Everyone agrees that the more self sufficient you are, the greater
your personal freedom is. If you are making monthly payments for
your mortgage, car loans, and to credit card companies, you are obligated
to work so that you can pay those bills and your time is not your
own. Your freedom is limited by your debts. But, if we are financially
free, we can choose how to spend our time. And the freedom to use
our time as we please is a goal worth striving for.
To that end, I will offer a few tips that are easy to incorporate
into you spending habits which bring you closer to that goal. These
are
not earth shaking changes that will turn your world upside down. These
are baby steps down the path to financial independence. But every penny
that you can save increases your personal freedom. If you are not following
any of them, by using these techniques you should save 10% on the purchases
you make most often. That is the practical equivalent of getting a
10% raise. And who couldn’t use that?
No matter how much we do for ourselves, we spend some portion of our
hard earned cash for the basic requirements of survival. You need food,
shelter, and clothing. In addition, there are other items that you
buy regularly which you can shop wisely for like over the counter medicines,
pet food, and fuel. I’ll use groceries as the example for this
issue, but you can apply the techniques to anything that you pay for
regularly.
The first step is to get a firm idea of what the fair price of the
item in question is. This is as easy as just noticing what you pay
for each item as it goes in your grocery cart. Once you know what you
normally pay, you will be able to recognize and take advantage of bargains,
and avoid the pitfalls of false advertising and marketing schemes.
In store sales are often a good way to save money, but only if the
price is less than you would normally pay. An offer to “buy one,
get one free” is not a bargain if the first item has been marked
up 100%. If the item in question is offered for sale for less than
the normal price for two, then the sale is worth taking advantage of.
Similarly, you may be able to save a few dollars a month by using discount
or mail in rebate coupons. In fact, if you are diligent at clipping
and redeeming you can save quite a bit of money over time. But be careful.
Because I tend to buy the cheaper brands and coupons are often for
more expensive brands, I can rarely save money by making use of coupons.
For example, a $3 box of cereal still cost less than a $5 box with
a "$1.00 off "coupon.
Using coupons and taking advantage of sales should let you save a few
dollars every trip to the grocery store. But real savings occurs when
you have the ability to take advantage of bulk discounts. Let’s
say that the “buy one, get one free” offer we discussed
above is for a can of ravioli or soup that your family eats once a
week. The can normally costs a dollar. So buying two cans for the price
of one saves a dollar over buying two when they are not on sale. But
canned food is fairly shelf stable. If the cans on sale are not near
their “best used by” expiration date, consider buying as
many as you can afford. If you bought $20 worth, you would save $20
that you would normally spend over the next five months. By buying
one can a week you would normally spend $40 over 40 weeks (5 months.)
But by buying the same amount of food for $20 because it is on sale
at half price, you save $20. That is like someone putting an extra
$20 in your pocket. Sure you might get an odd look from the cashier
when you put 40 cans of the same thing on the checkout counter, but
is it worth an odd look to get $20? It is to me. When I find pasta
on sale at three pounds for a $1 or less, I buy 30 pounds. It is shelf
stable, and it gives me the peace of mind of not only knowing that
I have saved at least 50% vs. buying it one box at a time, but also
that my family won’t starve if times of shortage or financial
hardships arrive.
“Buy one get one free” deals don’t happen as often as we’d
like, but 25% off sales do happen frequently. Even if the sale is only
25% off the normal price, the same $20 spent would save you $5. Why
not save $5?
The last tip I will offer this month is one that should only be used
by people with strong self discipline. It can be downright financially
dangerous if you can’t control yourself. But if you have the
will power to do it, it is literally free money. Your secret to tool
for free money is … a credit card. But not the cash advance feature!
Many credit cards offer cash back rebates on money spent. Discover
card established itself by paying back a percentage of money spent
in Sears’ store credit. Today many credit card companies offer
store credit or cash back options. Most are 1% back on dollars charged
with additional bonuses for using your card at certain retailers. My
credit card pays back a straight 1% on all purchases made. I put my
grocery bills, gasoline expenses, and anything else I can pay by credit
card through that account. As a result they pay me $10 for every $1,000
spent. This is free money actually earned (not just saved.)
Now here is the dangerous part. You must pay the balance off every
billing cycle. If you do not pay off the credit card (in full) each
month, you will be charged interest on the balance and it is 100% certain
that the interest due will exceed the cash back rebate earned. But
if you have the self discipline to only use the credit card for expenses
that you would normally pay cash for and to pay off the balance every
billing cycle you can actually make money using a credit card. At $10
cash back per month you earn $120 per year. $120 will buy a lot of
groceries when a god sale comes along! In addition, using the credit
card for routine purchases makes balancing the check book a whole lot
easier when you only write one check each month.
So there you have it - five steps toward financial freedom: learn what
a fair price is; take advantage of sales; mail in rebates and other
coupons; save money by stocking up with bulk buying discounts; and
if you have the self discipline to pay off your credit card each month,
take advantage of cash back rebates. These techniques will let you
save and earn a portion of every purchase you make, and every penny
saved or earned is a step closer to your financial freedom! - Mr. Yankee
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