What is “Savoring” and How Can it Help You Build Wealth?
I’m sure you have all come across the articles that tell you to give up your daily Starbucks coffee (and brew coffee at home) or stop going to the gym (and start taking free Youtube classes). As much as these are great tips to save a few hundred dollars, many of us are stressing over these little wins when we are spending way more in other areas we are neglecting.
When thinking about your New Years Resolutions, it’s critical to focus on achieving “big financial wins” in your life. By choosing your top two to three big financial wins to tackle in 2019, you might easily be able to save hundreds or thousands into your savings or investment account. Here are some ideas that have transformed some of our community member’s lives:
If you are carrying around a credit card balance and only paying the minimum each month, you could be paying a hefty interest of 20% APR. That high interest can quickly escalate into hundreds or thousands of dollars. Instead of paying the minimum, set a goal to pay off the credit card debt within a certain time frame (e.g., 6 months) and tackle this by saving a little more each month and putting any extra money (think tax refund or bonus) towards this amount.
If you have student debt with a high-interest rate (think anything above 6%) and don’t plan to pay it off within the year, you should spend some time looking into refinancing. A refinancing is free for you as long as you meet certain income and credit requirements and can make the monthly minimum payments. We’ve seen the Snowball community refinance their student debt from 10% interest to 5% while saving thousands of dollars in the process.
Related: get a free student debt assessment
As much as this might sound counterintuitive, by focusing on increasing your income you might be moving the needle even more. We advise a lot of our Snowball community to focus a big goal on either on trying to get a raise or promotion at work. That extra 3-5% bump in your paycheck could add up to thousands of dollars in extra savings over the course of the year.
Related: Negotiating with Real Leverage
Before making a large purchase, our Snowball community will spend the time doing diligence and not rushing into things. One Snowball member recently looked into buying their first car. Instead of buying a brand new car straight out of the lot for $40,000 ($20,000 cash and $20,000 in financing), they searched online and were able to find a slightly used version for a 40% lower price. By buying at a cheaper price, they were able to both avoid the extra debt and interest payments and spending a ton of money on an asset that will lose value right out of the car lot.
Even though subscriptions can seem like small dollars (think the internet for $50, phone bill for $80), these can end up adding up to thousands a year. A quick tip our community has utilized is to check their subscriptions once a year and look at the ones they use and don’t use. They cancel the ones they don’t use and for the ones they use, they spend an hour on a free day calling and negotiating for a lower rate. Whether it’s Comcast or Sprint, often times a provider will be able to provide you a lower rate (and it never hurts to ask).
We’ve found a lot of wisdom from the community in making sure to invest in yourself. Even though you are technically spending money, but focusing on preventative care it can lead to lower bills down the list (and avoid that unexpected few thousand dollars for that root canal you need ASAP). Our community advises that you make sure you have basic insurance and you are taking care of yourself (think dental, health, eyes, fitness, etc.)
Setting up an automatic transfer into a high-interest savings account can quickly add up into a big win, on top of being a great forcing function to save.
When it comes to a credit card payment, we suggest keeping a balance that is small enough to pay off at all times. Most credit cards also have the option to “pay balance in full” automatically (vs. automatically paying the minimum).
Related: High Interest Savings Accounts 2018
Looking at your budget, can you begin getting closer to saving for a goal by downsizing into a smaller apartment, or getting a roommate? It may be hard to go from living alone to renting out a room, but what if that meant you could save up to buy a house or condo?
Remember, by even tackling ONE of these big wins it can have a huge impact on how much you can save each year. Rather than stressing every single day about that caffeine kick you’ve missed, by spending 30 minutes to an hour researching a way to achieve your “big win” you can save thousands. If you are getting started, it’s a good idea to dedicate a weekend morning to taking care of your personal finances (we like Sunday mornings).