• Matt Wolodarsky

Top Money Saving Tips for Wealth Creation

Most people don't get excited about saving money. But, for one of the world's wealthiest people, Warren Buffett, I suspect it brings him a lot of satisfaction. We all know Warren Buffet as the "Oracle of Omaha", a legend in the investing world. What most people don't know is that he is also legendarily frugal. He loves the simple things in life, such as McDonald's hamburgers and Oreo's. In fact, he still lives in the Omaha, Nebraska home that he bought in the 1950's for $31,500.  Check out more of his frugal quirks here.


So what does Warren Buffett know that most of us don't.  I would argue it's his understanding that personal savings is a cornerstone of any realistic strategy to build wealth.   


While many believe to the contrary, the simple fact is that it is your personal savings rate—not your investment choices—that is the most important determinant in growing sustainable wealth over time 

And, the good news is that saving money doesn’t need to necessarily infringe on the enjoyment of your life.  In fact the top five tips I adopted into my life, as described below, did not have a material impact on my quality of life and they netted me almost $5,000 in annual savings.

Use your company’s group insurance provider: Many of us will work for organizations that negotiate, on behalf of their employees, group insurance rates that are more competitive than rates you would be able to negotiate on your own.  Take advantage of these lower group rates for your home and automobile insurance needs.  I did, it took me one phone call and signing a couple forms, and it saved me $600 a year as compared to what I was paying with my previous provider.  So simple, yet so impactful. 


Consider switching to a variable mortgage rate: One of the most commonly debated personal financial decisions an individual can make when shopping for a new home is whether to opt for a fixed or variable rate mortgage.  Like many first time home buyers I opted for a five year fixed mortgage rate, which satisfied my conservative side by locking into a rate and having a “predictable” monthly mortgage payment.  I made this important decision without really investigating the variable rate mortgage option, which offers an interest rate that fluctuates with the lenders prime interest rate.  Had I analyzed more thoroughly, not only would I have saved a considerable amount of money over the course of my five year mortgage, but I would have debunked one of the more common myths associated with variable rates that prevent many from benefiting from the cost savings of a variable mortgage – that most variable mortgages keep your overall monthly mortgage payment amount the same during the term.  Most lenders will just adjust what amount is allocated to pay interest and what amount is allocated to pay down principal, if lenders prime interest rates fluctuate during the course of your mortgage term.  The potential for savings by choosing a variable mortgage rate over a fixed mortgage rate are real.  A study done by Dr. Moshe Milevsky, associate professor of finance, Schulich School of Business, York University, found that based on data from 1950 to 2007, the average Canadian could expect to save interest 90.1% of the time by choosing a variable-rate mortgage instead of a fixed rate. The average savings was $20,630 over 15 years per $100,000 borrowed (Source: http://www.milliondollarjourney.com/avoid-the-5-year-fixed-mortgage-trap.htm


Cut the cable chord and subscribe to Netflix: There is a movement afoot people that involves breaking the stranglehold the cable companies have had over our downtime for the last half century.  #cuttingthecord is about being an empowered consumer by cutting the cords of your cable box (i.e., cancelling your monthly cable service) and choosing to pay only for content and services that you want; not just watching what’s on TV based on the bundling of channels cable providers have put together to optimize their profits.  Cutting the cable chord does not mean depriving yourself of entertaining content, quite the contrary.  There are many incredibly compelling alternatives to cable that have emerged over the last few years from Netflix to Google Chromecast, Amazon Fire TV, mlb.com and NHL Game Center.  Join the movement, cut your cords and watch your content on your terms, while putting savings in your pocket each month. 


Give up your traditional phone line in favor of keeping just your mobile phone and Skype for long distance: While I can still remember the phone number of the house I grew up in, my parent’s current home, I could not at the same time tell you the phone number of the last land line I had.  That tells you a little about the gap between younger generations and the baby boomers, but it also serves as a good reminder of the fleeting relevance of a traditional phone line.  Like the cable industry, the telecom industry is undergoing a transformation with more and more customers cutting their traditional phone line and opting to rely solely on their unlimited mobile phone plans for local calls and Skype, Facetime, What's App or some alternative for long-distance calls.  


Stop using your debit card in favor of your credit card for your purchases:  This only applies for those that can stick to using a credit card only for stuff they would buy anyway and never carry a balance on the card. In addition to the savings on debit fees for each transaction, you can redeem the reward points you accumulate with each purchase on your rewards credit card trips, consumer goods or in some cases cash.  Some estimates suggest $1,000+ in rewards is possible, especially for middle income families.  Most of these reward based credit cards also offer excellent insurance coverage, and zero liability on fraud protection. If you lose your card or it’s stolen, you are protected on any future purchases. If you lose cash or it’s stolen, well, it’s gone.


If some of the above saving tips don’t appeal or work for you, there are many other tips plastered all over the internet – from breaking your daily specialty coffee habit, to using programmable thermostats to conserve on energy to using no-frills banks or discount brokerage. 


So, get excited about saving money. And, don't let anyone tell you that you are being cheap, it's called being frugal. Just tell them Warren does it. 


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