Tips from Money School on how to Save More by Spending Less

I have recently just finished reading a book called “Money School” by Lacey Filipich which deals with becoming financially independent and reclaiming your life. I have written a full review of the book HERE. But in this post I wanted to explore some of the savings tips that were talked about in the book. I believe saving is the most important factor when it comes to being able to reaching financial independence and I found the section in this book of particular benefit, so I thought it would be helpful to share. Overall, the book is full of really useful information no matter where along your financial journey you are so I thoroughly do recommend finding a copy for yourself and having a read, you will not be disappointed.

Spend Less

I will start out by saying that it isn’t possible for everyone to be able to spend less, and this is explained in the book. There are some people who, for whatever reason not necessarily through any fault of their own, simply cannot reduce their spending any further as everything they spend money on is essential. For people in this position, then this post will not be for you, and feel free to ignore it and skip it. Then there will be people who think they cannot spend any less, but are not being completely truthful, I bet if you were brutally honest with yourself there would be several ways you would be able to save some extra money.

I also want to point out, that I am not advocating for everyone to live off baked beans and rice just to be able to save some money off their grocery bill. If you have a certain quality of life that you do not want to give up, then I am the last person who is going to stop you. But if you did want to look at saving money, then you may find something useful in this post that could help you out.

The Sensational Savers

When we see stories of people like Mr Money Moustache or the Frugalwoods or Mike Rosehart, we think: ‘Ah, they must have been earning bucketloads’ – after all, these people were all able to retire significantly earlier than most. But that is not necessarily the case at all.

Mr Money Moustache and his wife were earning US $60,000 a year each, relatively median for where they live. They were still able to save 60% of their after tax income. The Frugalwoods? Similar incomes again and an even more impressive 71% post tax savings rate. And what about Mike Rosehart? He earned around $55,000 CAN a year for three years and was able to save 88% of his after tax income to become financially independent at age 24!

There are people in the world living comfortably on a fraction of what you (and I) spend. They are no less content with life than we are. Even if you only do a few things they do, you will find you can spend less and accordingly save more.

So, so what do these sensational savers do? I’ve found three themes in their writing and videos, most of which are freely available online so feel free to check them out if you are keen:

They Think About Their Spending

Not one dollar leaves their account unless they’ve thought about it and decided it was worth it. They tend to have detailed budgets they have actively worked to reduce. They don’t give in to temptation, spending frivolously or just because there is a sale. If they didn’t deem it important enough to put in the budget, they don’t buy it. In other words, they are conscious spenders.

They Have Clear Priorities

These people understand the difference between ‘needs’ and ‘wants’. They have focused on getting their needs in the most affordable way, since needs are non-negotiable, and their ‘wants’ are carefully scrutinised. There is a trend of ‘wants’ being experiential – hobbies like hiking, picnics with friends, that kind of thing – so they get personal satisfaction and human connection without spending much money, if any at all.

They Buck The Consumer Accumulator Trend

Do you feel a twinge of envy when a friend’s house is nicer than yours? Does that jealous feeling strike when your colleague drives a brand-new car into the carpark? Do you long for the latest stuff 0 clothes, furniture, gadgets, sporting equipment – when advertisements flash up on your phone?

Yes? Congratulations, you are normal.

We are programmed to want more. We think spending fills a void. It is not true. This ‘have more stuff and you’ll be happy’ lie is reinforced in many and varied forms. Those who spend very little have worked this out. If they feel the desire to buy lots of stuff, they resist it. This takes self-discipline.

Apply Sensational Saver Strategies

I am in awe of Sensational Savers. They are saving superheroes compared to my mere mortal habits. But you and I can still use what they have done in our lives. A few simple tactics have helped me immensely. Even though I wouldn’t be worth of a saving superhero cape, these four tricks have paid off to the tune of hundreds of thousands of dollars for me:

Use Past Trends to Find and Get Rid of Future Waste

If you have made purchasing mistakes in the past, this is the time to learn from them. This could constitute a scroll of the transactions from your spending account, or you might like to get nerdy and download your full bank history for some spreadsheeting entertainment. You are looking to understand where your money is going so you can spot waste.

If you know you have got a tendency to spend without thinking, this process may feel like standing naked in front of the mirror after a decade of eating an entire cake daily. You might feel embarrassed, ashamed and/or revolted. Don’t let this put you off. Fixing your spending can be achieved quicker than losing weight if you are focused. It can also feel liberating, especially if you have had some subconscious low-level guilt about your spending habits. Get ready to kick that guilty to the kerb. Start by looking for:

1. Subscriptions you don’t use to the full or aren’t competitively priced

The subscription economy is designed to make regularly parting you from small amounts of money frictionless. It’s easy to not notice, or disregard because it is a tiny amount. It might be tiny each month, but over a year or more it can add up:

• If you have got Foxtel, Stan, Netflix for example, do you really need all three?
• Got a gym membership you are not using?
• Signed up to a whizz bang internet or phone plan but barely use your data?
• Got apps on your phone coting you each month but not being opened?
• Defaulted to an electricity or gas provider that is more expensive than similar competitors?

These are all opportunities to reduce your spending (depending on any contract penalties for cancelling early). Book an hour in your calendar each week for the next month, and use that hour to look through your regular charges. For each one, ask yourself:

• Is this a need, or a want?
• If it’s a need, can you get the same service cheaper – with this provider or another?
• If it’s a want, are you using it? Do you want it enough to justify the cost? Can you find a cheaper alternative?

2. Stuff you haven’t used

If you bought something on a whim and it is sitting in the box unused, you probably didn’t need it. If its still in your wardrobe with a tag on it, you probably didn’t need it. If you had no idea whether you used it or where it is now, you probably didn’t need it. Can you get a refund, or sell it second-hand? Be mindful how and when you bought it, so that in future you can work at avoiding circumstances that make purchasing easy.

Some stuff you haven’t used may have come to you as a well-intended but unwanted gift. Telling people what gifts you want may be a no-no in your network, but it is becoming more and more acceptable to announce your preferred gifting strategy to your well-wishers on holidays and birthdays. If you are willing to brave Aunty June’s wrath at having the gall to ask for what you want, you could make specific suggestions. Here’s a few I have seen and loved:

• No presents, just presence: come spend time with me instead of buying a gift
• I am working towards FI right now, so I am spending less on luxuries. That means a gift of <your preferred luxury item> will be very welcome
• I do not need anything, so do not buy my anything. If you absolutely insist on showing your love in dollar terms, an anonymous donation to <charity of your choice> would be wonderful.

3. Convenience Spending

We pay a premium for speed an ease in today’s time-poor world. Some forward planning and preparation makes convenience spending ripe for reduction. For example, take away coffees and bought lunches may have become everyday expectations, not unusual exceptions. There there’s the eight open packets of band aids you now own because you didn’t pop a single one in your bag or wallet when you bought the first packet. Or the extra neck pillow you had to purchase for $50 at the airport because you left your $20 one – sensibly bought at a cheaper location – at home. I am not saying never have a cup of coffee or a meal at a café, or not to buy a pack of plasters when you get a blister while out and about. I am saying don’t get into the habit if it’s just laziness or lack of planning. Be honest with yourself and factor in preparation time.

Buying second-hand is also a wonderful way to spend less. Tamary DiMattina, founder of the Buy Nothing New Month movement, described her first venture into recycled clothing as a ‘financial imperative twenty years ago when I was working at Sotheby’s, London. I had to look smart – but they expected me to look champagne smart on a beer salary.’ Not only has buying whatever she can second-hand helped Tamara’s budget, it is making an impact on the environment by reducing waste.

Subscriptions, unused items and convenience spending are straight forward to identify as wasteful. Reducing these might save you a few extra thousand dollars a year with not much effort or discipline required.

Far more confronting will be spending due to your lifestyle requirements increasing – whether it’s justifiable or simply comfort creep, or even some sense of feeling entitled to an upgrade to satisfy your ego. For example, it might be a more expensive home or car. My advice on this one:

Delay Purchase of non-assets

…..for as long as you can, or even forever.

When you look around at all the stuff you own, have a think about how many hours of your life you have given up so far to own those things – and how much of your future time you are giving up to pay off the debts their purchase has brought about.

A great place to start is your shoes. Add up the cost of every pair you own, then divide that by your hourly rate of pay. That is how many hours you worked just to own so many pairs of shoes. Last time I did this, my show collection was worth one full-time week of work: 40 hours. It seemed excessive. I have stopped buying shoes.

Your desire for nicer, fancier stuff is costing you. Big time. When it comes to items representing more than a week’s salary – cars, homes and Birkin bags for example – make yourself wait for as long as you can before you cave. You may find you don’t need them; in which case you save yourself another cost.

Another personal example: a few times a year, I look at my phone and think, ‘I should probably upgrade.’ My phone is a little slower than it used to be, it is a tad scratched up. The case has yellowed with age. But it works – it has not failed me permanently yet; it is just mildly annoying at times. I look at the cost of replacement online, which seems to be rising (counter to the maxim of tech costing less over time) and see the replacement would be in the order of $1,800.

I could buy a cheaper brand, get a payment plan, or buy a second-hand phone elsewhere. But I don’t really need to. I’ve been going through this exercise every two years now. Every time, I talk myself out of the purchase. Recently I committed to stop thinking about it until the phone was irretrievably damaged or faulty. I might get another year out of it, or more.

Had I given in to that whim two years ago, I would be short $1,800. You may think I lose out on productivity, but I doubt it because I do not use the phone for anything critical.

Negotiate

Asking for a discount is a reasonable thing to do on any major purchase, and on any debt you have. You can ask for a better price on whatever you care to. Sometimes you will be told: ‘No, that’s the price, it is not negotiable.’ On other occasions, you will negotiate and, as a result, save yourself some money.

But: don’t ask, don’t get. I consider this a tax for laziness fear or ignorance. Now you know – you cant claim ignorance only laziness or fear.

People pay this tax all the time. They find the thought of asking for a discount icky, as if it reduces their standing. Or they are worried they will be embarrassed by a ‘no’. Or they think their time is too precious to waste on negotiating. Or they just didn’t know it was possible.

You don’t have to ask for a discount, but if you don’t, be aware you are paying for this tax.

Wondering what you could ask for a discount on? I’ve tried:

• Mortgage Interest Rates – I cannot think of any other way I could make $20,000 an hour with my clothes on and dignity intact (because the deduction applies to the life of the loan, it adds up over time). Each year, I call the bank and ask for a discount on my mortgage rate. It hasn’t failed to get at least 0.25% off yet.
• Cars – because they are easily interchangeable, you can be ruthless if you are not fussy. The sticker price on a car is the opening bid. Even if you can only get a few hundred dollars off, it’s been worth the time in my experience.
• Property – whether it is a home or an investment, you could be paying tens of thousands more than you need to if you are paying the asking price. The less fixed you are on buying a particular property, the more ruthless you c an be.
• Anything from an electronics store – my portable speaker, tripod and vacuum bags all for a reduction when I asked.
• Bulk Items – anytime I am buying something in bulk, I’ll ask for a discount. Even if it means contacting the provider by email to ask for a quote instead of just clicking ‘Buy Now’.

I’ve been raised in a family where negotiation is considered a sport because it is hugely satisfying and can be hilarious. We trade stories about deals we have been able to pull off. Someone who gets a price reduction – whether its $4 off their vacuum cleaner bags or a 0.5% interest rate reduction – is held in greater esteem than a champion footy player. Legends of particularly outlandish wins are shared over dinner.

Example Family Legend: My great-aunt Vi once spent an hour haggling with a shop owner over a wallet marked 5 pounds. She got him to down to 2 pounds….then pulled out 5 pounds to buy two wallets and take one pound change!

Build the love of negotiation in yourself – and your family – and the savings will mount over time.

Stop Caring about Material Things

Reducing waste, delaying purchases and negotiating are tactics. This one is more of a philosophy, and it is where the big savings lie. Many have written in more depth and to greater effect on this topic than I can. Their essence can be captured by a quote from Chuck Palahniuk’s book Fight Club:

‘The things you own end up owning you’

Our consumer sense relentlessly reinforces the idea that owning and accumulating things is good and will make you happy, but it doesn’t work. Christmas morning with young children is an excellent example: they are usually showered with gifts, often to the point of overwhelm. By the end of the day, the toys are abandoned while they make forts out of packaging. It happens in adults too, its just that we are better at hiding it – or perhaps we spread out the purchases over the year!

Take a walk around your home. Look in the kitchen cupboards, in the linen closet, at the piles of electronic equipment. Scan your wardrobe, the medicine cabinet, your garage. If you have got kids, observe the toys. How much stuff have you accumulated that you genuinely do not want or need anymore?

Why did you buy it in the first place?

I’ve been there, and I’ve had friends and family share their own experiences. I think we are all trying to fill a void of meaning and connection, and somehow, we’ve bought into the idea that stuff will do the filling. But any happiness from upgrades and new stuff seems to be fleeting. The void remains long after the dopamine-fuelled glow of the purchase is gone. Even the currently popular ‘experiences over things’ approach is not a guaranteed void-filler. Taking an expensive holiday is unlikely to solve the problem either.

So why do we persist? I suspect it is mostly out of habit, and partly because the ingrained messages of consumerism take active willpower to resist. It could also be because it’s hard to spend time with friends and family who are still committed consumerists. But habits can be broken, and resistance can be built up like a muscle.

The ratcheting-up of your desires as you experience comfort creep is not mandatory. You can make a conscious effort to control your spending, so your money goes where you most value its impact. Aim to align your priorities and your spending.

Your spending is proportional to how much you care about material things. More care = more spending. Want to spend less? Stop caring so much about stuff, or, as James W. Frick put it:

‘Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are’

One Final Thought on Saving More

Don’t be tempted to justify increased spending in another area because you have done such a good job saving, otherwise the savings stream stays the same width – or worse, it gets skinnier! None of these saving strategies work unless you actually direct the extra money – additional earnings or reduced spending – to savings.

Once you have got your chosen strategies in place, update your savings target and automations accordingly so these savings do not get the chance to escape and instead flow straight into your FI fund.

Summary

The above is an excerpt from Lacey Filipich’s Money School, I decided to highlight that section because I found it particularly poignant and relevant to my philosophy of the importance of saving with regards to reaching FIRE.

If you do get a chance I definitely recommend seeking out a copy of the book and reading it all for yourself, it is packed full of useful information no matter how far along the FIRE journey you are.