When it comes to getting ahead financially, finding a way to boost your income can be especially powerful.
With more cash at your disposal, you can save more, invest more, and grow wealth on a grander scale. Sounds awesome, right?
But, what about saving money? For many people, the thought of saving money makes them want to cry. <insert crying emoji> ????
You see, saving money can sometimes mean cutting back. Occasionally, it can mean going without the things you want, too.
In the worst cases, saving money can be an absolute drain on your life force. Spend a morning cutting coupons and you’ll know exactly what I’m talking about.
Personally, I’d rather beat myself with a stainless steel spatula than cut coupons for 5 minutes.
Here’s the thing, though: Believe it or not, I absolutely love saving money.
Just not in a “let’s spend all weekend cutting coupons kinda way”.
Let me explain…
While saving money isn’t quite as sexy as earning more, it can be just as powerful – especially if you do it right.
I’m not talking about cutting coupons here, nor am I talking about shopping second-hand, eating ramen twice a week, or sewing your own clothes.
I’m talking about saving money on a larger scale, using money hacks to slash your expenses, and thinking outside of the box to redesign the way you spend.
“Hacks like these are what separate wealthy individuals from everyone else,” says Kansas City Financial Planner Clint Haynes. When you think about the “big picture” ways to save money, you can truly grow wealthy over time. Your strategy doesn’t need to be mind-blowing, but it needs to include small changes that can make a big impact.”
In this case, Haynes is absolutely right. Using a few strategies and without sacrificing much at all, I have saved over $4.1 million dollars over the years. Can you believe that?
4.1 million dollars!
Don’t believe me?
Here are 5 money hacks that have led to millions in additional earnings and savings over the years. Some of these numbers are estimates, but you’ll get the picture as we go along.
Money Hack #1: I shopped around for life insurance.
Is there anything more boring than shopping around for life insurance? I don’t think so. Still, it’s a crucial step to take if you think you may be paying too much. If you wind up saving a ton of cash like I did, you may not find it so boring, either.
In my case, I had several different term life insurance policies that added up to $2.25 million in coverage. Once I started shopping online for life insurance, I realized I could get a similar term policy for $400 less annually. But, here’s the kicker. This new policy would actually be for $2.5 million dollars – adding another $250,000 in coverage.
Obviously, I jumped right in and snatched up the new policy for more coverage and $400 in savings every year. Over the course of 30 years, this move alone has helped me save $12,000. Score!
Lifetime Savings from Refinancing Life Insurance: $12,000.
Money Hack #2: I drove the Lu.
Ever seen a grown man driving a grandma car? Well, that was me during my first few years as a financial advisor.
A gift from my grandmother, this 1998 Chevy Lumina was my pride and joy. Not only was it okay-looking on the outside, but it got me where I needed to go. Best of all, it was absolutely free. Score!
You can read the major details of my love affair with the Lu in this post, but I’ll summarize here. Basically, driving this paid-off car – and investing the difference – helped me save and invest $2 million dollars!
Here’s how the math works: By driving the Lumina (and avoiding car payments thereafter), I have been able to invest an additional $400 per month. If you rely on an aggressive return of 10 percent from my early days, that $400 month grows to over $2.8 million in 41 years. Even with an 8 percent return, I would earn over $1.5 million.
To come up with the $2 million figure, we’ll split the difference. At the end of the day, driving a paid-off car has been absolutely huge for my finances. It was huge then, and it’s still huge now.
$2 million dollars huge!
Check this out this Facebook Live where I share why I think the car payment is the #1 payments ruining you from building wealth.
Money Hack #3: We make an extra mortgage payment every year.
The arguments for and against paying off your house early are plentiful, but it doesn’t have to be “all or nothing.” With just an extra payment each year, you can save thousands of dollars in interest without too much hassle or impact on your bottom line.
There are two different ways to win when you make at least one extra mortgage payment ever year, says North Dakota Financial Advisor Benjamin Brandt.
One extra payment per year will reduce the length of the loan, and reduce the total interest paid over the life of the loan. Fewer total payments and less interest paid is more money in your pocket for other areas in your budget.”
When we lived at our old house, we made one extra payment on our mortgage every year. Since our mortgage was for $120,000 and came with an APR of 5 percent, we estimated we would reduce our home loan by six years and several thousand dollars by making one more payment each year. Score!
We have moved since then, but we’re still doing the same thing. With our new home that we built ourselves, we opted for a fifteen-year loan at 3.25 percent APR instead.
Getting a shorter-term loan with a lower rate offered considerable savings by itself. But considering our mortgage started around $300,000, making one extra payment every year is still saving us a bundle.
Over the course of our loan, we’ll save $8,175 in interest. Meanwhile, we’ll slash one year and five months off of our repayment timeline. It’s not huge, but I’ll take it!
Money Hack #4: We boost our investments by one percent every year.
While I haven’t always earned a lot of money, I have grown my income over the years. To put that extra money to good use, however, I have remained steadfast in my dedication to investing for the future.
For us, that has meant increasing our investments by at least 1 percent every single year. When I earned just $40,000 per year, this meant investing another $400 per year. When I broke six figures, this means adding another $1,000 to our investments every year.
But now that I’m earning over $158,000 in a single month sometimes, this is obviously huge!
Without divulging too many details on our income and investments, I can easily estimate our ramped up investing style will help us rake in an additional $2 – $3 million dollars by retirement age depending on our rate of return.
Here’s how this strategy could work for your everyday Joe:
Let’s say you earn $50,000 and invested that extra $500 per year. After thirty years of investing that extra $500 and earning an 8 percent return, those extra dollars would grow to $61,172.93 on their own.
So, you can only imagine how this number would surge if you added an extra 1 percent of our earnings every year or if you earned a lot more!
Money Hack #5: We use credit card rewards.
Although we remain absolutely debt-free outside of the money we owe on our home, we use several rewards credit cards to earn cash back, travel rewards and more.
Since we never pay credit card interest on our balances, this is truly free money for the taking. And yes, we totally use it to our advantage.
Here’s a good example: Last year, we flew our family of five to Jamaica for a vacation (this was before we added baby Janella). Not only did we use points from airline credit cards for our flights, but we used hotel points to book our hotel.
It was absolutely sweet, and the entire thing only cost a few hundred bucks in airline taxes and fees. Better yet, had we paid for this trip in cash, it could have easily cost us $4,000 or more!
- Best Travel Rewards Credit Cards
- Best Airline Credit Cards
- Best Cash Back Credit Cards
The cool thing is, this is something we do every single year. I’ve got all kinds of personal and business expenses to charge, and they add up fast despite how frugal we are.
If we earn points and miles conservatively and score just one $4,000 trip for free each year until retirement, that’s a savings of $120,000 over thirty years. And remember, this is a completely free hobby as long as you never carry a balance, never overspend, and avoid credit card interest and fees like the plague.
As Indiana Financial Advisor Tom Diem notes, however, not everyone should pursue these type of rewards. If you’re struggling with debt, you should stay far, far away.
“It doesn’t matter how great the program, interest on balances will be greater than the rewards by even carrying a moderate balance,” says Diem.
Remember how you thought saving money was boring? With these cool money hacks, my family has been able to save and invest more than $4.1 million dollars using a conservative estimate.
If you truly want to get ahead in life, it’s crucial to remember that small moves really do add up. Whether those moves include investing just a little more every year, paying that extra house payment, or driving your old, paid-off car, you can use your savings to get rich over time.
So, don’t forget to think about the big picture. Don’t forget to consider every bill you pay each month – and how you could reduce it or refinance and save some cash.
Or, you could ignore the potential and send those savings right down the drain instead. The choice is yours.
What money hacks have you used to save a ton of cash over the years? Do you make an extra payment on your mortgage every year? Have you ever refinanced your home? Please share in the comments below!