One of our savings schemes is to pay off our car loan in a couple of years and then continue to make the payment to ourselves with interest until we’ve saved the equivelent of what we paid for it over the term of the loan. The next car we will buy outright and pocket the interest we would have paid on a new loan. With our last vehicle we got huge discounts and incentives buy buying the previous year model that had been sitting on the lot costing the dealer money. They make these deals with the hope of making up the discounts with the financing. Buy paying cash we’ve estimated that the potencial savings between the discounts and the future interest we will continue to pay ourselves in interest berring accounts will be in the tens of thousands of dollors. That is more than enough to cover the registration and required insurance while still getting to enjoy a newer car. Why give all that money to the finance company. Basicly we want to be our own bankers.

Glad you found these posts! Your advice is really well taken – most people don’t every really sit down and evaluate how much they spend on the basics.

The comment on the ethical implications of not having an emergency fund is very interesting. There is no question that being tapped out limits your options, and could definitely put someone in a corner where desperation takes over.

Adam

Wanted to share my top 2 tips for saving money:

1. stop going out to eat and carry your lunch. When I stopped eating out for dinner and started taking my lunch to work, I found I could afford to eat really high quality food from Whole Foods, at nearly 1/5th cost of my old life style. Bonus: I’ve lost weight because I’m not eating all the excess calories that are served in huge, high fat portions in restaurants. Double Bonus: it’s been great for the relationship to cook together each night.

2. Shorten the commute. I discovered when I was commuting from SF to San Jose, I was spending 24k PRETAX to commute in depreciation, parking, gas, maintenence, etc. Let me repeat that, I could afford to take a pay cut by stopping the commute. I now walk to work. I still might sell my car, use zip car instead, and save another $500 a month!

I had created a six month efund and paid off all short term debt after only six months of these 2 changes in my life. Now all that’s left is the student loans and I am whacking away at the high interest ones first, then it will be time for serious investing.

And lastly, some philosophy: I had a professor in b school who used to refer to the e fund as the “go to hell fund.” He showed us a study of Harvard MBAs who had been faced with an ethical challenge. The people most likely to make unethical decisions were the ones with no financial cushion. The Go to Hell fund enables you as a manager to simply walk away when a company isn’t furthering your professional growth, or tempting you to cross an ethical line, or putting you in a position to compromise your values.

Saving my money that I’ve earned with my time, which is my most precious possession = personal freedom! I just wish it hadn’t taken me 35 years to learn this!

“Every now and again, you hear about the old widow who left $20 Million to a University, even though she lived with no heat and ate oatmeal every day. Sad, really.”

You know, I live with no air-conditioning, and eat oatmeal everyday…it’s really not that bad…

Other savings methods that I use
1) avoid regular / month expense. Many companies does automatic deduction from checking account, etc. I never sign up for them.

2) make a goal to cut your expenses by 5% every year. It’s actually not very difficult. Every Jan I review all my bills from the year before and call up all the vendors and ask them about promotion, and discounts for regular customers. Review my credit card, insurance, cable, internet, etc. Do a little bit of comparision shopping. You be surprised how much you can save with just a few phone call.

3) Do your own taxes or at least understand everything that your accountant is doing. For me after mortgage, taxes often is my 2nd biggest expense. I alway do my taxes twice. I do it once and my accountant does it again then I ask about every disprecancy and understand the difference. Managing my tax liability has help improve my savings rate.

The next two ideas are not directly saving method but it’s important to build a habit for saving.

3) Talk about money! In my family and with close friends we regularly share ideas about where to get the best interest rate, tax strategies, saving strategies, etc.

4) Choose your friends and associates wisely. If you hang out with spenders you are going to be less careful with your money. Hang out with saver, then it’s easier to save your money.

Great article. looking forward to the next one.