Passive Saving - Like Giving Yourself a Raise!

Passive Saving Puts More Money in Your Bank Account

Sadly, Americans are not good savers.  A survey done last year by GOBankingRates found that 69% of us have less than $1000 in savings while 34% live paycheck to paycheck and have no savings whatsoever.  This holds true for Millennials as well and considering the fact that approximately 66% of them have a student loan to pay with an average balance of $40K, we need to do better. 

By the time we reach adulthood, saving should be a regular habit in our lives. We will need money to purchase our first home, then to save for our children’s education, and for our retirement. But given the statistics stated above, it is evident that for way too many of us saving money is not easy.  When we think of saving, it conjures up words like austerity, frugality, deprivation and we make a face like we just bit into a lemon. What if I can show you there is a way to start saving that is painless. It’s called “passive saving” as opposed to “active saving”. 

“What exactly is passive saving?” you ask skeptically, feeling sure I am about to scam you into leading a life of sacrifice. Passive saving is not changing your consuming habits or lifestyle. It means not giving up pleasures or activities you currently engage in or those nice things you like, but it does mean making changes in how you purchase them and from whom.  Once you initiate the changes you will never notice the difference except that you will have more disposable income every month which should go directly into your savings. Need more convincing? Here are some suggestions to get you started.    

Improve Your Credit Score

If your eyes just glazed over at the mention of the words “credit score” pay attention. This number called your FICA score follows you everywhere you go through life and will decide not only whether you get approved for a credit card, a mortgage, a car loan or a lease on an apartment but also will determine how advantageous the interest rate you receive will be. A good credit score may mean a lower security deposit on that rental and a lower cost to insure your car. When you buy a big ticket item like a home, even a quarter of a point lower on your interest rate can put ten’s of thousands of dollars in your pocket over the life of your mortgage.  

Update Auto Insurance

I’m beginning with 4 little words – it pays to shop. Monthly premiums are not all created equal and if you have not done so recently this is a good time to get some quotes on what it will cost to insure your car. Another way to lower your costs is to consider how much coverage you actually need. If you have an older vehicle, for instance, you should review the option of dropping your collision and comprehensive coverage. Raising your deductible is another option that will lower your monthly car insurance bill.  

Change Your Cell Phone Provider

If you have been paying attention, the cost of owning a cell phone keeps getting higher. Recently I switched from one of the major carriers to Google’s Project FI and couldn’t be happier. No contracts, no penalties and an option that allows you to sell back unused data minutes every month is a winner in my book. Because I do not use the 4G Lite network often, I have not had a bill over $30 in the 6 months I have been on the plan. The one catch is I did have to give up my iPhone for the Nexus 6P but considering the lower cost purchasing the phone ($600) and the monthly savings of approximately $60, that first-year savings of $1200 eased any initial resistance I had. The service is great and the Nexus phone does everything I need it to do and does it well. And that $1200 yearly saving is going into my IRA.  Now that is a passive saving win in my book. However, if you are of a mind that life wasn’t worth living before the age of the iPhone, this may not be for you but this was the largest amount of yearly passive savings for me. 

Cash Back Credit Cards

With so many credit card options for cash back on purchases, this one is a no-brainer.  Paying all your monthly bills and expenditures on a card can add up to hundreds of dollars each year or points that provide free gifts or airline tickets.  A word of caution here, be aware that this only works if you pay the balance off every month and avoid those pesky interest charges. 

Be a Smart Shopper

The miracle of the internet makes it so easy to comparison shop for the lowest prices. Like many of us, my favorite go-to place is Amazon where I now buy my hair care products, over the counter medications, vitamins, and other odds and ends. In addition, I have the Amazon store card which gives me 5% cash back or the option of 6 months interest-free financing on orders over $150. Being a Prime member I also enjoy free shipping.

Cut That Cable

Cable TV charges are getting so high they should be a deductible dependent on our income taxes. According to an article in Fortune magazine, the average cost of cable TV was $103.10 last year and we know for many that cost is higher depending on how many premium channels are tacked on to their monthly service. Several years ago I cut the cord. Now I am an avid live streamer. With my Amazon Fire Stick and Prime for $99 a year and a live streaming subscription to Netflix for $9.99 in HD, and a splurge on adding the Starz network for $8.99 so I could watch Outlander, I have more to watch then I could have ever imagined. Monthly cost rounded up to $30.  An added bonus – a wide variety of premium channels available through Amazon and other options like Hulu and Sling. The world is your viewing oyster folks so get out there and enjoy while you throw that coin you saved into Miss Piggy. 

Connect to the World Wide Web for Less

If you are purchasing your Internet through your local cable provider you may be able to do better. Check into other providers. Here in the Twin Cities check out CenturyLink.  If you prefer not to make a change, review the service you have with your current provider and see if you can trim your plan. I discovered I was paying for basic TV plus HBO which I never watched and didn’t even know I had. By getting rid of the extras and going into a contract plan I was able to trim $35 off my monthly bill. Score another win!

Ask and You Might Receive.

You should also ask your Internet provider as well as your cellular company for a better deal if they want to keep your business. You might be surprised to find out how much they will lower your monthly service price to hold on to a customer. It never hurts to ask for a better interest rate on your credit card as well, especially if you have improved your credit score since you opened it. Same goes for your car insurance. Every company wants to hold on to the customers they have and if you have a good FICO score and have paid your bill on time consistently you are in a good position to bargain.

So is that painless like I promised?  You bet it is and that is the tip of the iceberg. There are many additional opportunities to save without sacrifice before you move up to the next level. Figure out what you saved every month and feed it to that “Buy a Home” piggy bank, vacation fund, or remodeling project.  If you have a tip of your own you would like to share, please do so in the comments section because I am always looking for new ways to save money painlessly.

Coming soon in our “savings” series is trimming the budget where we get a little more serious about saving money.  See you then!