could save you hundreds of dollars.
Choose Practical Over Luxury
Once, David Oreck came to my school and spoke to a class about his company. In his speech, he made a significant point. On one wrist, he had a $25 Timex watch from Target. On the other wrist, he had a $25,000 Rolex.
He said the Timex worked flawlessly for years, never needed a new battery, and kept perfect time. It was cheap, efficient, and did the job. His Rolex needed maintenance, new batteries, and was more for looks than practical purposes.
What is the point of this? You do not need a BMW SUV when a Toyota Corolla or Honda Civic will do the job. You do not need a $1,000 plasma HDTV when a 20″ TV would be fine.
There is a difference between buying something you want and buying something practical that you need. While having luxury and status is fun, it’s more realistic and beneficial in the long run to have what you need and no debt.
Think of Yourself as a Corporation
A corporation is an entity that has cash inflows and outflows. It can have assets and liabilities and engage in business deals. That is kind of like you.
If a company goes bankrupt, it will be in a difficult situation. While it can rebuild, it will take a while. That is also kind of like you.
You should think of yourself as a company. You even have stockholders. They are you, your significant other, your kids, your pets, and anyone who relies on you financially. If your net income goes down, your shareholders will be negatively impacted. If your income goes up, your shareholders will be positively impacted.
Like a company, you should assume that most money you have goes back into the “you” company. Operating expenses—think housing, food, clothes, and transportation—must be kept to a minimum to ensure higher net income. You should also maximize revenue to ensure net income goes up.
When buying things for fun, think of it as a dividend. You could have put that money back into the company (invest) to increase future returns. It is a decision that CEOs and CFOs make every day.
I am the Eric Company. To increase my gross income, I have a major income source (freelance work) and several subsidiaries (blogs and other endeavors). I have several operating expenses (living, car, etc.) that offset my gross income to find my net income. I also invest (education, stock market) to build future returns, and even take an occasional dividend (vacation, streaming subscriptions, eating out) to make my shareholders happy.
If you think of yourself as a corporation, how can you waste money or opportunity? You can’t. Work to build your net income today and in the future.
The Final Word
Creating a budget, cutting cable, comparison shopping, avoiding sales, bundling insurance, choosing practical items, and changing your mindset are simple ways to start saving money today. With some creativity and careful planning, I’d bet you could come up with even more.
Try following a few of these easy tips, and look forward to that raise in net income you’ve been searching for.