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My Top Two Money Saving Tips

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The usual tips for spending less are all about price shopping. That's a great start, because if you can get the same thing for less, you are that much further ahead. So we should learn how to find the deals, and maybe it even makes sense to use coupons (although the time investment is often too much to compensate for the savings). But there are more powerful ways to save money on the things you buy. Here two of them.

Find True Alternatives

As mentioned, it is common to look for a better price for something. But there are often alternatives that have nothing to do with paying less for the same thing somewhere else. To find them, you have to think in terms of the underlying goals of a purchase.

For example, going out to eat isn't just about food. It is about getting out of the house and letting someone else do the cooking. What are some alternatives that accomplish both of these goals? You might buy prepared food at a delicatessen and go on a picnic. This could mean a savings of $15 for two people.

This assumes that you enjoy picnicking, of course. The idea here is to meet the underlying needs or desires in a less expensive way. It isn't about giving up what you enjoy.

Here's a three step money saving technique:

1. Find the true cost of what you are considering.

2. Identify the deeper needs or desires it is meant to satisfy.

3. Think creatively and start looking for alternatives that meet the need at a lower cost.

Let's look at an example of putting this technique into action. Suppose you're going to buy a boat. Step one: do an honest tally of all expenses. The boat will cost $12,000 and be worth $4,000 in eight years or so, so there is $1,000 per year. Interest on the loan, insurance, gasoline, maintenance, a trailer, gas for your vehicle to haul the boat around, life jackets - you add up everything and find that the cost will be about $2,400 per year over the course of the expected eight years before you replace the boat. You realize that you honestly might only average using it ten times per year, so the cost is about $240 per use.

Second step: List the deeper goals, which in this case might be fun, entertainment, something to do with the family, the prestige of boat ownership.

Step three: Find ways to accomplish all or some of these goals at a lower cost. Maybe you can rent a boat three times a year at $200 each time, rent two snowmobiles for $200 per day three times and spend a weekend fishing with the family at a nice resort for $600, for a total of $1,900. If that sounds like more fun, you just found a great way to save $600 per year. That's a money to add to your retirement fund, save for a big vacation or for the kids college fund, or for anything else you value.

Go Without

It is easy to imagine that we need something, but we often see only the imagined benefits without looking at the whole picture. Choosing not to buy something does not always mean a sacrifice. Often, we are happier without the things we thought we needed. Many things we buy actually cause more stress because they add ongoing expenses and responsibility to our lives. Look closely at everything you consider spending money on, and ask if it truly adds something of value to your life. If not, save the money for something that does.



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