Penny Pincher Journal

Sunday, December 14, 2014

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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Tip 38: Eat less

Most people are overweight. If fact, the average American is 23 pounds overweight- that is a lot of extra weight. Most people can simply eat less- you will save money on food and loose some of that extra weight. Food is one expense that almost everyone can reduce and it is actually good for you to eat less for almost everyone. The cost for food to gain 23 extra pounds that most Americans have is about $720. I know I would rather have 720 extra dollars than 23 extra pounds! Most people can simply eat less and pocket the money they save by not buying unneeded food.

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Tip 39: Cut down on travel

Traveling for meetings is expensive- use technology to save money. Sometimes meeting face to face cannot be replaced, but routine business can often be conducted effectively through Skype or phone calls. This can apply to traveling long distances and also to traveling a few miles in town.

Sometimes I call into meetings instead of driving to a different location. This works well for routine meetings when you already know the people involved. You can easily add video cameras, but I usually just go with audio and share slides or spreadsheets from my computer at teleconferences. You can save a lot of time and money if you can find ways to travel less.

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Tip 40: Install a programmable thermostat

If you have an older thermostat, you may be able to save a lot on your utility bills by upgrading to a programmable thermostat. A programmable thermostat allows you to set temperatures for various times of day so you can spend less heating or cooling your house when no one is there. For example, you can program your thermostat to warm the house up to 68 degrees by 6am, and then turn the temperature down to 60 degrees starting at 8am when no one is home on a week day. You can turn the thermostat down manually, but it is easy to forget and you waste money heating your house when no one is home.
You can install a programmable thermostat yourself in about an hour with no special tools. The total cost for the project is around $75 for a nice touch screen programmable thermostat that will last for many years and will pay back many times over in energy savings.

I like it when I can find a way to save money that results in improving my house and making things more convenient for me. Once I got my programmable thermostat installed, it takes care of turning the temperature up and down for me automatically. I think of it as a robot that works for me to save money on my utility bills.

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Tip 41: Chew gum instead of eating a snack

As we have learned in one of the other tips, most people are overweight, so eating less is usually a good thing. Chewing gum instead of having a snack is a good way to save money. A piece of gum costs less than 10 cents and is good for your teeth. Chewing gum can give you a lift, but without the calories and expense of eating a candy bar or similar unhealthy selection from the vending machine. I usually go for sugar-free gum- Orbit Sweet Mint is my favorite.

For some reason, my son bought some sugar free bubble gum and decided he doesn’t like it, so it’s bubble gum for me for a few weeks...

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Tip 42: Switch from soda to free water

Free is hard to beat, especially where beverages are concerned. You can get a bottle of soda for about $1.50 that is loaded with calories for regular soda or loaded with chemicals for diet soda. It takes some time to switch from drinking soda- if you are accustomed to drinking soda, then plain water will not taste very good. If you are used to having caffeine, it will take time to get used to not having as much caffeine. Start by substituting some of your soda with water and eventually try to have soda only for special occasions. This is much healthier and will save lots of money too.

If you drink 2 sodas a day at $1.50 each, you'll save $90 per month by switching to water. Just make sure to switch to free water- bottled water costs about as much as soda and is the same as tap water. Some popular brands of bottled water are actually bottled from city water supplies- it is literally bottled tap water marked up from less than one cent worth of water. You can easily bring your own water from home. I sometimes use an aluminum water bottle and fill it with filtered water from my refrigerator. You can usually find a place to fill your own water container during the day- for free.

Tap water is so cheap it is virtually free. The cost of tap water is about 2 cents per 1000 gallons in most places. All you need to take advantage of free drinks is a refillable bottle. I have an aluminum bottle that I sometimes use.

You can save some money by drinking bottled water instead of soda. You can get bottled water in large packs for around 30 cents per bottle, which is a lot cheaper than soda. Tap water is much cheaper than bottled water if you want to save even more on beverages.

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Sunday, December 14, 2014

Tip 31: Stop buying lottery tickets

Tip 32: Stop smoking

Tip 33: Take shorter showers

Tip 34: Find out where your money is going

Tip 35: Avoid boarding your pets

Tip 36: Get multiple estimates for home improvement projects

Tip 37: Get enough sleep

Tip 38: Eat less

Tip 39: Cut down on travel

Tip 40: Install a programmable thermostat

Tip 41: Chew gum instead of eating a snack

Tip 42: Switch from soda to free water

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