Here’s a simple trick to save an extra $504.30 this month

Takeaway: Most habits cost money—but there are usually alternatives that can save you money. To buy back more of your freedom, recognize these alternatives, do them instead (when they’re not too tough) and invest the difference.

Estimated Reading Time: 2 minutes, 48s.

SaveMoneyRZ
Photo: Pictures of Money, CC

 

Last month I found an extra $504.30, and deposited it directly into my retirement savings account (RRSP). But I didn’t skim this amount off the top of how much I earned. I used an easier (and frankly much more fun) tactic—one that appears obvious in hindsight.

The connection between money and productivity is simple. When you save money, you can enjoy more freedom and time in the future. But you don’t need to make more money in order to start saving—which, depending on your goals, can help you take a yearlong sabbatical or retire sooner. Saving money today is a way of buying back your time later on.

But since money is also tied to virtually every habit we have, it’s almost impossible to live a day without spending some. Unless we’re sitting somewhere doing absolutely nothing (which can actually be quite rewarding), we’re usually burning through some cash—eating, traveling to work, reading a book we bought, drinking our morning coffee, or having dinner with friends.

But while money is tangled up in pretty much every habit we have, there are usually cheaper alternatives that can be just as rewarding: bussing to work instead of driving, renting a book from the library instead of purchasing it from Amazon, preparing a morning coffee at home before heading to work, or hosting a potluck with friends instead of making a reservation at a fancy restaurant.

Last month, I made an effort to think about the alternatives that existed to my most expensive habits—like drinking overpriced almond milk lattes, and ordering too much delivery food. By realizing that alternatives existed and acting on them, I had $504 of extra cash at the end of the month. According to my calculations, saving this much will let me buy me back 23 days of freedom later on in my life. After I made each tiny change, I took note of how much I saved, and transferred the total amount to my RRSP at the end of the month.

It didn’t take long to save the $504. Here are the changes I made last month:

  • $38.12: Making tea and matcha at home, instead of ordering overpriced drinks at coffee shops
  • $46.18: When a friend paid for my portion of a meal out
  • $150: Preparing food at home, when I would have ordered delivery
  • $120: Taking public transportation instead of Uber (when I had a few extra minutes)
  • $150: Renting six books from the library, instead of buying them off Amazon
  • = $504.30 total

I’m not saying that you should eliminate every joy from your life in favor of investing that money. Where’s the fun in that? But there are usually cheaper alternatives to your most expensive habits. These alternatives, like the ones I listed above, can be just as rewarding. A potluck with friends can be even more fun than a meal out, and a book from the library contains the exact same words as a book from Amazon (except for The Productivity Project, of course—I heard the library edition is totally different!)

Taking money you would have otherwise spent, and investing it instead, is a way of trading a small amount of freedom today for a lot more freedom later on. Compound interest is one of the most powerful forces in the universe, and it’s worth taking advantage of at every chance you get.

  • And what’s most important here is actually BANKING the money vs just spending it elsewhere instead! So well done! And less chance of pulling it back out since it went into *investments* vs cash savings too :)

    • So true! And thanks for the kind words man! As someone who knows hardly anything about money, I’m scared of what might happen if I began withdrawing some of the money from my RSP, so I just leave it alone! :-)

      • Joy2b

        You might really enjoy a hobby of hands on learning about money.

        The fundamentals are most easily learned by sitting down and fiddling around with a pencil or a spreadsheet. It’s unexpectedly interesting to try a monthly and an annual prediction in retrospect, and compare it with what actually happened.

        I spend an evening that way some years around tax time. That time is probably worth $500 an hour, it makes such a huge difference in getting the big picture.

        Day to day, we think about money, but we don’t see the forest for the trees. At the end of the year, we can see how the year is dotted in costs we can only predict annually, like gas and tires in July, but 2/3 of the money is every month, and it’s just going a few places. Effort put into taming that predictable 2/3 often has the biggest payoff.

  • feelthebern

    That part about renting books from the library is so true – I don’t see why people buy Kindles and spend so much money on those e-books, when you can just borrow from the library, put yourself a time limit as well on reading it, and have the feeling of flipping those pages, smelling the book, … oh, the joy!

    • I’ve got to admit, this one has been a pretty difficult one for me, especially as someone who loves hoarding a huge collection of physical books! I’m still not perfect—I still buy any books I think I’ll reference—but use the library as a sort of filter to see which ones would be worth hanging onto!

      • Kthebeck

        What do you mean “rent” books. In my library you borrow then and bring them back… no cost at all.

  • Paul

    Great article. Quite often I will buy used books from the library. Great way to hoard books if that

  • Liz

    All good stuff, and happily I am currently putting most of this into action. I fall down on the coffee, with an average spend for $1.90 per day. I’m banking a good amount each month as a result but it’s all against debt at this point. I feel like I’m on the cusp of figuring how much ‘free-time’ it will buy me once I get to put that same amount into TFSA’s and RRSPs!

  • Yeah, there are almost always cheaper alternatives. But many of us are inclined to pay for convenience I think. For me, sometimes that ‘investment’ in convenience makes sense, and sometimes I just have to concede I’m being lazy! :)

  • Finding new ways to do things you feel you must do is definitely a good use of the brain in our heads. If we invest the difference. Great post!

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