Penny Pincher Journal

Tip 31: Stop buying lottery tickets

I still buy a lottery ticket occasionally- it is fun to imagine what I would do if I won. But I realize that the odds of winning are extremely small. Some people buy lottery tickets every week. This is like paying a tax that you don't have to pay. Considering the odds of winning, and the probability that you would have to share the prize if you win, the actual value of a lottery ticket is less than 50% of the purchase price. Buying lottery tickets is not a good financial strategy.

Let’s say someone spent $10 per week on lottery tickets for 40 years. That adds up $20,800 for lottery tickets. The person may get lucky and win millions of dollars, but the most likely scenario is that our gambler will win some small prizes, perhaps amounting a few thousand dollars over the years. But if our gambler were to invest $10 per week for 40 years, it would grow to $140,000 getting historical average stock market returns of 8%. Of course, there are some people who say that investing in the stock market is gambling too, but your chances of making money in the stock market are much, much better than winning the lottery. The 8% historical average stock market return includes the Great Depression and other downturns. If you can invest for the long term, you have a good chance to grow your money. Buying lottery tickets has an average return more like negative 50%.

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Tip 32: Stop smoking

Cigarettes are expensive- over $5 for a pack in most places. Many people who smoke go through a pack or two a day, so the expense of smoking is like making a car payment. Everyone knows smoking causes serious health problems. Cigarettes are one of the few products that will kill you when used according to the directions. If makes me sad to see young people smoke- they are ruining their health for no good reason.
If you smoke a pack a day and quit smoking, you'll save at least $150 per month just on the cost of cigarettes. You'll save much more in terms of improved health and quality of life. If you are a smoker, start with this tip, it will save you the most.

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Tip 33: Take shorter showers

Heating water is expensive, you can save money by taking shorter showers. Some people like to take long hot showers. I remember in a Civil Air Patrol summer camp as a teenager taking 1 minute showers. It can be done. Also use less shampoo, you don't need much to clean your hair. The chemicals in shampoo are not good for your hair anyway.

The cost to heat water for a 10 minute shower costs about 50 cents. If you take a shower every day, the energy cost for hot water is about $180 dollars. If you take 5 minute showers instead, you'll save $90 per year. If you have a family of four and everyone cuts there 10 minute shower to 5 minutes, you would save $360 per year. This is not a huge savings, but I like the idea of spending less money and conserving resources whenever I can. Shorter showers not only save energy, but conserve water as well.

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Tip 34: Find out where your money is going

One way to cut spending is to really understand where your money goes. There are a few big expenses that are easy to understand- housing, vehicle payments, utility bills, and food. The opportunity most people have to reduce spending is by working on everything else, so understanding the smaller expenses and how much really goes for food is important.

Doing the work to figure out in detail where your money is going can be a great tool to spend less. When you look at monthly totals and realize you are wasting hundreds of dollars per month on wasteful spending, you may be motivated to change spending habits and keep this money instead of giving it to others. This is a motivator for me. When you spend money, it generally ends up in the hands of people who need it less than I do. It seems like store owners, company shareholders, bankers and others with lots of money are the ones who end up with most of the money that I spend. I am happier keeping more of my money myself than having it end up in the hands of people who already have plenty of money.

When you see that you are giving a lot of money away to other people- people who need it less than you- this helps you focus on keeping some for yourself instead.

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Tip 35: Avoid boarding your pets

Boarding pets can cost about as much as a hotel room! See if you can have a friend or someone in your family watch your dog next time you travel instead of boarding your pet or taking fido along on the trip. You can return the favor by watching their pet sometime.

You can avoid pet boarding by taking your pets with you when you travel. I have taken dogs along on car trips. I have had dogs stay on travel trailer camping trips and also at hotels. You can find hotels that allow dogs. I have seen dogs on trips at the airport, but have not tried this myself. Airfare for a pet can run over $100 each way. This could still be cheaper than boarding, depending on the length of your trip.

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Tip 36: Get multiple estimates for home improvement projects

It can be difficult and time consuming to get multiple estimates for a home improvement project. I once got an estimate for roofing my house from a popular roofing company. When I looked at the estimate, I realized I had no way to know if the estimate was low or high, so I got a couple other estimates. The low estimate was about $3,000 less and I went with the lower price. You may not always want to pick the lowest estimate, but it is good to have a few independent estimates for the same work. If a company is busy, they may give a higher estimate. You may be able to find a company that is hungry for work and will give a lower estimate.

You can sometimes use one estimate to help negotiate a better deal- explain that you got a lower estimate and give the company you want to deal with a chance to match the lowest estimate you received.
Another benefit of getting multiple estimates is that if provides a "cooling off" period that helps you avoid an impulse decision that you may regret later. If someone offers to do work, you can always say that you need to get a couple other estimates. During the time it takes to get the other estimates you have time to think about if the project is necessary and the highest priority for spending your money. I can remember several occasions where I got estimates for projects and decided not to go forward. Not doing optional projects is a great way to save money!

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Tip 37: Get enough sleep

Getting enough sleep is free, you'll feel better, and be less likely to over-eat or make poor decisions when well-rested. I try to be in bed 8 hours a night which usually results in about 7.5 or so hours of sleep considering interruptions like my dogs needing to go out. I like to have it very dark when I sleep, and prefer cooler temperature. I use a programmable thermostat that automatically turns down the temperature at night in winter. I use a fan in summer to stay cool and get good sleep. I think it is easier to get good sleep when you go to bed at the same time and get up at the same time every day.

If you are not getting enough sleep, try to make changes to get enough rest. This provides a good foundation for increasing your willpower and being able to consistently make good choices to spend less money.

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Penny Pincher Journal

Penny Pincher Journal

Sunday, December 14, 2014

Tip 31: Stop buying lottery tickets

Tip 31: Stop buying lottery tickets

Tip 32: Stop smoking

Tip 32: Stop smoking

Tip 33: Take shorter showers

Tip 33: Take shorter showers

Tip 34: Find out where your money is going

Tip 34: Find out where your money is going

Tip 35: Avoid boarding your pets

Tip 35: Avoid boarding your pets

Tip 36: Get multiple estimates for home improvement projects

Tip 36: Get multiple estimates for home improvement projects

Tip 37: Get enough sleep

Tip 37: Get enough sleep

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