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In the previous article entitled “Get Out of Debt Now!” we suggested some ways to reduce and potentially eliminate your debt.  In this article we will share some simple ideas that can help you save thousands of dollars per year.  The amounts listed in this article are approximations based on typical spending patterns of an average American family.  Certain assumptions were made that may not fit your spending patterns, but you can still benefit from the idea.  Since the quantities are not meant to be exact, they were rounded to the nearest $100’s.

Here are 10 common areas of spending that most people can reduce:

1. Eliminate Cable TV - Potential savings of $1,200 per year

This is an expense that most people can do without, and yet many people in debt continue to spend on cable TV.  A starter package from Comcast will cost you $52 a month.  That is $624 per year.  The premium package costs $103 a month or $1,236 per year!  Honestly ask yourself if you really need all those channels or if the few channels that you get with a regular antenna will suffice.  Do you ever feel that the cable TV experience is much like the song from Bruce Springsteen, “57 Channels (And Nothin’ On)”?  If so, get rid of cable now and potentially save yourself over a thousand dollars per year.

2. Reduce Telephone Expenses – Potential savings of $700 per year

With the advent of the internet and Voice Over IP (VoIP) technology, the days of paying for long distance calls are over.  If you already have high-speed internet at home you have an opportunity to get rid of you long-distance carrier and switch over to a VoIP service.  Personally I like Vonage which I have been using for several months.  For only $24.99 a month you get unlimited domestic long distance calls.  And if you call internationally you will pay significantly less for those calls as well.  The service is very good, and you will hardly notice any difference in sound quality.  There are occasional hiccups, such as a call dropping, or the sound quality deteriorating for a short period during a call.  But these are rare, and should not keep you from using the service.  Based on average calling patterns, you can probably save about $50 a month or $600 a year with this service.

Also look at how much you are spending on cell phone charges.  Most people should do fine with a $40 per month plan.  If you are spending significantly more than that, re-evaluate your use of the cell phone and think about whether you really need to talk on the cell as often as you do.  If you look at your cell phone bill closely and make changes to your plan, you can probably save another $100 a year in phone bills.

3. Carry High Deductible Car Insurance – Potential savings of $300 per year

In the article “Accidents Happen – Be Prepared and Then Move On” we talked about how carrying a high deductible car insurance can save you hundreds of dollars in premium payments.  You should have a minimum $500 deductible on your car insurance, and if you car is more than 5 years old re-evaluate whether you really need to carry expensive collision and comprehensive insurance.  With a high deductible car insurance you should be able to save about $150 per year in premium payments.  For the average family with two cars, this is a potential savings of $300 per year.

4. Drink Water with Restaurant Meals - Potential savings of $400 per year

Have you ever noticed how disproportionate the price of a drink is compared to the price of a meal at a restaurant?  Does it really make sense to pay almost $2.00 for a soda when the meal itself only costs about $7 or $8?  If you drink an alcoholic beverage it can cost more than half the price of the entire meal!  This is a high-margin item for the restaurants, meaning, they are making a lot of money at your expense.  What is the alternative?  Get in the habit of drinking water.  It is better for you and will save you some money.  For a family of 4 that eats out once a week we are talking about a potential savings of $34 per month or $412 per year.

5. Reduce Utility Costs – Potential savings of $200 per year

If you don’t have an electronic thermostat you may want to consider investing in one.  In the winter, set the thermostat to a lower temperature when you are sleeping or not in the house.  In the summer, set it to a higher temperature when you are away.  You could potentially save 10-20% of your utility bills, and to the average family this can represent a potential savings of $200 per year.

6. Shop Online Before Making an Impulse Purchase at the Store – Potential savings of $400 per year

You often can buy the exact same item that you see in the store for much less on line.  This is even more pronounced with electronics and software.  I have bought many brand new items on eBay for less than half the price of what I would have paid at the store.  If you save 30% on $1,500 in annual purchases, that is $450 in your pocket.

7. Buy it on Sale – Potential savings of $300 per year

Keep an eye on items that are on sale and you can save several hundred dollars a year.  This is a very effective way to save money, especially for seasonal items like clothing.  Why pay full price?  Wait until the item goes on sale and buy it at a discount.  If you spend $1,500 in clothing a year you could easily save 20% or $300 buying it on sale.

8. The Latte Effect – Potential savings of $1,000 per year

You must have heard of the latte effect.  This term was coined in reference to the expensive gourmet coffee sold in places like Starbucks.  If you buy a latte a day for $3.50, this will cost you $24.50 a week, $100 a month, or $1,200 a year!  Even though the term latte is used here, we are not just talking about coffee at Starbucks.  We are talking about all the non-essential little things that you buy that add up to real money in a year’s time.  We are not saying to never buy and enjoy a latte.  Buy it once a week as a treat instead of everyday, and you save about $1,000 per year.

9. Cook Your Own Meals – Potential savings of $1,500 per year

Instead of eating out frequently, cook your own meals at home more often.  You will eat better and save a good amount of money.  Let’s say you eat out 3 times a week and spend about $30 per outing for a family of 4.  That costs you about $4,680 per year.  The same meal cooked at home would probably cost you about half of the price, so that if you eat out once a week only, you will potentially save about $1,500 per year.

10. Buy Used Cars and Drive Them as Long as You Can – Potential savings of $1,000 per year

The biggest expense you incur when buying a new car is depreciation.  The moment you drive off the dealer’s lot you already lost about 10% of the value of the car.  Instead, if you buy a car that is 2-3 years old, with relatively low miles, and drive it for 8-10 years, you can easily save about $1,000 a year during the life of the car.

These relatively small numbers can add up quickly.  If you realize the potential savings indicated above you could save a total of $7,000 per year!

Happy Savings!

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