6 Simple Ways to Save Money (I save $1653.96 a month)

Want to save more money to achieve your financial goals? Maybe even get closer to financial freedom? Even if you’re on a tight budget, you can save an incredible amount of money with the techniques listed here.

I will share with you the 6 simple ways I save $1653.96 a month.

Why we need to save money

First, we need to understand the importance of decreasing your spending. 

The path to financial freedom is to increase the gap between your earnings and your spending. One method to do that is to decrease your spending.

Here is a breakdown of Average American Spending according to howmuch.net.

When it comes to saving money, it’s best to start with the large ticket items. 

Saving 20% on your housing costs will have a much greater impact than saving 20% on your coffee expenditures.

How to save money each month

Save money on housing

If you’re like most people, including myself, housing is your biggest expense. Here are several techniques to save on housing:

1. Rent instead of buy
2. Buy instead of rent (Tricky right? You’ll have to run a Net Present Value (NPV) calculation to determine which is cheaper)
3. Get a roommate. If you are renting a 2 bedroom apartment all to yourself for $2000 a month, and you get a roommate who will pay $1000, you’ve easily saved $1000 a month!
4. Downsize
5. Live in a less expensive neighborhood

How I save money on housing

I bought a one bedroom condo about 10 years ago. The current market value rent for a one bedroom condo is about $1100 more than what I’m paying for my Mortgage + HOA + Property Tax. This amount of savings goes straight into my investments!

Side Note: My roommate is a cat. Sometimes she doesn’t pay rent.

I could include a detailed analysis of the time value of my down payment, the appreciation of my home, tax savings, home equity, etc… but for the purpose of this post I will say that my approximate savings is the difference between what I’m paying and the market rate for a comparative condo.

Approximate monthly savings: $1100

Save money on taxes

You can save on taxes by contributing to a tax-deferred account such as a 401K or an IRA. This might save you money on taxes in the long run if your tax bracket is higher now than when you withdraw money in retirement. 

How I save money on taxes

I contribute to an employer-sponsored plan that’s very similar to a Roth IRA. My goal, and plan, is to make more money in retirement than I do right now working. So for me, it makes sense to pay the taxes now to get tax-free distributions later.

Approximate monthly savings: TBD

Save money on transportation

It boggles my mind how some people spend $40k, $50k, and over $60k for a brand new vehicle! It’s estimated that a brand new vehicle loses close to 10% of its value the minute you drive it off the lot. Can you imagine losing $6000 after just one minute of driving? 

Furthermore, a car will lose between 15% and 20% of its value each year according to Bankrate.com.

If I were to buy a car, I would purchase either a new economy car (think Honda/Toyota/Ford) or a used car in the sweet spot, which is a period when a car is about 1-2 years old.

If you buy a vehicle that is lightly used, about 1-2 years old, you’ll purchase it after the biggest drop in depreciation. 

Personally, I wouldn’t mind purchasing an older vehicle, for reasons I’ll show below.

How I save money on transportation

I drive my parents’ hand-me-down 2002 Toyota Camry. 

Yes… I am aware that it’s nearly two decades old!!

But it gets me to where I need to go. A Lexus or a Lamborghini might be fun and exciting to drive. But it won’t get me to the grocery store any quicker than my Camry can! 

Before the Camry, I was driving my parents’ hand-me-down 1998 Mitsubishi Galant before it broke down!

I’m not going to tell you how to live your life. Only you know what your priorities are. But if you’re interested in saving money, go with a reliable vehicle that takes you to your destination safely, without headaches… and financial heartaches.

However, if you’re still more interested in impressing your friends and your neighbors, get the Lambo and invite me for a ride! 

The average car is valued at $37,876. With depreciation of 15% per year, this would equate to an average monthly depreciation of $473.45.

My car is valued at $2000 when the sun shines on it just right. I can’t imagine it losing anything in value, so it’s essentially fully depreciated. I assume I’ll have to pay a little more for maintenance on this old vehicle than I would on an average car, which I’ll peg at an additional $50 a month.

Approximate monthly savings: $423.45 (I haven’t included the cost of the Camry which was borne by my parents, but I also didn’t include the added cost of insuring a newer car – which would make the savings even greater!)

Save money on food

Save money on food at Home

You can save money by food prepping! 

To food prep means to buy food in bulk and cook enough to last you the next 2-3 days. 

It is a very effective way to spend money on food that you know you’ll eat, as well as minimize waste.

Save money on food away from home 

• Take advantage of happy hour specials
• Order from fast casual restaurants 

How I save money on food

I cook much more often than I eat out. I rely on staples like rice, chicken, and fresh veggies and try to food prep when time allows. 

I also have very inexpensive tastes! When I do eat out, I enjoy relatively inexpensive fast casual chains like Subway, Chipotle, and Panda Express. I know most people won’t agree with me, but I find tremendous value in the food, and make sure to load up on the proteins and veggies in each meal.

Approximate monthly savings: TBD

Save money on entertainment

Save money on drinking

Option 1: Buy a bottle of moderately priced whiskey and enjoy a drink at home for $2.50.

Option 2: Buy a whiskey on the rocks at your favorite bar for close to $12 after tip and tax.

I can’t tell you what to do, because obviously there are social reasons why we drink at bars. Just thought I’d let you know so you can make your own decision!

Save money on reading

You can borrow Kindle books from your local library for free! I’m sure it depends on your city, but in San Francisco it works great. They have a huge selection of books and they send books straight to my Kindle. I can borrow a book for up to 21 days, and re-check it out if needed. Which works fantastic since I’m a slow reader…

How I save money on entertainment

I’m a little older now, so I don’t spend much at bars. And when I do, it’s usually just for one drink each time (I’m such a lightweight).

I borrow close to one book a month which saves me about $15 each time!

Approximate monthly savings: $15 (not counting drinks)

Other ways to save money

• Utilities: Shop different cable providers
• Streaming services: Take advantage of discounts
• Delivery: Share if possible

How I save money 

I changed my cable provider from Comcast to Monkeybrains (Savings: $25/month)

I take advantage of the student discount for Spotify (Savings: $5/month) – I was a student a few months ago so this perk will probably expire sometime next year

I share an Amazon Prime Account w/ my sister (Savings: $59.50 a year = $4.96 a month)

Approximate monthly savings: $34.96

My monthly savings

This is what my monthly grand total of savings looks like:

Money savings if invested over 30 years

Imagine if I invested that $1653.96 a month into an index fund that tracks the S&P 500 for the next 30 years. How much money would I have?

Assuming an 8% annual compound interest rate, I’d have $2,329,686.33 !!!

Source: https://www.calculator.net/investment-calculator.html

The power of compound interest truly is amazing.

Imagine having an extra $2.3 Million in your retirement, all by making a few minor adjustments to your spending that have little to no impact on your standard of living.

How to save money: Summary

I just covered 6 techniques to save money on your biggest expenses including housing, taxes, transportation, food, entertainment, and miscellaneous. 

Using these techniques I’m able to save at least $1653.96 a month which equates to approximately $2.3 Million if invested in the market over 30 years.

I hope that you can also examine your spending and utilize these techniques to save a substantial amount of money and bring you closer to financial freedom.

Let me hear from you!

What techniques not mentioned here do you use to save money? Which of the techniques in this post will you implement today?