Although big changes are the most difficult ones to make, they hold the potential of completely changing your financial life for better. Here are the 5 big changes that can possibly save you hundreds, and perhaps even thousands of dollars every year:
Getting rid of your car
Many people residing in cities consider switching from car travel to public mode of transport, and occasional use of services like car rentals or Uber for moving around, at some point of time.
Regardless of how you look at it, car travel is always expensive. Even if you get past the monthly loan repayments, you’ll need to bear the fuel cost, insurance cost, registration cost, parking charges and those occasional/frequent traffic tickets. Going by the AAA’s estimates, the average cost incurred by a US citizen for owning and operating a vehicle works out to $ 8698 per year.
Just think how much you’d be saving by ditching that car! All major cities have efficient public transport systems that provide monthly passes at reasonable rates. Majority of such passes can be bought at around $ 80 – $ 100 depending on how far you stay from the central points. If you manage to effectively use public transport for meeting all your travel needs, you’d be actually dropping down your annual transport expenses from $ 8700 to around $ 1000. That’s a lot!
Although you may need transportation services like taxi, Uber and/or car rentals from time to time, they’ll not increase your monthly/annual outgo by a lot. Whichever way you look at it, you’ll be the eventual winner!
Moving into a smaller place
Another big change that can save you plenty of money every year is relocation to a smaller home. Staying in a home full of unused spaces, especially if you’re the homeowner, can be a very taxing affair. Moving into a smaller place can provide you with plenty of financial advantages such as lower maintenance costs, lower association fees, lower utilities, lower property taxes and much more!
Although the exact amount of savings may vary from place to place, in most cases opting for such downsizing option is guaranteed to save you at least a few thousand dollars per annum, apart from freeing up a good amount of home equity you would have built over a period of time.
Furthermore, despite the fact that you may need to incur costs associated with such a move, such as the ones involved in moving to the new location, selling the old house, purchase of the new one and the costs resulting from the change in place of commute, the overall pros would still outdo the cons.
Getting a roomie
The cost of utilities and rent can be quite a lot if you stay in a one bedroom or a studio apartment all by yourself. So, it may make a lot of sense to move into a two bedroom house in order to cut your costs and split the expenses with a roommate.
In general, the rentals of two bedroom homes are around 12% – 34% higher compared to the one beds, depending on the place under consideration. Assuming that the overall cost is 30% higher including all sorts of expenses like garbage, parking, sewer, rent, electricity and others, it would mean that you’d need to incur 130% of your current total cost if you make the move. Getting a roomie to split that with you would mean that you’d only need to shell out 65% of your current expenses. Not a bad arrangement at all if you ask us!
Let’s see how that translates into real dollars and cents! Presuming that you stay in an area where a regular one bedroom apartment can be rented for $ 1200 per month, it’d mean that your total cost would go up to $ 1560 for a two-bedroom place. Now when you split the cost with a roommate, your half would come to $ 780, saving you a good $ 420 every month. That sums up to around $ 5000 per year – a pretty good deal!
Any drawbacks that come to your mind? Well, the obvious one would be the company of a roommate who may/may not have a completely different lifestyle. Furthermore, you may need to move to a new location, which may result in life changes like in terms of your travel route.
Letting go of your gym membership
The average gymnasium membership cost in the United States is anywhere between $ 40 and $ 70 per month. Let’s say you’re paying $ 60 each month for nothing but an occasional run on the treadmill. Cutting out that $ 60 per month cost would lead to annual savings of $ 720.
However, please keep in mind that dropping your gym membership doesn’t necessarily mean doing the same with your exercise routine. Instead, you may have to come up with a novel and customized workout regime that includes exercises that can even be done at home.
Let’s take the best case scenario – you’re someone who does nothing more than a few cardio exercises in the gym. Now, shifting your running routine from gym to actual track, and performing all those cardio exercises outdoors would result in flat $ 720 savings per annum.
Even if you’re into heavy weights and need to invest into appropriate equipment and weights (costing around $ 1000), apart from freeing up some space for the exercises, you’d still save $720 every year after recovering that cost.
Cutting off your cable connection
An average American household spends around $ 99 per month on cable TV expenses. It’s a bill that a lot of people would happily like to get rid of. And for a large number of customers, it’s something doable too.
Replacing the regular cable TV connection with a streaming service such as Netflix that costs as less as $ 9 per month ($ 108 per annum) and/or over-the-air free TV channels, can save you in the vicinity of $ 1000 per year.
Although you may need a fairly good home Internet connection, it’d be no additional cost if you already have one. You’d only need to pay extra for the Netflix membership. The savings would still be impressive even if you opt for multiple streaming services apart from Netflix. Paying $ 30 per month is way better than shelling out $ 100.
While you work on the above 5 changes to improve your financial life, here are the 5 common financial mistakes you should be aware of and guard yourself against.