Contrary to popular belief, you can save a ton of money in a really short space of time if you know exactly where to focus. The problem that most people have is that they try to do too much and save money in as many ways as possible by cutting back on everything. This often makes you miserable because you deny yourself the things that you really do want.
When your personal finances make you miserable, there is a high probability that you will fail and simply go back to old ways. Being aggressively frugal isn’t practical for most average people. An excellent way to start out is to focus on “big wins”. This means that you make huge savings in a few big areas that frees up cash flow to be spent elsewhere.
Once you’ve got the big wins working in your favor, you can focus on smaller savings – but only cut things that you don’t really want. If you really enjoy having your Starbucks coffee a few times a week – keep it. Focus your energy on saving that money elsewhere (or better still, making more money to afford it).
Here are three of the biggest savings you can make in a very short space of time:
- Switch your car insurance. Car insurance companies often like to throw out big numbers like “you can save $550 a year if you switch to us”. The reality is a little less exciting, but you can save a good $100+ by switching. Most people get a car insurance quote and never change. Check your cover and decide whether you need that much, then call around to pit insurers against each other. Doing this, I saved almost $194 a year.
- Get rid of the gym membership. How much do you spend on gym membership fees? My gym cost $60 a month and I went a couple of times a week. That’s $720. I cancelled my membership and bought the P90x home workout DVD set for $140 from Amazon for a net saving of $580 a year. If you’re not really using the gym membership to the fullest, this is a great way to save a big amount of cash.
- Transfer your credit card balance. According to CreditCards.com, the average APR for a card is 12.78%. If, for example, your credit card balance is $2000 (the average household credit card debt is almost $16,000) and you repay $100 a month at the average APR, you would pay an extra $242 in interest and it would take almost two years to repay. Transfer the balance to a 0% introductory card and that same balance would be clear in 18 months with no interest – a saving of $242.
By focusing on just these three big ticket items, I saved a total of $1016 and it took me less than a month. Sure, that money isn’t sitting in a high-interest savings account right now, but it is money I no longer have to pay out.
And by not paying it out, I reduced my monthly expenses and I can invest that extra $85 every month into whatever I want.
When you factor in the big ticket items in other areas like re-mortgaging (which takes a little time and often carries a fee), switching your home energy supplier or consolidating your debt – there are even more savings to be had.
The beauty of this technique is that you aren’t cutting anything from your lifestyle and you’re really just renegotiating existing payments and cancelling payments you aren’t getting the benefit out of.
Using the big win strategy, it would only take a little planning and effort to reduce your annual bills by $1000-1200 or even more.