There is really only one way to save money. You have to spend less than you earn. For most people, this means having less of a bar and going out less, but there are actually much better strategies for spending less than you make.
At IWT, we believe that the best way to save money is to use the CEO approach.
The CEO Approach: The Best Way To Save Money
Traditional advice on saving money only focuses on limitations. By looking for other ways to improve your finances, such as: For example, by earning more and optimizing your expenses, you open up a multitude of new opportunities to save more.
That makes the CEO approach the best way to save money. We’ll show you how to get started today.
Save money Tip # 1: cut costs
Most of us know what it means to cut costs. But cutting costs doesn’t have to mean giving up everything you love.
The best way to save money is to cut costs only on things that you don’t really care about or that you don’t use. That way, the more likely the change will be permanent. The two best ways to save money by cutting costs are with the a la carte method or the envelope method.
The a la carte method
The a la carte method saves you money on services that you have a subscription to, e.g.
- Gym membership
- Amazon Prime
There is a good chance that you are paying way too much for these things. A conservative estimate shows we’re spending over $ 1,800 / year on subscriptions alone.
The convenience is undeniable – subscriptions are a fantastic way to automate our lives.
But when was the last time you checked your monthly subscriptions and canceled one?
Probably never. However, compare this to each time you went shopping, saw something you liked but didn’t buy.
Read that again. This is key to lowering your subscription spending.
The basic idea of this system is to cancel all your subscriptions at your own discretion – magazines, Spotify, Netflix – and buy whatever you need à la carte.
- Instead of paying a high monthly fee to companies like Netflix, just buy or rent the shows or movies you want to see on Amazon or iTunes. Most episodes of TV shows are only $ 1.99.
- Buy a day pass to the gym (around $ 5 to $ 10) each time.
- Buy the songs you want from Amazon or iTunes for $ 0.99 each.
This forces you to be aware of your expenses. If you are following the same principles that make automating your finances great, then you need to actively think about any fee you might charge when buying a song or a TV show.
After a while, if you spend enough money on these items to warrant the subscription, be sure to pick them up again. If not, you have saved yourself a lot of money.
Another great system for reducing costs? The envelope method.
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The envelope method
The envelope method puts cash in special envelopes for all of your monthly expenses (e.g. gasoline, going out, shopping).
For example, you might have a “restaurant” envelope so that every time you go out to eat, you take money out of it to spend. Once you have used up all of the money in the envelope, you are ready for the month!
This method is flexible as it can dip into other envelopes in an emergency. However, there will be less money for the month for this spending category.
You also don’t need to use physical envelopes. One of my friends who started tracking her expenses some time ago had a great system: she set up a separate bank account with a debit card.
Whichever system you choose, you just have to make sure that you decide how much to spend in each category (and that’s entirely up to you).
If you think this system will help you become more aware of your expenses, read more about setting up your handling system in this post.
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Saving Money Tip 2: Earn More (the best way to save money)
As Ramit always says, there is a limit to how much you can cut, but there is no limit to how much you can make.
Before you roll your eyes and skip this step, you can ALWAYS earn more. Even if there’s a recession, even if you’re broke, or busy, or don’t know where to start.
According to Ramit, there are several ways you can earn more. You can ask for a raise on your current job, find a higher paying job, start a business, or take up a freelance job.
Ask about a raise
You can make thousands more in just five minutes of conversation, and better still, profits add up year after year.
This is one of the best ways to make money from a single conversation. It is essentially easy money that, unlike doing surveys or selling your body to medical studies, will make you a ton of money over many years.
Check out this table that shows the effects of a $ 5,000 increase:
Ramit wrote a great all-round post on how to negotiate your salary. It has a ton of information in it and the steps are easy to follow. When you’re ready to get paid for what you deserve, give it a try.
Find a higher paying job
Should you change jobs? Change industries? How do you know whether to stay or take a risky move that can lead to more money?
Some jobs just don’t offer an opportunity to earn more or climb the ladder. If you want to make more money, you may need to find a better job. If you find yourself in this situation, Ramit has a ton of great resources to help you get a better job on YouTube.
Start with this video:
Writing a successful resume is the first step to finding a higher paying job.
(We also have an entire course on Finding Your Dream Job. To learn more, click here.)
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Start a business or start freelance work
Finding a new job or changing a career takes time. But in the next few days you can build up your first sideline. Once you have your first paying customer, it’s easier to get more customers and make more money.
The first: Lots of other websites will tell you to troll for freelance gigs in places like Fiverr or Mechanical Turk. These places work when you want to compete with people around the world to do most of the work for less. No thanks.
Instead, take a look at what you already have. 95% of the jobs can turn into a kind of side appearance. Ask yourself:
- What do I want?
- What do I do with my free time?
- What are people asking me because I’m so good at it?
Start by assessing the skills you use every day at home or at work. Remember, people pay for solutions, not your skills. How can you use your skills and turn them into a solution to someone else’s problem?
Here is a very simple example:
Skill: You are good at math
Problem You Can Solve: With schools closed in most states, many parents have difficulty helping their children with distance learning and would like to pay for tuition.
Your new sideline: teaching kids math using Facetime or Zoom.
Now imagine if by tutoring you for a few hours a week you suddenly had an extra $ 500 a month.
With this money you can save directly without reducing your expenses. And this is just a small example, it can work for virtually any skill. That’s why it’s one of the best ways to save money when you make more.
If you want to turn your skills into extra cash, check out this post for everything you need to know about starting a side gig.
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Save Money Tip 3: Optimize Your Spending
Little of people realize that just a few phone calls can save them thousands of dollars in a day. You can call a company that you spend money with and ask them to waive fees, interest charges, or lower your prices.
And yes, these companies are ready to offer you a discount. You need to understand that these companies have spent a lot of money trying to get you as a customer so they don’t want to lose you (especially in the current circumstances).
Many companies also think long-term. If they can keep you as a customer (even if you’re not spending that much right now), over time they can get you to spend more in the future.
You have a lot of power as a tenant, tenant, and customer, and you should leverage that leverage.
Below is a video of how you can save $ 1,000 with just 5 phone calls. This is what we mean when we say, “Only make the changes that have the greatest impact.”
Instead of saving $ 3 by not buying a latte, you can negotiate your bills and save $ 1,000 while still buying all of the latte you want. Because of this, the CEO approach is the best way to save money.
Don’t be intimidated by negotiations, even if you have never done so before. Here are some of the messages Ramit has received from students who used these exact techniques to save money.
If you use all of the tactics outlined in this post, you can do it in just a few hours.
Remember, the best way to save money is to cut the cost of things you don’t need to get more by increasing your salary or starting a sideline and optimizing your expenses through negotiation.
It sounds like a lot, but it really is only three steps to saving more money without giving up everything you love.
If you use this strategy and it works for you, then you can send your story to @ramit on Instagram. We love to hear from you.
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