Below are 6 things I've done in the past or continue to do that have had a large impact on my personal savings. The first is the biggest life choice I've made which has had the largest impact on my personal finances. The other items are all choices I've made that have all made a significant difference in my spending and savings.
- Getting a college degree
I previously discussed the value of a college degree in the article : What is a college degree worth? Median income between high school and college is : high school = $33,609 and college = $59,365. After taxes the take home is going to be around $28k for high school and $46k for college (assuming single filer). So you are looking at an extra $18,000 annual income for the college degree holder.
- Buying used cars and driving them for years
My last car cost around $7500 and I drove it for 10 years. By comparison if I had bought 2 new cars and driven them 5 years each I would have spent much more. If I had bought a relatively cheap new car 10 years ago for $10k, driven it 5 years and then traded it in for another fairly cheap new car for $12k I would have paid $189 monthly payments for 5 years and then $151 payments for another 5 years. $20,400 total for 2 new cars with about $4k in value at the end. I instead paid about $8300 in payments and had $1000 value at the end. Thats a difference of about $9100 over 10 years. So I'm saving about $910 a year on car payments.
- Driving a fuel efficient car
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- Driving less
These are two separate choices I make that multiply for extra savings. First I drive cars that get decent fuel economy. My cars have gotten over 20 MPG in the city. If I had an inefficient vehicle with 10-15 MPG in the city I'd be paying about twice as much for gasoline. Second I drive less than most people. I purposefully live close to work and I try to be smart about not driving more than necessary. I only drive around 8000 miles a year. The average American drives more like 12000 miles a year. If I drove 12000 a year and got 10 MPG I'd be spending $3000 a year on gas. By driving 8000 miles and having a car that gets 25MPG I spend $800. Combined I'm saving up to $2200 a year.
- Quit smoking
I used to smoke a pack a day. Cigarettes around here cost around $4 a pack or more. So by quitting smoking I've saved about $1460 a year.
- Avoiding Starbucks
I've never bought a daily coffee at a Starbucks or similar coffee stand. By avoiding this habit I'm saving $3 or so daily. This saves me $750 to $1095 a year.
- Packing my lunch
I used to spend about $10 a day on lunches a few years back. I was eating out at restaurants daily with a coworker that I am friends with. Then I cut back to eating in the cafe here at work which ran about $5 a day. Now I've switched to packing my lunch 4 days and eating out 1 day a week. This costs me about $2 for the packed lunches and $5 to eat out. Originally I was spending about $10 a day or $2500 a year. Now I'm spending about $650. So by packing a lunch I'm saving $1850 over eating out at restaurants daily.
All of these things add up to make a large impact on my personal finances. If I had instead never gone to college, bought a new low MPG vehicle every year, drove as much as an average American, continued to smoke cigarettes, picked up a Starbucks habit and still ate lunch out daily then I'd be $25,000 behind total annually. Of course going to college has had the biggest impact for me. Each of these the last 5 items might individually seem like small things but they add up to over $7,000 annually.
These are just some examples from my own life. We each have lifestyle choices that add up to significant financial differences. Do you subscribe to cable TV? Do you have a high end cell phone plan with high minutes, unlimited texting, web etc.? Do you pay someone to mow your lawn instead of doing it yourself? Do you have a gym membership you rarely or never use? Some of our lifestyle choices are worth while to us and some we could live without. So look at your own life and consider what you spend money on and then figure each item as an annual expense. Then consider if its really worth while to spend an extra $2000 a year to eat out lunch or an extra $1000 a year to have a new car instead of used.