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Home » Budgeting & Finances

5 Techniques to Save BIG Money

Modified: Jan 26, 2020 · Published: May 9, 2007 by Dave Lee |

Now that we've reviewed effective strategies for paying off debt, it is time to turn our attention to a much more fun topic, saving money!

While my goal has been to go backpacking around the world, the amount of money I've been saving over the past five years is easily enough to buy a condo in a nice neighborhood in Washington, DC or a Porsche.

For these techniques to work, I am assuming you are as passionate about your goal as I am about mine.

Table of Contents

  • 1. Maintain your current standard of living
  • 2. Downgrade your living situation
  • 3. Sign up for automatic paycheck deferrals, or an Employee Stock Purchase Plan (ESPP)
  • 4. Sell your car, or live closer to work
  • 5. Be conservative on your taxes
  • Bonus Savings Tip

1. Maintain your current standard of living

Adopt a mantra akin to " I want what I have, and don't want what I don't have."

In my case, as my income rose over the past few years due to raises, cost of living adjustments, and a promotion, I simply saw the added income as a way to save more money toward my goal, rather than upgrade my car (Audi A4 please) or buy a new watch (Tag Heuer).

This approach may not work if you are impatient, or have little time to achieve your financial goal.

2. Downgrade your living situation

This tip is for those of you who cannot maintain your current living arrangement while working toward your goal.

If you're living alone, perhaps it's time to find a roommate, move in with a friend, or (gasp) back home with your parents.

Personally, I'm the type of person who is much happier living alone after years of experience with roommates (who were often friends mind you).

Technically, I considered my move from living with a roommate to a studio apartment an upgrade; however I locked in an amazing deal on the terms of my lease as a result of good timing.

My initial rent began at about $250 less than the normal rate for my apartment.

My yearly increases were 7%, thus I saw the benefit of my initial rate pay off over 4 of my 5 years in the apartment.

By this last lease renewal (for 9 months), the rate caught up with me due to the real estate growth in my neighborhood, however I still negotiated them down from their initial renewal rate!

If you can't bring yourself to downgrade, then commit to technique number one by not upgrading.

3. Sign up for automatic paycheck deferrals, or an Employee Stock Purchase Plan (ESPP)

I've worked for two start-up companies, earning stock options with both.

Neither situation afforded me an early retirement when the company went public or was bought.

I did learn the value of ESPP's though. In both cases, I was able to defer a percentage of my post-tax salary to buy the parent company stock at a 15% discount off of the lowest price within a financial quarter (three month period).

The current participation in my company's ESPP plan will account for about 35% (or $10,000) of my total trip savings.

The reason I prefer this approach over deferring money every paycheck to be deposited in a savings account is that I have the potential to earn at least a 15% return on my investment.

Luckily, my company has been doing well, so it will be more than that when all is said and done.

If you do not have access to an ESPP, then definitely sign up for a percentage of your salary to be deferred into a high-interest savings account (such as ING Direct) each pay period.

Increase the deferral percentage periodically, or whenever you receive a pay increase.

This technique is extremely effective because you save the money before you are tempted to spend it!

4. Sell your car, or live closer to work

I couldn't bring myself to sell my car, the driving culture is too ingrained in me. I did ensure that I lived close to my job though.

I currently live 8 miles away. This reflects a desire to save money, as well as time (long commutes are draining). I can go two weeks on one tank of gas in my VW Jetta.

Given the increasingly high cost of gas, this should be a no-brainer.

Getting rid of a car altogether can save you on loan interest, insurance, maintenance, gas, parking, and car washes.

Plus, using mass transit, a bicycle, or walking are all better for the environment. If you need to buy a car (such was the case when I totaled my first VW in 2005), go pre-owned (aka " used").

You immediately avoid the instant depreciation that occurs with a new car, and reinforce the importance of your goal over a new automobile (which really boils down to a status symbol, right?).

5. Be conservative on your taxes

My suggestion here is to pay the government a little more than you may owe at the end of the year.

By doing so, you will ensure a refund once you file your taxes, versus potentially owing money.

I made this switch for the 2006 year, and was much happier to receive a $600 refund than having to pay as I did in previous years.

The counter argument here is that the government will not pay you interest on that money.

Using my 2006 refund as an example, even with 5% interest, I'd only be earning $30 off the extra money paid in taxes.

Considering this would account for 0.001% of my total financial goal, I'm not too concerned.

Plus, I'm setting myself up for a refund for the 2007 year, which I will receive once I've already quit my job and am on the road in 2008.

Bonus Savings Tip

Drive defensively

In my early 20's, I received four speeding tickets within 13 months.

My car insurance doubled from $900/year to $1,800/year.

It took me three years of slower driving, and no additional tickets, for my insurance rate to noticeably decrease.

Careful readers may note my mention of an auto accident under tip number four.It was my fault, however I was shocked to find out that Progressive didn't raise my rate because it was my first accident.

Next week I will touch upon some smaller, day-to-day ways to save money.

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About Dave Lee

Dave is the Founder and Editor in Chief of Go Backpacking and Feastio. He's been to 68 countries and lived in Colombia and Peru. Read the full story of how he became a travel blogger.

Comments

  1. Timen says

    May 10, 2007 at 4:35 am

    You have some great advice. I'm still a student, and students get well taken care of here in Holland, but I always feel I could be saving so much more. I go out to dinner a lot, for example. Always good advice from you. Thanks!

  2. Stacy says

    May 10, 2007 at 9:29 am

    It's all about making conscious decisions, isn't it, and knowing the reasons you make a purchase. Buying something because of the status it gives you (house, car, clothes, jewelry) might give you a thrill in the short term, but it won't give you the happiness that people think it will. In the end, it's one more thing to pay for, take care of, and worry about.

    We use the Money program to track our finances, and it has made us so much more aware of where the money goes, and how we can cut expenses. I know too many people who have no idea where the paycheck goes. I think awareness and deliberate choices are the key to saving for your goal. Where do you spend the money, and why.

  3. Mike says

    May 10, 2007 at 10:08 am

    I think #1 perfectly sums up the right mentality, at least for me it has.

    Saving for my trip really got me into a place, mentally, that I was surprised to be in. Having been so consumer-minded all my life, and now paring down everything I buy, I find that I'm so much happier not wanting for anything. I drive a Civic with a few dings. I haven't bought new clothes for myself in a couple of years because I don't need any. I don't care about the biggest TV and the latest stereo tech. Etc. None of that matters.

    In some ways, I think consciously forcing yourself to think about saving money treats the symptom (i.e. spending too much money), but not the root cause. Once I realized that buying more stuff didn't make me happy, I just stopped spending money in the first place. Now, it doesn't even occur to me to think about spending money on things that don't matter because I honestly don't miss any of it.

    It's kind of like the difference between "dieting" versus permanently changing the way you eat and think about food. The former is almost certainly doomed to fail because it's a temporary mindset and you'll probably relapse. But the latter - though much harder - will succeed if you can tough it out.

    • Dave says

      May 10, 2007 at 10:40 am

      Mike - your analogy with dieting is the perfect comparison.

  4. Court says

    May 11, 2007 at 3:21 pm

    I'm so tempted to sell my car sometimes. I work from home, so I could definitely get away with it. Getting rid of the payment would be really nice. I haven't been able to do it yet though! I know it would be a good financial decision though.

    • Dave says

      May 11, 2007 at 3:25 pm

      Court - thanks for the comment. I read your recent post on the Do-follow approach, and I have to say the light bulb finally went on for me. I'm going to install the Do-follow plugin and start sharing the comment link love. Thanks!

  5. Rebecca says

    July 01, 2007 at 7:31 am

    I found the best way I've saved money for my year off is by funnelling any "extra" money into my holiday saving accounts (both high interest) e.g. when I paid off my car loan / furniture / moved back with my parents etc the money that had gone towards repayments, rent, utilities all got put away - money I wasn't going to miss seeing as I hadn't had it for the last 5 years! Also, tax refunds, money from sale of my car when I inherited a 'new' one etc went there too. It's amazed me how quickly I've saved a workable sum to live off!

    • Dave says

      July 01, 2007 at 9:43 am

      Rebecca -

      You sound very disciplined when you sum it up like that. I'm pretty amazed I've made it as far as I have in savings with all the temptations out there!

  6. inception42 says

    August 16, 2010 at 11:33 pm

    Wionderful tips! You did a great job with this article!

  7. Goodparent says

    December 31, 2010 at 3:13 am

    I must commend you for the advice that one can go back home to their parents if saving money is a concern. It may not be always a socially encouraged behavior but reaffirming the concept that parents are supportive of their children's goals is not bad thing.

  8. Brad says

    September 26, 2012 at 2:20 am

    Excellent advise Dave thank you. just one question things like selling your car is a short term money saving technique. meaning not continuously going to be selling my car. once i have sold that is there any other technique you could advise? because now public transport comes into the picture and that then becomes a cost.

    Thank you.

Dave at Ahu Ko Te Riku on Rapa Nui (Easter Island), Chile.

Hi, I'm Dave

Editor in Chief

I've been writing about adventure travel on Go Backpacking since 2007. I've visited 68 countries.

Read more about Dave.

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