How to Save Money Every Month
In my investment broker days I gave out little black books so people could learn how to save money every month. I became known as a go-to person for help of all kinds, whether it was personal financial advice, saving money tips or financial investment advice.
I was paid only for the latter. The woman who appeared unannounced in my office one day certainly was not there for investment advice. She was small, restless-eyed, about 40, skinny, nervous like a trapped sparrow and wanted to solve her life’s problems in 40 minutes. She had come from the neighboring city on her lunch break and was afraid of getting back late and losing her well-paid job as a legal secretary.
Spending Out of Control
Her marriage was in trouble, too. The cause: high debt and her out-of-control spending. With pressing credit card bills, she urgently needed tips on saving money. Among other things, she revealed what sounded like an addiction to coffee. She bought a coffee from one of the large national coffee shop chains on her way to work in the morning, another for her morning break, one or two at lunchtime, another during the afternoon and yet another on her way home. Five or six takeouts a day. I didn’t ask about snacks to go with it.
“Why don’t you get a tin of their coffee, a Thermos® and make enough at home to last the day? How much would that save in a month? Take that money and pay down your high-interest credit cards.”
Using the little black books
I reached into a drawer and handed her two small black notebooks. “Here’s one of the ways to save money on a tight budget. I want you and your husband each to write down every single thing you each spend in a month, from the change in the parking meter on up. Do it at the time you spend the money, not later. You might forget the smaller things otherwise, and it is those small things that are the most important for getting out of debt and saving money for retirement.”
Tips on saving money and financial investment advice go hand in hand. You cannot start an investment program without money, and the safest way to invest is regularly.
I can hear you complain now: “But it’s impossible to save, especially in this economy!” You may be right, but why don’t you get a small notepad, one small enough to fit into pocket or purse, to record all spending for one month? You might be surprised to find what money still leaks from your tight budget. But first agree with your spouse not to criticize each other for what might be revealed. Be nice.
Name of the game: survival
Maybe the money you find in these difficult times will not be for investment; maybe it will help pay for increased mortgage expenses instead. For many, the only game in town is survival.
At the end of the month, sit down with your spouse and cross off all the things that cannot be avoided. Mortgage or rent, car loans, student loans, essential food and medical expenses come immediately to mind. It makes no difference if some expenses are on both lists. Food is an interesting one. Some is essential for good health, some is not, so list items individually along with costs.
You now have a shorter list from which all essentials have been eliminated. Go through the list again and decide what items would result in a negative change to your lifestyle if they were cut out, and then eliminate these non-essentials from your list.
Exposed by the short list
What’s left is an even shorter list. These are things that you have agreed between you are not essential to either your life or your lifestyle. This is how to save money every month. You have decided what, if anything, you are wasting money on or areas where you are overspending. No one else is laying their judgments on you.
Are two cases of Pepsi a month really necessary? What about those between-meals snacks? Starbucks latte? Friday nights out with the guys? Could you invite them around to your place instead? You can have just as many laughs and the beer is cheaper. You get the idea. With a list you can see the effect of expenses that may not seem important at the time.
My one regret over the woman who came to see me: she never came back to give me the results of their expense review, but perhaps the saving money tips I gave her will help you even if you have no need for financial investment advice right now.
But for would-be investors, you may find a review of expenses to be just the thing you need to find money with which to invest.
50-year-olds wanted a million
The same system works just as well for established investors saving money for retirement. It is all about planning the future you want after your earning years are over and one story that sticks in my mind is a demonstration of how easy saving can become before long.
He was a conservative university professor, she taught piano in her home. They were not hurting financially but he wanted to retire with one million dollars. They had some savings but not nearly enough. I made some projections based on a reasonable rate of return and told them they needed to save an extra $600 a month.
“Oh,” the woman cried as I expected, “we couldn’t possibly do that!”
“Alright, then you will have to adjust your retirement plans.”
The looks on their faces said it all; this was not a pleasant prospect.
“Well, if we started out with $600 a month, could we reduce that if we found it too difficult?”
“Of course, as long as you are willing to change your goals.” Then I added: “If you are able to save for three or four months you will be amazed; you won’t miss that money.”
The Return Visit
A few months later, the woman returned alone to my office. I was disappointed for her because I thought she would say they had to give up on their dreams.
“You were right, Sydney, we don’t miss the money. In fact, we could save even more,” she burst out enthusiastically
“You don’t need to,” I told her. “Go and spend the extra money and enjoy yourselves.”
On a visit to my office a few years later she told me with pride they had increased their savings, bought for cash a new car after paying off the previous one, and had taken a cruise to Alaska, again for cash.
A year or two later, the husband took early retirement and shortly after that I left the brokerage business. By then the couple had about $960,000 – close enough.
All it takes is a little understanding about how to save money every month and an ‘I can’ attitude. Do you think it possible $6.67 dribbles unnoticed out of you pocket every day? That’s $2,400 a year.
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