If you want to become an extreme saver, your first step is to understand your finances. Once you understand your finances, you can identify areas where you are wasting money. A common misconception regarding extreme saving is you can only save money by making sacrifices. In some situations, you cut out expenses entirely, but extreme savings is typically about replacing expensive purchases with less expensive alternatives.
Other methods of extreme saving focus on getting the same products or services for free or at a reduced price by using deals and coupons. Essentially, extreme savings is about refusing to waste money on goods or services you can receive for a lower price. Becoming an extreme saver may seem time consuming, but once you get into the rhythm it is easy to maintain. For the best results, extreme savers must be willing to utilize online and offline resources to save money. Use these tips to begin your extreme savings lifestyle.
How to Treat your Savings
One of the first tips for new savers is to treat your savings like any other bill. Set aside a goal to put into your savings every month, as if you were paying for rent or utilities. It may seem like a simple step, but it is one of the most important ways to get into the mindset of an extreme saver. When you set a specific goal to reach for your savings each month, you are less likely to spend your money on unnecessary impulse purchases. Many spenders fall into the trap of making a series of small purchases throughout the month, dismissing how quickly these expenses add up.
If you look at all these expenses at the end of the month, you realize how much you could have saved if you put the money into your savings account instead. If possible, considering automating your savings program, so each month a certain amount is deposited into a savings account. You can set an automatic deposit for other accounts as well, such as a retirement fund or a college fund for your children.
Avoid Lifestyle Inflation
Many workers are tempted to spend more money after receiving a raise. It is perfectly reasonable to celebrate your newfound success, but if you increase your overall spending you end up saving roughly the same amount as before the raise. Another danger with inflating your lifestyle expenses is if the income boost ends up being temporary. This is more common when you receive a one-time income boost, such as an inheritance fund or a holiday bonus. Once you return to your traditional income, you may end up spending more than before because you are used to an inflated lifestyle.
Avoid the Credit Card Trap
Many extreme savers are motivated to start saving because of credit card debt. Credit card debt is a common problem, and ultimately ends up harming your attempts to save. The Freedom Financial Network estimated on average paying off credit card debt leads to investment returns 15 to 20 percent higher in the following year. Even if you are not already in debt, using your credit card creates a false sense of security. It is easy to fall into the pattern of only making the minimum payment on your credit cards and letting your interest gradually build over time. If you rely on credit cards, you fall into the trap of convincing yourself you have more money on hand than you actually do, especially if your credit card has a high limit. It is much more effective to have physical savings on hand versus extended credit lines.
Choose What to Purchase
The first step to saving is building a financial plan. Look at how much you typically spend each month and determine where all of your money goes. There are a couple of common spending areas to consider cutting back on:
- Instead of buying a lunch every day, pack a lunch from home. Bringing your own food to school or work is an easy way to save hundreds of dollars every month.
- Only buy clothing you truly want. It may seem overly frugal at first, but it is common for shoppers to buy clothing on an impulse but ultimately wear the outfit a handful of times before tossing it into the closet. A common tip is to wait a day or two to see if you still want the outfit after time has passed, or if it was just an impulse buy.
- Car expenses are another area where you can save money. If you live in an area with strong public transportation, consider utilizing it instead of buying a car. Even if you do have a vehicle, using public transportation, walking or carpooling when available helps cut down on costs. If you know you can get away with minimally using your vehicle, you do not have to spend as much on a car in the first place.
Bargain Shop
If you want to succeed as an extreme saver, you must familiarize yourself with bargain shopping. There are two primary ways to bargain shop. The first method is to use coupons as often as possible for savings. The second option is to take advantage of any non-coupon deals or sales in your area. For example, instead of buying your groceries every week, consider purchasing groceries for the month in bulk for a discounted rate.
Websites are an excellent source for bargain shopping. Even if you do not purchase specifically from a website, you may be able to visit manufacturer websites to print out special coupons. Many companies offer coupons if you complete customer surveys. You can use saving networks to stay up to date with the latest deals. Some of these sites provide coupons, while others provide information on great online deals.
Finally, look for deals on used items. The internet is a good resource for buying used items, but you can find good deals at yard sales or flea markets. Thrift stores are another valuable resource if you want to minimize spending. Keep an eye out for companies going out of business. In addition to offering great sales, the company may sell unexpected items at reduced prices. For example, many stores sell office equipment like chairs, computers and monitors as part of a going out of business sale.
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