The following is a list of pareto tips for saving up money real fast by cutting down on big expenditures drastically. These are my own personal learnings over the last 7 years. Right now, I don't follow all these tips myself anymore. But I have followed them at least once in the last 7 years to much benefit.
This post is focused exclusively on saving short-term really fast. Like $200k in 4 years for example. A lot of these tips could very well break down when considering long-term decisions. This post also targets single unmarried individuals between the ages of 17-30, but most of the tips here could apply to everyone else as well.
The list is roughly reverse sorted by how much absolute dollars you'll save by following this tip. If you can't follow them all, at least follow the top 5. And if two or more tips seem contradictory, the higher-up ones take more precedence. There is no implicit 'and' between these tips.
- Don't own a house. You'll be losing way more money in maintenance
costs, property taxes, strata fees, etc. than you would on rent. Keep in
mind buying a house could be cheaper in the long run, like over 5-10 years.
- Don't live in downtown or similarly expensive "pockets" in town, live a
bit off. Rental prices fall off dramatically with not much compromise in
distance or location suitability. If you live in the suburbs, consider the
added cost of transit to and from work everyday.
- Don't buy or own a car. It's a black hole for money. I have come close
to buying a car 3 times in the last 2 years. The costs are staggering. Car
purchase price, interest on loan, gas, underage insurance, maintenance,
repairs, oil change, brake change, snow tires, parking tickets, speeding
tickets, parking fees at work, garage fees at home, car cleaning,... the
list goes on and on. It's significantly cheaper to live close to the subway
or transit line and take public transit to work everyday.
- Share your apartment. Lease a 3, 4 or 5 bedroom
house/apartment/condo. Ends up being way cheaper per person. Live with your
parents for free if you have to.
- Share a bathroom. Rental prices go down steeply with fewer bathrooms.
- Eat at work if you get food at work. You'll save at least $5k a
year. If you don't get food at work, then pack lunch from home.
- Buy (almost) all furniture 2nd hand. Almost brand-new furniture can be
bought very cheaply on Craigslist or Kijiji. The cost of depreciation for
furniture is almost as bad as it is for cars.
- Buy only the bare minimum of furniture that you really need. My list
is: office desk, office chair, chest-of-drawers, mattress, and couch.
- Don't visit stores like Walmart, Costco or IKEA. You'll end up buying
crap you don't need. Always create shopping lists and stick to them when
you go grocery shopping. Impulse buys can be a total money burner. Use
coupons to reduce your expenses wherever possible.
- Keep the heating low and wear more clothes instead in the winter. In
the summer, instead of AC, keep the doors and windows open to increase
cross-circulation. If you have a big house that you're sharing, buy a space
heater or space warmer instead of heating or cooling up the whole house.
- Don't subscribe to Amazon Prime overnight shipping or one-click
purchasing. Your money will disappear before you know it
- If possible, live close enough to work to avoid buying expensive
transit passes every month — walk, jog, or bike instead. However,
living closer to work might make your rent go up significantly depending on
where your workplace is.
- Don't buy a TV, don't buy a mattress frame. You don't gain anything
with either of this unlike a toaster or an office desk. People might look
at your crazy, but they'll also look at you crazy when you end up with
$100k in the bank after just 2 years of saving.
- Don't own pets — they're not cheap, even with pet insurance
- Don't buy alcohol — it's not as cheap as you think over a
year. Drink beer from work if they have it.
- On weekends, cook and eat at home if you can. Buy groceries from your
- If you must have Netflix, at least share a connection with your
roommate. It's unlikely you will both want to stream at the same time. If
you do, then just slot your time like you did for your shared bathroom.
- Don't drink beverages like juices, shakes, coffee or tea. They add up
quickly. Tap water is all you need. Stay away from Tim Hortons, Starbucks,
Second Cup and other similar café chains. They are all over priced and add
up quickly over a year.
- Don't travel. Traveling cheaply is always possible, but it's still not
that cheap. Little day and weekend trips to New York, LA, Tahoe, Whistler,
Vegas, etc. can become a lot pricier than you might initially imagine,
especially when going with a group of friends.
- Always car-pool and split gas, especially given the price of gas these days.
This post assumes you're saving money for the short term. But if you're saving for the long term, don't leave it all as cash, invest it! I'm not a financial guy, but the standard advice for investing applies here: 30-40% liquid cash in bank, high-interest savings accounts, fixed-term deposits, stocks (only if you're pro), mutual funds, 401k/RRSP/TFSA, real-estate, your own startup, etc.
Few friends have been asking me: but why save? To what end? That's a post of its own, but for me, it's primarily financial freedom. Having $50k sitting in the bank will change how you think about and run your life. You wouldn't worry too much about disagreeing with your immediate manager, for example. You could also be saving for a larger trip or vacation rather than several small ones. Some people could be saving up for their upcoming wedding, assuming they're funding it. Whatever the reason, knowing how to save lots of money in a short amount of time is a key skill to have! Assuming of course earning more money isn't an easy option for you :-)