The following is an excerpt from my book Margin Matters: How to Live on a Simple Budget & Crush Debt Forever.
In our society, people are hardwired to value earning money more than saving it. You’re probably saying to yourself, I don’t make enough money to save. If that’s true, you need to reexamine your expenses and determine what cuts to make. Whether you realize it or not, most Americans live like no other people on earth. We can’t tell the difference between needs and wants and are unable to delay gratification. Here are some items I consider money wasters with a few thoughts on how much money you can potentially save:
#1 Cable TV
Do you really need to pay $100 a month for 300 channels you never watch? Cutting your cable could easily save you $1,200 a year, or more. Explore cheaper alternatives like Netflix (basic plan $8.99/month), Hulu (starting at $5.99/month), and a HDTV antenna (provides local channels for free). We bought a smart TV and a HDTV antenna. Expecting to get to the four local broadcast channels (ABC, NBC, CBS, FOX) I was pleasantly surprised to see around 60-70 over-the-air channels that were available to watch…for FREE and in fabulous HD! Also, I was astonished with options as to how much embedded streaming content comes inside a smart TV. Did I mention the cost of TVs has dramatically dropped? We bought a 51-inch smart VIZIO TV for $299 at Target. Has your time arrived to cut the cord?
#2 Gym Membership
It’s always wise to be leery of any subscription-based memberships and services. This model is quickly becoming the preferred method for businesses to operate. Why? Because they lure you in with amazing promotions and start-up rates (see cable TV), then after about a year they sometimes double or even triple the rates on you – hoping you won’t notice. This is why you really have to ask yourself, “Will I use this service in 6, 12, 18 months from now?” The majority of the people I know are non-attending fitness club members. Every time I went to the gym, I wondered what would happen if all the members showed up at the same time? The fire marshal would have to come and shut the place down. I’ve known people who have held onto memberships and never stepped foot into the gym for years. It’s the psychological feeling of “I have a gym membership, so I can go get back in shape any time I want.” Unfortunately, most of the time that never happens and you end up flushing money down the toilet. With the average membership rate at $50 a month, you could save $600 annually by doing push-ups at home and jogging at the park.
#3 Eating Lunch Out
If you’re used to eating out on most workdays, you may be paying $7 for a sandwich and $3 for a drink, for a total of around $10 per day. That can seem harmless enough, but it adds up quickly. That’s $50 per work week and can total $2,500 or more per year. More specifically, my friend Duke loves Jersey Mike’s Subs. In fact, he eats there every day for lunch. While their subs are great, they also aren’t cheap. On average, a giant sub meal can cost about $15. There are 261 work days in a year, which means Duke would have shelled out $3,915 for lunch alone. What if Duke decided to pack his lunch instead? Of course, there is a cost of packing your lunch too but on average you can brown bag it for about $3 a day.
#4 Eating Dinner Out
This is a challenge for us all. The lure of eating out at either a fast food or dine-in restaurant is a powerful one. With a society that thrives on busyness, eating out is the perfect convenience for many of us. Sure you are saving time from having to drudge through the grocery store – wandering aimless up and down the aisles – and from having to plan, prepare, and cook a meal yourself, but at what cost? On average, restaurant food is marked up about three times (300%) its wholesale cost. It’s just too easy to just say, “Screw it, I’m going to Arby’s!” Or, “We haven’t been to a nice restaurant in a while.” The last time my wife and I said that, we left after easily spending over $100 just for the two of us. We traded one restaurant meal for about one week’s worth of groceries. I’m not trying to be a killjoy and say don’t ever eat out, but what if you went out to eat just 2 less times per month? At $25 a meal, that would save you $600 a year.
#5 Groceries
The No. 1 rule of grocery shopping is to have a list and stick to it. Showing up with a mental list is a recipe for disaster. Americans spend more than $150 at the grocery store each week, according to a Gallup survey. If that’s more than you’d like to spend, join the club. Rest assured, it’s not your fault. In reality, you’re probably being duped by your grocery store’s deceptive psychological tactics to get you to spend more money. This is achieved by a carefully designed process orchestrated by marketing and brand experts who know how to pressure us to spend more money. Think about all the grocery store features created to lure us in: the layouts, carefully-crafted color schemes, and even checkout counter designs. If you can train yourself to stay focused and figure out a way to cut just $25 a month in groceries will save you $300 a year.
#6 Insurance
You might save $1,000 or more over a year simply by calling around and finding a cheaper car and/or home insurance policy. Remember insurance agents are salespeople and they are making a commission off you. Unfortunately, that means that many of them are going to upsell you on products and services you don’t need. It’s up to you to do your research and due diligence to make sure you’re not being taken advantage of. Fortunately, there are many insurance companies out there that offer highly-competitive rates. You can either call around or request quotes online and compare it to what you’re currently paying. We recently switched our insurance carrier from State Farm to Liberty Mutual and saved about $500 a year. However, we kept our life insurance plans with State Farm because Liberty couldn’t offer us a better rate than what we previously had. The time it takes to shop around is a minimal investment for the potential savings you might discover.
The Big Picture
You see how all this adds up? The six ideas listed above total a potential savings of $6,200 a year. Do that for five years and you’ve saved $31,000! The easiest way to earn money is to spend less of it. Are you starting to see the big picture now?