We’ve all heard the standard “latte factor” savings that so many experts push to increase your savings rate. The problem with this approach is it targets something that is a daily indulgence and is painful for folks who enjoy their daily coffee/latte. If given up, it will be a painful reminder daily when they drive by the Starbucks/Dunkin Donuts instead of pulling in. This is not to say that you shouldn’t save money there too, but let’s first focus our efforts on painless ways to save.
So much of personal finance is driven by emotion, so why cause such negative feelings when trying to save money by getting rid of things that generate daily pleasure? The key to sustainable savings ideas is finding ways to save money that have little to no impact on your daily life and are easy to implement. Now I’m not saying that you shouldn’t target everything if your financial situation dictates, but if it doesn’t, start your focus on the items that will create significant savings with little to no change to your daily life.
Can you find services to replace the services you currently have, but at a lower cost? I found I could with several, and created significant savings that helped me to eliminate debt and grow my savings rate to over 58% of my income (track your “Top 3 Financial Metrics To Achieve Financial Freedom”)
What worked for me
Some of the following items caused no change in my daily life but generated significant monthly savings.
- Cell phone service – Most people now have some version of a smartphone and pay a hefty monthly bill. Mine was over $160 a month for my wife and my phones. I found that I could switch to a lower cost provider and reduce my monthly bill to $75 a month. No change in what type of phone we used, in fact, we kept our existing iPhones, and my wife still has an unlimited data plan.
- Home Internet Service – If you’ve been with your service provider for over a year, you’ve likely lost out on any new subscriber discounts. I went online and searched for what deals my internet service provider was offering new customers to get an idea of what I could be paying. With a 5-minute phone call, I reduced my bill from $65 a month to $29.99 a month for 12 months. My strategy on the phone was telling the customer service rep that I loved the service, but couldn’t afford the price, and asked what could they do for me. Not only did they give me a reduced rate promotion, but they also told me the exact date it would expire and encouraged me to call back at that time for a new deal. Tip: Kindness wins. The more you take this approach, the more likely the person on the other end of the phone is going to want to help you. Plus it’s hard for them to argue with someone saying they can’t afford the service.
- Auto Insurance – I had been with my same auto insurance company for 15 years. Both my wife and I have not had any accidents or tickets (knock on wood) in about the same amount of time. So you’d think we’d have a great rate from staying with the same auto insurer, maybe get some loyalty discount, as well as good driving discounts. We were wrong, by a lot. I quoted out my auto insurance business and went with Esurance (which is an Allstate owned company) lowered my auto insurance premium by $456.57 every six months, which works out to $913.14 a year in savings or $76.10 a month. And I have the EXACT same coverage!
- Homeowners Insurance – This falls into pretty much the same description as my auto insurance. I had been with the same insurer starting with Renters policy, moving on to homeowners policy with my first home, and staying with the same insurance provider when I moved into my new house. I also bundled this insurance with my auto to get a multi-policy discount. I had the same experience when I got my quote back from Esurance on this as well. My rate went down $702.72 (almost by half of what my previous company charged) per year or $58.56 a month. So for those keeping tabs, that’s a grand total of $1,615.72 per year saved or $134.66 a month, for the EXACT same coverage.
My total savings for the items above adds up to just over $254 a month or $3,056 a year. I saved thousands by implementing four simple changes that have zero impact on my daily life. These changes enabled me to pile even more money towards paying off my debts and helped me to become debt free even faster. Now I utilize the extra funds to continue to build up my savings and investments.
What will you do?
Now you’ve seen that there is a path to saving money that doesn’t involve cutting out your daily latte or lunch out with co-workers, what are you going to tackle first? The key is to address one at a time, but more importantly, you need to start. Once you’ve started and are generating additional free cash flow, don’t just let it go to waste. Start paying off debt at a faster pace or increase your savings rate (“How To: Achieve Your Savings Goals And Live A Richer Life In 10 Minutes”).