Smart ways to save money and reach FF sooner
How I saved money in every possible way until I reached Financial Freedom
Making money is harder for everyone (even for high-income earners), but saving money is a less sexy way to get your dollars’ worth, the same as your earned income. Do you want to know how I used to save money in my earlier years (20s and 30s) to achieve Financial Freedom? Keep reading!
Pay special attention to the DON’T part of this post since every good thing comes with a catch.
5 Smart ways
Every penny saved is a penny earned; that does not mean you will need to penny-pinch all the time. If you are interested and keen enough to take advantage of all the money-saving tips, you could easily bank close to $2K/year. I do not know about you, but that income was equal to my monthly income as a student. Here are my top 5 ways to save money with the caveat (things to watch out for):
1. Credit Card
Credit card is one of the smartest ways to make, save a lot of money, and at the same time pay a lot of unnecessary interest if you are not careful enough. It also helps you to build your credit score in the early days. A good credit score (above 740) will get you all the best rates for a car loan, a house mortgage, insurance even for credit card interest rates.
a) Sign-up Bonus
Most of the travel credit cards (sometimes everyday usage cards too) offer a sign-up bonus when you get a credit card from a financial institution, and you spend $3K - $6K in the first 3 months. Sign-up bonuses come as credit card points, which can be redeemed as travel credit, statement credit, or even a cash check. Check out the thepointsguy, nerdwallet sites to compare each credit card's bonuses and their pros and cons. Reach out to me if you need a referral for personal credit cards. It’s always a good idea to set up automatic payment or a calendar reminder to pay a few days before the due date.
DON’T keep balances on your credit card; pay in full (the only exception is 0% APR) after each month to avoid paying high interest on the credit card balance.
If you have a business account (LLC or S-Corp), you can use my Chase referral link to get a $750 Bonus Bash Back after spending their minimum requirement.
DON’T apply for a credit card with an annual fee if you are just starting and your credit score is below par (less than 600).
b) 0% APR
Some credit cards offer 0% APR up to anywhere from 11 months to 21 months. These are my favourite credit cards if I need to make a large purchase, but I don’t want to pay it off next month. It gives a runway of 1 to 2 years. Keep in mind, you are keeping balances on your credit card for a while, so your credit score will get a hit due to large balances (if it is more than 30% of the credit limit). Don’t buy anything you can’t afford just for the sake of meeting card’s spending requirement (that’s what the financial institution wants you to do), good idea is to put the cash amount of the purchase price in a savings account and earn 4% interests and use that to pay the credit card before the expiration date.
DON’T forget to pay off the whole amount before the 0% APR expires, otherwise you will pay a lot of interest. I typically put 3 monthly calendar reminders in each month before the expiration date.
c) Balance Transfer
If you already have large balances on your credit cards and the interest rates have skyrocketed, you can think about transferring balances to the new credit card, which has a 0% APR on balance transfer. Typically, it gives you another 12 to 18 months’ runway.
DON’T do a balance transfer if the fee is above 3%, you are paying an upfront fee to do the transfer. Some cards used to offer 0% balance transfer fees, so do your due diligence before taking this route.
d) Points
Most of the credit cards offer points based on purchases you make using your credit card. Look into this in detail, especially Chase Freedom & Discover quarterly rotating categories. I used to have a 5% cash back calendar in my phone, so that I could take a look at it before giving a credit card to the cashier in Groceries, Restaurants, Gas purchases, or supermarkets. Amazon Chase credit cards offer 5% cash back on every Amazon purchase.
DON’T use the wrong card, and always keep track of which card falls into which category in a specific quarter. Don’t forget to do quarterly activation and pay off the card balances in full after each month.
2. Insurance
Please don’t drive a vehicle without insurance. A single road accident can wipe out all of your life savings in a matter of seconds. When you are shopping for insurance, try to compare the best rates based on your required coverage, not solely based on the premium.
a) Vehicle
Typically, vehicle insurance renews every 6 months. I used to shop for car insurance every 6 months before the renewal period, now I do it every year. Just to give you an idea, in the last month I saved $600 in my 3 car insurances just by transferring back to my old insurance provider with less than 15 minutes of work. Most of the time, I stay in Allstate, Geico, Progressive & State Farm insurance companies. Some of them also provide a good driver’s discount by monitoring your driving behaviour. Ask for all the lesser-known discounts, like being married, having a graduate degree, or even having any affiliation with the specific organization.
DON’T stay in the same insurance for more than a year unless they are providing the best/competitive rate.
b) Property
Property insurance renews every year, so shop for the best insurance rates based on your location. If you can bundle your home and car, you typically get the largest discounts. But I would always prefer to compare that individual's best rate every year. I have more than 20 rental properties and just by comparing rates, I see a rate difference of $400-$500 for a single property in some years.
DON’T go for the cheapest property insurance without comparing the insurance provider’s financial health. In the case of an insurance claim, you want your insurance provider to be solvent enough to pay for the whole house rebuild in the worst case.
DO get an umbrella insurance if your net worth reaches close to $1M, which covers liability above your typical vehicle and property insurance limits.
3. Affiliate links
An affiliate link for referral is another great way to make some extra cash without spending too much time. There are numerous ways you can refer someone and get a small portion of referral fees. My rule of referral is that if I have already used the product or service and am happy with it, then I refer. These are the following ways you can earn a referral fee:
a) Employee referral
Most employers offer a referral fee for successful candidates referred. Reach out to your employer to learn about the details. I received referral fee multiple times from my employer by referring candidate to the company. Most of the time there will be some requirements such that a new employee needs to be in the company for 6 months to 1 year before they send out referral fee.
DON’T refer someone if you think you wouldn’t want to work with the person (or know that the person wouldn’t be hired) in your company, just for the referral fee.
b) Bank/Credit Card referral
You can refer your friend for a bank account or a credit card too. Most of the financial institutions offer a few thousand points or a few hundred dollars for a successful referral, and most of the time it takes a few minutes. If you need a referral for any of the services I am writing about, reach out to me. I will get a small commissions as well and you get the expert opinion about the product/service before opening account.
DON’T refer any unknown financial instruments to a friend/family person before researching the product thoroughly. People get into trouble by unknowingly refer or even influence other person’s financial decision.
c) Amazon Associates
You can open an Amazon Associates account to refer products to your friends or family. You can open an associate’s account for free, the only catch is that your friends need to buy at least a single product within 6 6-month timeline.
4. Black Friday/Prime Day
Black Friday and Prime Day are two of the special days when you get a lot of deals if you know the regular price of the product. You will need to do a few trials and errors to figure out what works for you. I can share my strategy how I evaluate deals for these scenarios.
If I need to buy something and it can wait for a few months, I typically put that item into my Amazon Cart and leave it there till Prime Day or Black Friday to see if the price changes. Most of the online retailers are smart enough to increase the price and then provide a large percentage off during the holiday season. If you know the regular price, then you can easily calculate the difference. Most of my big-ticket item purchases are typically done during the holiday season if I get a good deal on the price.
DON’T buy something because you just got a good deal on the price, and you won’t use it enough to justify the price. I was guilty of this phenomenon multiple times in my earlier years. If you can wait a few months (at least 30 days) and you still think you will need that product, go for it.
5. Coupon/Deals
I used to collect all the coupons from newspapers, online, and marketing materials/brochures in my earlier years to get a good deal on the products/services. These are the following I used in the past:
a) Restaurant
Most of the restaurant gives coupons for a specific day of the week or even Happy Hour pricing. If you can collect the coupons (sometimes from online) or prepay for it using coupon sites (like Groupon), you get a good deal on your lunch or dinner. Consider stacking up with the 5% quarterly bonus credit card points offer to get the maximum value.
DON’T just visit every restaurant during their happy hours and spend money which you don’t have. We typically setup monthly budget (like $200 for 2-persons) for dining out and only spend the amount within our limit.
b) Employee Benefits site
This is one of the lesser-known ways you can get a good deal on the price. Most employers provide subsidized services for their employees. Be sure to check out the employee benefits section of your employer. I used many more services with very small out-of-pocket money, just using my employer’s coupon code for legal services, car rental, movie tickets, and travel-related services.
DON’T share your employer’s coupon code outside; you might get banned from using those in the future, or even your employment might be terminated.
P.S. Feel free to reach out to me if you need any clarification on the above topics or if you need a referral code. I would be more than happy to share my referral code if I have one. Happy deals hunting!
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