As we roll into the New Year, it is time to get started with some great money-saving hacks to help you retire rich.
While smart investing is part of the journey to early retirement, saving money daily will light a fire beneath the power of compounding within your investment portfolio.
Put together, these savings tips could help save you upwards of $5,000 each year!
Buy Refurbished Computers & Cell Phones
Some of the most expensive and continuous purchases we make in life are the electronic devices that we use on a daily basis; namely our prized computers and cell phones. Not only can these electronics cost upwards of $1,000, but they often break, get lost, and slowly become obsolete.
The good news is that if you can put aside the desire to have the latest tech, there is a huge market of second-hand refurbished gadgets that can be purchased from tech-hungry consumers who are always upgrading to the latest generation.
When I say refurbished, I am not talking about buying sketchy electronics off Craigslist, but am referring to designated refurbished products from accredited vendors on Best Buy or Amazon. Refurbished products from quality retailers will often even come with warranties!
Second-hand products can be bought for less than half the price of the latest version, saving you upwards of $500 per year if you are updating your phone and laptop every couple of years.
For example, let’s look at Samsung’s flagship Galaxy Note smartphone. The newest Samsung Galaxy Note 20 comes with a sticker price of $1,200 for of a brand new phone. If we move back a generation to the older Samsung Galaxy Note 10 (still a great phone!), a refurbished version can be purchased for only $550. This refurbished phone is assured to have 80% battery capacity still and comes with a 90-day replacement or refund guarantee.
If we look back two generations to the Samsung Galaxy Note 9 (still an impressive phone and what I still use!), a refurbished version can be purchased for only $279 with the same 90-day warranty.
By buying refurbished electronics, not only are you saving tons of money, but you are also lowering your environmental footprint… if you are into that sort of thing.
Bring Lunch to Work and Don’t Buy Coffee
While the social aspect of getting lunch with your co-workers the odd time can be valuable, consistently buying lunch every day can quickly burn a hole in your bank account. With 250 business days in the year, spending $10 a day on lunch can quickly add up to a whopping $2,500 in savings!
If your effective income tax rate is 30%, this $2,500 of after-tax savings represents $3,571 of pre-tax income ($3,571 = $2,500 / (1 – 30%)). These savings might be bigger than the salary increase you were hoping for next year anyways!
The cost of cooking at home will dig into these savings by a couple of dollars a day but this $10 daily lunch was kept purposely low to reflect this. Also, I have only mentioned lunches in the opening paragraph, but adding daily coffees from Starbucks or Tim Hortons can easily add another $2 – $5 per day to your weekday spending habits which amounts to $500 – $1,250 annually. Take advantage of free coffee perks at the office!
My approach to consistently bringing my lunch to work is to cook big and delicious meals on the weekend which leaves lots of extra for lunches. By bringing your lunch to work, not only will your wallet thank you, but your waistline will probably benefit as well too.
Ditch the Gym Membership
Staying active is part of a healthy lifestyle but it doesn’t have to slow you down from reaching your savings goals. The average gym membership in the U.S. runs from $40 – $50 per month which adds up to $400 – $500 per year. On top of these monthly costs, there can often be initial membership fees ($300) to join the club, especially at higher-end exercise establishments.
These upfront and monthly membership costs can quickly add up to $800 per year which make the breakeven analysis of purchasing your own equipment for the home very economical with payback periods within one or two years. Given the amount of people constantly taking up fitness and quitting, second-hand workout equipment can be easily found online for cheap. In addition to Facebook Marketplace, websites such as craigslist in the U.S., Kijiji in Canada, or Gumtree in the U.K will offer numerous second-hand options to buy in your neighborhood.
However, just because you are working out at home won’t immediately mean you are saving tons of money. These days, companies such as Peloton, Sweat, and Shred to name a few have managed to find their way into your home and wallet, with apps that can still cost +$20 a month. In the case of Peloton, these apps also promote equipment that is +3x more expensive than a budget brand (let alone buying used!).
Don’t get taken in by the need to pay for workout apps as there are a bunch of free versions out there too and nothing wrong with writing a list of exercises down on a piece of paper the old fashion way either!
In regards to the trendy Peloton app and their pricey spin bike, the more frugal option is to create a Do-It-Yourself (DIY) Peloton bike at home that can still sync up to the basic version of their app. By combining a basic cadence tracker which can be purchased on Amazon for $25, and a bike cell phone mount ($15), any old budget spin bike can be turned into the latest high-tech workout gadget. I am happy to share that my wife has embraced this frugal option and I am content turning the TV on and settling into some relaxing and low-cost cardio.
Take Advantage of Cash Back Credit Cards
The last big saving hack to start taking advantage of in the New Year is cash back credit cards which I have written about in more detail previously in a separate article. Cash back credit cards can save you 2.0% per year across all your expenses and unlike rewards/points cards, they carry no annual fee. The cash back savings get paid out in cash monthly and will compound in your investing account!
There are various categories of cash back cards but one of the most important to have is a good grocery cash back card. Groceries are one of the main expenses of any household and a good cash back credit card will earn you 3% on all purchases at grocery stores.
Other important cash back credit cards to make sure you have in your wallet are gas, restaurants, and a good general card. Together, such cards could save $440 per year based on $20,000 of spending across various categories and an average 2.2% cash back rate as laid out in my separate article. As long as you are paying off your credit cards every month, every penny you spend should go on a credit card if the vendor accepts it!
Takeaway for Savers
Being frugal and saving money is a big part of the journey to early retirement. While such savings may seem trivial on a daily basis, they quickly add up to thousands of dollars annually.
These savings will add fuel to the compounding effect of your investment portfolio! For more information on beginning your saving and investing journey, readers should explore how to build a portfolio with ETFs and the stability of a core-satellite approach to managing your portfolio.