Are you tired of being bad with money? Start the new year off on the right financial footing with these cash-saving tips from Eric Tyson, MBA.
Press Release – Hoboken, NJ (December 2017)—As the new year approaches, people are excitedly planning their goals for the future. But cash-strapped young people may not be in the mood for celebrating or making resolutions as many of them face student-loan debt, work in jobs that pay them less than they hoped, and worry about achieving financial stability in a highly competitive global economy. Financial expert and best-selling author Eric Tyson says there are powerful steps younger people can take right now to make the most of their money and save up for a brighter future. In fact, he says adopting a savings mindset could be the most important New Year’s resolution of all!
“Where and how you spend your money is of course a matter of personal choice,” says Tyson, author of Personal Finance in Your 20s & 30s For Dummies® (Wiley, 2017, ISBN: 978-1-119-43141-1, $19.99). “But if you can resolve to make smart choices now, there’s no reason you can’t build better financial security for yourself in both the short and long term. The new year is the perfect time to improve your spending habits and start saving to prepare for the kind of future you want.”
According to Tyson, a savings mindset involves getting the most from your spending while also spending less money in general. It also means living within your means, sticking to a budget, and saving as much as you can.
“You can get into the habit of saving even when your income is low,” adds Tyson. “Even if you can set aside just $10 or $20 every paycheck, you’re on the right road. And the good news is, even if you haven’t been an exemplary saver so far, it’s not too late to start—especially when you’re young and time is on your side.”
Are you ready to start the new year off right by adopting a savings mindset? Keep reading for proven tips and tricks that will add up to big savings in the future.
Save on Your Housing Costs
Consider living with roommates or family. When you’re younger and free of dependents, living in a low-cost fashion is much easier than it is later in life. The best route is to live with roommates. Living solo is a pricey luxury most younger people can’t afford. But sharing a rental lowers your per-person costs and may even brighten your social life. Another option is living with relatives. Just be sure to talk it through with everyone in the household first to set expectations, raise concerns, and establish costs and rental agreements.
Choose a low-cost rental. You may currently be living beyond your means. If you’ve allowed your champagne tastes to exceed your beer budget, consider completing your current lease and moving to a rental that costs less. The less you’re spending each month, the more you can save toward buying your own place. Just remember to factor in all the costs of moving to and living in a new rental.
Negotiate your rental increases. Some landlords increase their tenants’ rent no matter how good the tenant and regardless of the state of the economy. If your local economy is weak and the rental market is soft or your living quarters are deteriorating, negotiate with your landlord. You have more leverage and power than you probably realize. Landlords don’t want to lose good tenants who pay rent on time, and filling vacancies takes time and money. Craft a polite note or pay a personal visit to make your case.
Cut your utility bills. Whether you own or rent, try to keep utility costs low. (Landlords factor your energy consumption into future rental hike decisions.) Adjust your thermostat and wear layers in the winter, and keep your home warmer during summer months. If you own, try to beef up your property’s insulation. And if you pay for garbage service, recycle as much as possible.
Keep Insurance Costs Down
Use high deductibles. The deductible is the amount that must come out of your pocket before your coverage kicks in on any kind of insurance. They greatly help you lower your premiums (unless you have a lot of claims, in which case you won’t come out ahead using this method).
Take care of your health. “Exercise at least a few times per week and eat healthfully,” says Tyson. “Lose and keep off that extra weight if you’re now overweight. You get only one body and one life to take care of it.”
Manage Healthcare Expenses
Shop around for the best insurance and healthcare. Many different plan designs are available with a wide variation in costs. Also, remember medical providers have a profit motive, so they may recommend something that isn’t your best option, including extra testing that you may not need or benefit from. Always get a second opinion for any major surgery.
Kick your addictions. Smoking, alcohol, drugs, and gambling can cost you financially and emotionally. Be honest with yourself about the damage these habits are causing and quit today.
Cut Your Taxes
Contribute to a retirement plan. Tucking away money in employer-based retirement plans, such as 401(k) or 403(b) accounts, or self-employed retirement plans is a great way to exclude money from your taxable income. It also helps you build a nest egg so you don’t have to work for the rest of your life.
Use a health savings account. You can reduce your taxable income and sock away money for future healthcare expenses by taking advantage of a health savings account (HSA). In fact, HSAs can offer superior tax savings versus retirement accounts because in addition to providing upfront tax breaks on contributions and tax-free accumulation of investment earnings, you can also withdraw money from HSAs tax-free so long as the money is used for healthcare costs. No other retirement accounts offer this triple tax-free benefit.
Reduce the amount of sales tax you pay. “Remember that part of a savings mentality is choosing to spend less so you can save more,” says Tyson. “When you buy most consumer products, you pay sales tax. Therefore, if you spend less money and save it in a retirement account instead, you end up reducing both your income taxes and sales taxes.”
Increase your deductions. The IRS allows two methods for determining your total deduction and allows you to select the method that leads to greater deductions and lower taxes. The standard deduction is appropriate for those with relatively simple financial lives. The itemized deduction makes more sense for those who earn a high income, own their own home, and/or have unusually large expenses from medical bills and charitable contributions. Make sure you are choosing the method that benefits you the most.
Reduce Your Food Costs
Learn to cook. If you don’t already know how to cook, learn now. Eating three meals a day adds up to over 1,000 meals a year. Cook in large quantities and freeze leftovers for later.
Consider store brands. Name-brand companies spend a lot on advertising, which the consumer pays for in higher prices. You can save a considerable amount of money by buying the store brand (like Trader Joe’s or Whole Foods 365 Everyday Value), which is usually the same quality product at a lower price.
Buy in bulk. Wholesale superstores like Costco and Sam’s Club help you save by buying most items in larger sizes. As a further advantage, this requires fewer shopping trips and saves you in money for gasoline.
Kick the bottled water habit. Save hundreds of dollars annually and drink cleaner water by installing a water filtration system at home and improving your tap or well water.
Brown bag your lunch. Eating out daily racks up a lot of expense over time. Pack your lunch instead, saving dining out for special occasions.
Trim Transportation Expenses
Take public transit or ride a bike. Choose to live in an area that offers reliable public transportation, such as a subway or bus system. You can often purchase monthly passes at a reasonable rate. During the warmer months, use your bike to get from place to place.
Buy your car in cash. Tyson says spending money on cars is one of the leading causes of overspending and undersaving. The main reason people spend more than they can afford on a car is that they finance the purchase. When buying a car, choose one you can afford and pay in cash. For many, this means buying a good-quality used car.
Reduce Your Fashion Budget
Stop chasing the trends. “You don’t need to buy lots of new clothes every year,” says Tyson. “In fact, if your clothes aren’t lasting ten years, you’re probably tossing them before their time or buying clothing that isn’t very durable. Stick to the classics—they never go out of style.”
Buy gently used fashion. Check out consignment shops, vintage shops, or online for good bargains on pieces that have been previously owned.
Minimize accessories. How many shoes, jewelry items, and handbags do you really need? Chances are, very few. Don’t spend on accessories you won’t use and save your money instead.
Relax and Save
Don’t equate spending money with having fun. Cultivate some interests and hobbies that are free or low cost, like visiting with friends, hiking, reading, and playing sports.
Take vacations you can really afford. Take shorter vacations that are close to home and don’t borrow on credit cards to finance your trips. Or take a staycation and visit sites in your local area. For longer-distance travel, go during the off-season and off-peak times and days for airfare and hotel deals.
“You can create a better financial picture for yourself sooner and easier than you think,” concludes Tyson. “The new year is the perfect time to get started—because no matter your age and stage in life, now is always the perfect time to do all you can to ensure a better financial future.”