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My Saving Strategies
I have been asked by one of our readers to post about some of our saving strategies. My wife and I are fairly frugal, but not super frugal like some people I read about on the Internet. We take a common sense approach to spending where we try and divide our needs and wants. As I mentioned before, the strategy to “Pay Yourself First” has worked really well for us. We take a portion of our paychecks and put them away in savings. The rest of the money is used to pay bills and a small amount for discretionary spending.
Now, lets play a game and see how frugal you are compared to us:
Compare your answers with mine:
1. Do you NEED to go the theatres to watch the latest blockbuster? Or can you wait until it comes out on DVD to rent?
- My wife really enjoys the cinemas but we have disciplined ourselves to only go once every few months (or longer). We rent movies most of the time.
2. Do you NEED to go out for supper at a fancy restaurant? Or can you cook your supper at home?
- We go out to eat on special occasions [more often if someone else is paying ;)], however, most of the time we just cook at home. Cooking at home is cheaper (usually healthier too) than eating out at any restaurant, even Macdonalds.
3. Do you NEED to go out for lunch? Or can you brownbag your lunch?
- We always pack our lunch for work. It’s “easier” to go out and pick up something quick but usually more costly.
4. Do you NEED to buy a coffee at a coffee shop? Or can you perk your own at home?
- Say you buy $1.50 coffee every single day of the year (that’s not including the muffins!), that’s almost $550/year that you are spending on something that you don’t NEED! That money could be used towards your car payment, rent, or investing.
5. Do you NEED to smoke cigarettes? Or can you quit?
- Here in Canada, cigarettes cost around $10/pack. The average smoker probably smokes approximately 1 pack/day which equates to $300/month. If you were to take the cigarette money and invest it annually in a tax free retirement account growing at 8%, you’d have $274 452 in 25 years. Wouldn’t that be a nice addition to your retirement funds.
6. Do you NEED to party every weekend? Or can you hang out with your friends and cut back on the booze?
- Booze can be fun but it IS expensive. Cutting back on your booze intake is not only good for your liver but good for your wallet also.
7. Do you NEED a new car every 3 years? Or can you get by with a reliable used car (with cheaper insurance)?
- This one is the kicker, no one NEEDS a new car every 3-4 years whether it’s leasing or buying. We made the mistake of buying a brand new car upon graduation which came with a big car loan. Never again. Did you know that new cars depreciate 15%-20% as soon as you drive it off the lot? If you NEED a car (some cities have poor public transportation), then buy a reliable used Honda or Toyota around 3-4 years old and drive it to the ground. That’s what we plan on doing with our cars.
8. Do you NEED the full digital cable package? Or can you get by with basic cable?
- Although there are a lot of great channels in the digital cable package, we stick with the basic cable. It saves us around $40/month and all the TV programs that we care to watch.
There you have it. That’s just a few examples on how you can shave a few dollars off your monthly bills. Remember, $1 dollar saved is $1.50 dollars earned (after accounting for taxes)! If you have some more ideas, please feel free to add them to the comments.
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32 Comments, Comment or Ping
1. Johnny
Have you ever read the book “101 ways to save money”? Some good ideas in there, including some of the ones you’ve mentioned
Dec 13th, 2006 @ 10:14 am
2. FrugalTrader
Hey Johnny,
No I haven’t read that book yet. Do you know the author name? I’m always looking for good personal finance/investing related books.
FrugalTrader
Dec 13th, 2006 @ 11:20 am
3. Q Cash
As for cable, we don’t have it where we are, but we can download most of our favourite shows these days (without commercials). Not only do we save money, we save time.
My wife and I found we would watch a show we like at 8:00 and then watch something stupid from 8:30 to 9:00 to wait for our 9:00 show.
Now, I just make a list of our favourite shows, download them all at once and then we watch them at our leisure (usually after the kids have gone to sleep) and it means we avoid watching reruns :-)
Q
Dec 15th, 2006 @ 11:15 am
4. FrugalTrader
Hey QCash,
Do you remember what your networth was like in your mid-late 20’s?
Do you have any savings tips that has worked really well for you?
FrugalTrader
Dec 15th, 2006 @ 11:21 am
5. Q Cash
I don’t have my exact networth at 27 (1998) on hand, but I can tell you when I got married in 2000, my net worth was about $400,000, my gross networth was about $600K. At that time, I had a mortgage on my own home and a mortgage on my rental property (each about $100K). My wife had a net worth/gross worth of $150K no debt.
Q
Dec 15th, 2006 @ 1:51 pm
6. FrugalTrader
What would you say has contributed most to your networth? Savings? Or Portfolio growth?
If you don’t mind posting, what is your investment strategy?
FT
Dec 15th, 2006 @ 2:41 pm
7. gettingrichtogether.blogspot.com
I have to take issue with your comment ” then buy a reliable used Honda or Toyota around 3-4 years old and drive it to the ground”. While Honda, Toyota may have been more reliable 10 years ago, there really isnt much difference today. The residuals on a used Honda or Toyota are alot higher than on something domestic. You are paying alot more for something with higher perceived quality. The insurance on those cars are also significantly higher. I called for insurance on a Malibu vs a Civic. The insurance on the civic was $425 more per year. Repair costs for imports are also significantly more. When you add it all up, it makes alot more sense to drive a used domestic.
Dec 18th, 2006 @ 10:02 am
8. FrugalTrader
GettingRichTogether,
From my experiences, there is a significant difference between the quality of Japanese vehicles (honda,toyota) and domestic vehicles (dodge, gm etc). Around here, you’ll see a lot of 1999 Corollas or Hondas but you won’t see many 1999 Neons still on the road.
Why would you say “perceived” quality? Do you have any statistics to back it up? So you’re saying that the market has overpriced used foreign cars? I’m not a car expert by any means, just going by my experiences.
You have a good point on the insurance. I guess the higher sticker price means higher insurance? Are you talking about full covereage? If this is an issue, why not just get public liability on a used vehicle?
Also, with the Civic being the #1 car being sold in Canada (or so I hear), would repairs/parts really cost that much more than a domestic? Wouldn’t there be a steady supply of parts?
Good discussion. :)
FT
Dec 18th, 2006 @ 10:30 am
9. NLG
I’d have to agree with FrugalTrader on this one. The JD Power initial quality studies do show that North American manufacturers have caught up to their Japanese counterparts. However, I don’t remember the specifics, but this survey is conducted only a few months after someone purchases a new car, when few defects are likely.
The issue of long-term reliability is not accounted for in surveys like this, and I do believe that Honda and Toyota are still ahead of the game here (less rust, better mechanical longevity, fewer electrical problems).
For example, my roomate is driving a 1996 Corolla. It has no rust, the paint isn’t very shiny any more, but it drives well (no creaks, it handles bumps well, gets good fuel economy still, and has not had any major service in the last 2 years).
On the other side, until this-summer I owned a 1996 Neon. Over the 3-years I owned it, I replaced a CV boot, brake lines, 3 starters, O2 sensors, a driveshaft, and it was riddled with rust, the engine ran rough, and the suspension was shot.
So, it still seems to me that Japanese cars are better in the long-term.
Dec 18th, 2006 @ 1:12 pm
12. bootsie
I have to side with gettingrichtogether on this one (sorry guys!). He is pretty bang on with respect to quality being “perceived”. I can’t seem to find the link but a few months back there was an article in the Detroit News regarding the fact that, about 10 years ago there was a big disparity in both quality and reliability (which is what one should be concerned about when buying used) between the foreign car makers and the domectic OEMs. This gap has narrowed GREATLY, in fact today, domestics OEMs have better reliability reports than European car makers. The Asian OEMs are still slightly leading the domestic OEMs but by a very small margin, which in my eyes, does not justify the higher markup on an Asian used vehicle due to greater residual value.
The above information (and sorry again for not providing the link) helps to explain why so many people have a story about their 1996 Corolla or 1993 Civic still running prefectly fine. But if you were looking to by a used vehicle, would you buy a 10+ year vehicle or a 2-3 year old vehicle with low KMs, where the difference between automaker reliability is almost negligible but the price difference is significant? We won’t know the results of reliability of 2-3 year old vehicles for a few more years, and who’s to say the domestics won’t fair even better by then? That’s the way the trends are heading (after years of being beat down for quality issues), it’s entirely possible so I put my money (and less of it ;)) on the domestics.
I plan on telling stories in 2010 of how my 1999 Escort (currently 200,000+ KM) is still kickin’ around. :)
Disclaimer: I do work in the auto industry, but for a Tier 1 supplier that supplies Asian, European and domestic OEMs.
Apr 18th, 2007 @ 5:22 pm
13. canabiz
I haven’t rented any movies or bought any music CDs for as long as I could remember. Again, not advocating any illegal activies, just like to point out that we should not listen to what Bush and his cohorts say. Check the laws in your area and download away!
Also try to bike/take bus/walk if you could. It’s better for your health, your wallet and the environment (for your children, if nothing else)
Apr 29th, 2007 @ 2:36 am
14. Cinders
Shopping for clothes and shoes used to be my major weakness. But I found a way to help my spending sprees. First of all when I go into a store I only look at the sales racks. If you don’t look at the expensive new arrivals then you don’t have the temptation to buy them. There are tons of great deals on the sales racks. Keep the blinders on and head to the back of the store.
Jul 4th, 2007 @ 11:53 am
16. MoneySheep
Often before I buy something I try to estimate how much I have been taken advantage of. If the margin they make is ridiculously high, I will try very hard not to buy it. You wouldn’t believe the amount of profit these retailers make. Years ago I stopped buying coffee from Tim Horton after hearing some restaurant acqaintances said they made a lot of money from coffee. This is acknowledged by McDonalds when they reported huge profit after they switched their blend of coffee and got people to drive-thru. Donald Trump did comment: I hate to pay retail.
Aug 4th, 2007 @ 11:04 am
18. MaNo
Be carefull with the PC Financial stuff, you know the adage you get what you pay for? For basic stuff they’re fine, but their mortgages can be confusing, and if you’re looking for the lowest possible rate, you might be suprised with large possible penalties if you try to sell your home before the term is up. Talk to a local mortgage broker (look for the AMP - Accredited Mortgage Profession for best service), they’re free, and they’ll give you much more insight on how to save money on your mortgage than any of the banks will.
Aug 15th, 2007 @ 1:49 pm
19. Nars
You will some more tips here:
http://zenhabits.net/2007/08/the-cheapskate-
guide-50-tips-for-frugal-living/
Sep 4th, 2007 @ 2:21 pm
20. MrScrooge
I’m sorry to say but Neon and Cavalier/Sunfire are pretty crappy cars and I do not recommend buying them period. However, there are other fine used domestic cars which are a much better value compared to the Japanese econoboxes and just as reliable. In fact, it seems that the quality of some new Japanese cars have gone down. Finally, don’t buy a used VW unless you are ready to spend a lot of $ in repairs.
Oct 30th, 2007 @ 11:48 pm
21. The Financial Blogger
I prefer old bmers ;-) they cost a fortune to repair but they don’t break much! lol!
Oct 31st, 2007 @ 12:12 am
23. Pauls
This one’s related to the car questions on this forum, but also saves me money. Get an on-line subscription to Consumer Reports. It will answer the questions:
- what’s the best one to buy
- what features do I need
- what experience have other had with the same product
Not just cars, but all larger ticket items. Knowledge means savings and value.
And yes, the are SOME domestics that are as reliable as Honda and Toyota. Not very many. Why bother taking a chance IMO. Money and time spent in a repair shop very quickly overtakes the savings of the initial purchase.
Nov 4th, 2007 @ 12:10 pm
25. Benito
You only eat out when someone else pays? For someone with such a high net worth, you are CHEAP!
Dec 11th, 2007 @ 4:08 pm
26. FrugalTrader
Benito, i’ve been called worse. :)
If you re-read the post, it said, “We go out to eat on special occasions [more often if someone else is paying ;)]…”
The smile and wink was my attempt at humor.
Dec 11th, 2007 @ 4:18 pm
27. MoneySheep
About cars, I believe the best way is to buy a new car and then keep it LONG, and run it almost to the ground. Why? You are the only owner and you know you keep it well. If the unfortunate happens, like severe accidents, then I will sell it after it is fixed up for looks. So, that is also why I won’t buy a used car, you just don’t know how rough it had been handled. When I was a student I bought used cars, they were so troublesome and had to be repaired frequently (cost anxiety as well as $). My second last car was a new one, I drove it for 17 years, sold it for 10% of the purchase price. My current one is almost 8 years, it still drive like new.
Dec 12th, 2007 @ 12:54 pm
28. Ryan S.
Asking “need vs. want” always can make a difference with purchasing; I try to prioritize all of my buys, no matter how small or big. $1.55 for a Super Big Gulp is not a big deal once a year, but every day for a year becomes a really big deal (and a lot of soda!).
Dec 21st, 2007 @ 2:25 am
31. JR
# 27 post by moneysheep, the car thing, yes agreed and I do the same thing.
We are a two vehicle family, wife has one and I have one.
i purchase older cars, always on the look out for a vehicle that was driven by an older person, senior is better. 8-10 years old, low milage, good bodywork, and will not pay more than $2500. We will generally as arule keep the vehicle 5 years, spend on repairs no more than $1000 during that period on the things, then sell them at $1000. Try to keep vehicle purchase and depreciation to $500/yr. Insurance is always third party only at a cost of not more than $500 per vehicle per year
On other stuff, quick explanation.
We rarely eat out or have take-out. Brown bag it for lunch, and spend no more than 1% of the months net income on food & entertainment.
Groceries, coupon clip, shop at three - four grocery stores, load up with specials only, this gets us a weekly grocery tab of $50 average & yes we eat all the right stuff, including meat, fish, chicken, bread and veggies. We buy zero junk food.
Energy efficient lights, timers on the furnace and the communications bill (cell, internet, land-line & cable TV runs no more than $150/month. No special features on any of the phones.
Monthly running costs & living expenses for a family of three, two adults and one still live at home child 22, the freeloader (a great kid) that does not contribute to any expenses:
On a $2800 SQ.FT house, now fully paid for with a 75% HELOC on it that zero balance’s every tweleve months
Heat & Hydro $200
Property taxes $350 (thats the killer)
Communications $150
Food $200
Entertainment $50
Car insurance $83
Car maintenance & service (budget) $30
Gasoline $150 (one car used for work)
Clothes budget $30 (shop at the thrift store, we have a good one were we live)
SUB-TOTAL: …………….$1243
10% contingency ………..$125
MONTHLY EXPENSES ………..$1368
With the right investments, tax planning, HELOC we do in fact live free.
Apr 5th, 2008 @ 7:30 pm
32. Jeremy
JR - how do you zero your HELOC every 12 month? How does that work? What is the principle behind that?
Apr 30th, 2008 @ 4:32 pm
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