How long would it take you to earn an extra $1,000? Contrary to what spam and internet ads tell us, after taking taxes and deductions into account, it's not an easy task. But you might be able to save over a thousand dollars with a little work. The key is to decrease or eliminate unnecessary recurring expenses.
Some simple purchases or changes can lead to savings for months or even years to come, and the savings can have a compounding effect. You can build up a fund or invest the savings for important long-term goals, such as travel or retirement. Additionally, a savings safety cushion can help keep an unexpected setback from ballooning into a financial crisis, such as a broken down car or the loss of a job leading to debt.
First, identify savings opportunities. Knowing where and when you spend your money can help you make informed decisions. Connect your bank and credit card accounts to budgeting software, or upload previous months' statements and categorize purchases.
You'll get a quick snapshot of your finances, and can dig into the data to find out how much you typically spend on coffee, entertainment, dining out, utility bills, bank fees or any other category that interests you. There may even be automatic recurring purchases you didn't realize that you were still paying. This audit can help you identify savings opportunities and get a sense of how much money is on the line. If you're unsure how to turn your research into actions, consider the following steps you can take to lock in monthly savings.
Cancel services and regularly negotiate rates -- save over $100 a month. "Cord cutting" is a popular and simple way to save money. Rather than pay for cable or satellite TV, you might choose to cancel your service and opt for lower-cost entertainment options. Many online subscription services give you access to thousands of movies and TV episodes for $15 or less a month, a significant savings compared to the average $99 monthly cable subscription, according to one research group. An HD television antenna -- a one-time cost of under a hundred dollars -- will also pick up broadcast channels in some markets.
If you don't want to eliminate services entirely, you could try to lower your monthly bills by calling your internet and cable companies to negotiate rates. A successful call could lower your bill by $20 a month or more, saving you a couple hundred dollars a year. A few tips: ask for the cancellation department and request the business match a competitor's lower price or give you the current promotional rate for new customers. Don't be afraid to try again if you're not successful -- it can take several attempts to connect with a representative who will work with you.
Avoid bank fees -- save over $10 a month. Occasionally paying to withdraw money from an ATM or paying fees for a low-balance checking account might not seem like a big deal, but the money adds up. Two ATM fees and a checking-account fee could cost you over $10.
Some accounts waive fees as long as you maintain a minimum balance, and there often isn't an ATM fee for withdrawing money from an in-network ATM or getting cash back when making a purchase. There are also checking accounts that refund ATM fees at the end of each month. There can be advantages and disadvantages to any account, read the terms of your checking and saving account agreements to understand when, and why, you may need to pay a fee.
Shop for insurance discounts -- you might be able to save over 20 percent on your premiums each month. Shopping for insurance might seem about as exciting as your annual physical checkup, but it can be important for your financial health. Use online comparison tools to quickly and easily get quotes on auto, renters, homeowners and other types of insurance. Compare the rates, coverage and insurance companies to see if switching makes sense for you.
Ask your agent about potential savings if you decide to stick with your current insurer. You might already be eligible for discounts you aren't receiving because the information on file doesn't reflect your current situation. If not, there are usually discounts for simple purchases, such as a fire extinguisher for your home or an anti-theft device for your car. A multi-line discount, a savings some insurance companies offer if you buy several policies, could save you over 20 percent on premiums.
Buy products that more than pay for themselves -- save hundreds each year. Sometimes you need to spend money to save money. Buying a coffee maker for your home is the cliché example, but that doesn't mean it's without merit. Purchasing a water pitcher with a filter rather than bottled water can also lead to immediate savings. Other purchases are long-term investments. It might take months to break even after buying LED bulbs, installing and setting a programmable thermostat and upgrading your appliances to energy-efficient models, but after that you could save money on your utility bill each month.
Don't think -- automate your savings. Automatic savings can make the process painless and save you time. You can set up an automatic transfer to take place right after payday, or you might be able to allocate part of a direct deposit into your savings.
Some banks also have programs that round up debit purchases and transfer the difference from your checking to your savings account. Or you can try out a service that analyzes your spending and automatically moves money into your savings account when you can afford it.
Bottom line. Start your savings effort as soon as possible and you can build your emergency fund, a safety net that can help you avoid stressing about potential financial setbacks. Lowering your monthly cable bill will lead to almost instant savings, while making an investment in energy-efficient appliances will pay off after months or years. Add it all up and in the end you could find that just a bit of effort leads to over $1,000 in annual savings. It's a great start.
Nathaniel Sillin directs Visa's financial education programs. To follow Practical Money Skills on Twitter: www.twitter.com/PracticalMoney
This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.