You don’t have to start penny pinching to save money. It can help, but it’s not necessary. This is because there are 3 epic ways you can save thousands by approaching life from an alternative angle. Think of it like this:
Lions would not be able to survive on the calorie content of field mice.
Whilst they are potentially more abundant and easier to catch, long-term they would not be able to sustain an animal of that size; it’s a lot of continuous work for not that much reward.
The same thought process can be applied to humans.
Are you hunting field mice or antelope question; Is one of the 17 life-changing questions Tim Ferris asks himself.
It’s a question that can be applied to personal finance, financial independence, or any type of wealth-building exercise.
How Do You Try To Build Wealth?
The field mice vs antelope scenario can be applied to both wealth building and money-saving scenarios. Rather than struggling through life being reactive, we should be proactive.
Penny pinching is a sure way to devalue your life and prevent you from enjoying yourself. There are better ways.
Wealth Building
Whilst everyone is hunting field mice (a salary) and dying a slow financial death. The wealthy are hunting antelope; income-producing assets.
You might be continuously exerting the effort required to earn a salary, but this in isolation won’t make you wealthy.
You need to be strategic.
All the while you are simply spending the money (calories) every month and consequently need to go in search of more field mice.
Every month that goes by of you earning money to spend money, you miss the opportunity to break this cycle.
Equities, bonds, real estate, and business ventures are just some of the assets that form a healthy financial diet. This is just the start of unlocking your potential to live a millionaire lifestyle.
Saving Money
You might be someone who also attempts to make tiny changes to their lifestyle such as depriving themselves of a takeaway or dinner out, to save money.
Rather than looking for the big feel-good wins, you may be concentrating every effort on small victories that actually taste sour.
This actually diminishes your willpower, motivation, and excitement as the prospect of saving each month.
There is little momentum gained and as a result, you are more likely to give up.
It is far better to focus on some of the following strategies, to reduce your expenditure and actually free up resources to spend money on things you enjoy.
How To Build Wealth In A Way That Matters
Freeing up valuable time and money to both spend and invest in assets is essential. In the scramble to either save money or enjoy life, we don’t see this clearly.
Sometimes we actually need to slow down to speed up.
By thinking critically about our largest expenses we can have highly efficient and long-lasting ways to save money.
Once done, these changes set you up for months if not years of extra savings, which often number in the £100s or even £1,000s.
However, there is often some effort required up-front for you to reap the benefits later.
#1 You Need To Negotiate Your Core Expenses
Your ability to save is driven by how you approach your core expenses. You need to be willing to negotiate your broadband, insurance, entertainment bundle, even your rent.
Even small % changes on these big-ticket categories will save significant money in the long-term and it’s all automated saving once done.
When we first saw my current flat listed, I called the estate agent and told them that we used to rent a top-floor flat on the estate for £650, and that £725 was overpriced.
(Although that was 4 years ago, and the new flat has a park-view)
The price was then reduced to £695 per month, a saving of £30 per month. This doesn’t seem like much at first but it’s £360 per year, and £1,800 over 5 years. Which is not bad for one 5 minute phone call.
How To Reduce The Fear Of Negotiating
People are often afraid or anxious about negotiating. I never used to like it, but like anything, it is a muscle that you build.
It can feel especially difficult when you need to negotiate with experts such as car salespeople, who with their years of experience and training can try to make you feel ill-equipped.
However, if you can stay the course and show them you have shopped around and are willing to walk away, you will quickly gain the upper hand.
Tell them another car dealership has offered you a better price and be specific.
This strategy had one car dealership scratching their heads on how to beat this price, and we scrambling to rip out what they could out of their profit margins.
Overall, this saved me £5,800 (£100 per month) over 4 years, and £1,000 upfront.
Practice Negotiating Whenever The Opportunity Arises
Over time you will grow a natural reflex to high costs. For example, the week of writing this post my starter offer with Bluehost was about to expire.
My instinct to save money kicked in and I negotiated a 50% discount. Despite being told no less than 3x that it wasn’t possible to reduce the price. This saved over $130.
At first, it may feel like you are begging or arguing but you’re not. You are simply trying to find an optimal solution, where the deal suits both of you.
It’s about compromise; where one side will reduce the price to meet the other budget. So be honest and tell people your budget.
At the time it might seem like penny pinching, but it’s all short-term pain for long-term gain.
Switch Where You Can’t Negotiate
It’s not always possible to negotiate things such as your gas & electricity but you can focus your efforts on switching to a cheaper provider.
Uswitch indicates that you can save, on average, £120 just from switching electricity providers. Use the tools on my resources page to help you compare the market and find the best deals.
You can also switch bank accounts to bonuses. An action for which I recently received £125 in the last year alone.
As you can see, there is zero penny pinching required, and with two simple actions, you will have earned yourself £245.
Ad clicks not only help to pay for my site but I also donate 10% of my ad revenue(track our progresshere) toGiveDirectly.Org
#2 Negotiate Your Income
When changing jobs, be sure to negotiate your salary, this is something that earned me a salary almost $20,000 AUD above the original offer. At the time I was also on a working holiday visa, with very restricted working rights.
This proves that even in dire circumstances such as a recession, lockdown there are negotiating strategies you can implement.
You don’t need to play a big game when it comes to negotiating, even small behavioral changes like not offering up a salary can lead to better offers. These often exceed what you would be happy to accept.
You can also drop it into the conversation that you also have other interviews, maybe even reschedule your interview due to interview clashes.
These simple smart tactics are a very soft way of negotiating if you are new at negotiating. However, they can have a profound impact, they also make you come across as amicable and in no way demanding.
This subtle negotiating tactic resulted in receiving an offer of £30,000 per year instead of the advertised maximum of £28,000. At the time I had returned to the UK in the September 2020 lockdown, so this was a fantastic win.
Frequently Change Jobs
Throughout my 20s I have found the easiest way to grow my income has been to change jobs; this has helped me grow my income from £23,000 to £26,00 to £30,000.
When you are new to the workplace switching jobs is the simplest way to get a pay rise. Not only this, but you will also optimize your chances of learning new skills, increasing your pay potential for the future.
Employee loyalty is rarely rewarded and people who stay in the same job for more than 2 years will be paid 50% less than someone who changes jobs.
Get in, learn new skills. Go get a pay-rise.
#3 Focus On Your Investment Plan
One of the major financial steps you can take is learning how to invest. Building wealth by saving in cash is like trying to swim against the tide.
You will lose 2-3% purchasing power every year due to inflation, so you’re essentially going backwards no matter how fast you swim.
No matter how much penny pinching you do, without the right investment plan, you will always struggle to build wealth.
By contrast, growing your money in the stock market is like putting the sails up and going with the wind.
When you invest in the stock market you rely on the law of averages and the stock market has historically returned 10% on average for over 100 years.
When combined with the magical effects of compound interest it seriously shifts your financial outlook. In fact, the more heavy lifting my investment does, the less penny pinching I feel the need to do.
When I started my investment journey, I was incredibly frugal, now I focus on the next big win, rather than the pounds I can save.
Motivational Sparks
The goal of financial independence 10xs my motivation to save and knowing that:
- By investing I will double my money every 7.2 years (see, rule of 72)
- That I’ll be financially free by 45
- Passive income to cover my expenses and give me 100% time freedom.
How To Stop Penny Pinching And Maximise Your Savings
You can fast-track your path to wealth, it’s much simpler than you think. You don’t have to be a penny-pinching hermit to save money. You can simply be more strategic and building a clear plan for your money.
However, there are no get-quick-rich schemes here and you will need to accept the ‘scary’ and volatile nature of investing.
You will also need to understand that growing wealth and investing in the stock market is not exciting.
It’s actually more like watching paint dry, so patience is crucial.
Being able to leave your investments alone and not making knee-jerk reactions to your returns is essential; trying to time the market can actually half your returns.
So, if you are ready to accept these things, then you should start with my FREE ebook.
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