Cut back, save big money - MoneySense

Cut back, save big money

Whenever we talk about trimming back our budgets we end up targeting stuff like coffee, lunches out and cable television. We’ve cast these as wasteful, pointless things that simply bring us pleasure but no long-term payback.

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You probably get tired of hearing people say, “Skip lunch and you can save $10 a day, or $50 a week. That’s $2,600 a year.” Who wants to skip lunch every day? Besides if I skip lunch for a month and save $200, and then turn around and buy two tickets to see Jersey Boys, I’ll blow through my lunch savings in one sweep of the credit card … k’ching! Which is exactly the problem people have “saving” money.

I can’t tell you how many times I’ve heard some version of, “Yah, I can give up eating lunch out and save $25 a week, but what’s that really going to get me?”

How about a $30,000 savings on your mortgage. Interested?

On a $250,000 mortgage at 6% amortized over 25 years, if you add an extra $100 to your monthly payment, you’ll save $32,640 off your mortgage and chop 3 years off your amortization. That’s got to be worth brown-bagging it for lunch!

Most people never realize the gains they could make because when the do something to “save” money, they leave their “savings” in their wallet, where it eventually vanishes into a cup of coffee, a new magazine, or a DVD for the kids.

If you want to make your “savings” work as hard as you do, then you’ve got to apply them somewhere important quick, quick like a bunny. Use the money you’re saving to pay down your credit card balances or your mortgage, bump up your emergency fund, or increase your retirement savings.

I’ll bet there’s a bucket-load of ways you’re spending unconsciously. And I’ll bet you can find the $100 a month to save $30,000 on your mortgage. Why don’t you take a look?

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