A look around the personal finance blogosphere will show you a number of different approaches to living a financially rewarding life.
Some bloggers like Ramit Sethi from I Will Teach You to Be Rich scoff at little cost cutting measures like making your coffee at home instead of stopping by Starbucks, arguing that the way to truly become wealthy comes from making more money, not cutting little corners.
Others like Crystal Paine at Money Saving Mom advocate a frugal lifestyle.
She regularly advertises free deals and ways to be frugal such as using coupons when shopping, menu planning, and taking advantage of free summer activities with kids. While she does advocate having a side gig if you’re able, her main focus is saving money by spending less money.
Of course, these two strategies combined — earning more money and saving money in all the little ways you spend on a daily basis — are important to growing your net worth.
But there’s also another strategy that may be even more important than cutting corners on routine, small expenditures–cutting corners on large purchases that can save you thousands in one fell swoop.
Saving on large purchases isn’t discussed as much because there’s not an opportunity to save as frequently. After all, you may go to the coffee shop every day, and you may go out to eat a few times a week, but you’ll likely only buy a new car every five to ten years.
Still, the big purchases can save you as much in one fell swoop as a year’s worth of savings by making your coffee at home.
These Big Financial Wins Rock!
When you get a new car, you buy insurance. And then, if you’re like most Americans, you just keep paying the premium year in and year out without much thought. But take an hour or two out of your day one afternoon to compare rates, and you may save yourself hundreds.
The best way to save is to either call several different companies to compare rates or to use an online comparison site like Insure.com or InsureOne.com. Make sure that you have your current policy in front of you so you can request the exact same coverage to see which company gives you the best deal.
CBS Money Watch says, “Yes, you can probably save a lot of money by making changes, but there’s no single company that offers the best deals.” You’ll need to invest some time to shop around.
Call Your Current Insurer
If you don’t want to change insurance companies out of a sense of loyalty, another option is to call the company and see how you might be able to save on your premiums. You could try to bundle your auto insurance with home owners insurance to get a lower rate. You could increase your deductible. Your insurance agent will likely be able to give you several strategies for lowering your premium.
Home Owners or Renters Insurance
Just like car insurance, calling around for a quote on home owners or renters insurance is a smart idea, especially if it’s been a few years since you compared prices.
There are other strategies you could also use that might save you money on your home or renters insurance:
Install a security system
If you don’t already have a home security system, you may want to consider installing one. Since having one lowers your risk of being burglarized, your insurance may reward you with a premium cut. “You can usually get discounts of at least 5 percent for a smoke detector, burglar alarm or dead-bolt locks. Some companies offer to cut your premium by as much as 15 or 20 percent if you install a sophisticated sprinkler system and a fire and burglar alarm that rings at the police, fire or other monitoring stations” (USA.gov). Of course, check with your insurer first to see how much you’ll save before you make the investment in your home.
When you buy insurance, insure for the cost of the home and your possessions. Don’t also include the price that you paid for the land as that does not need to be protected from theft and natural disasters.
A word of caution, though.
If you’re eager to save, don’t make the mistake of moving to actual cash value insurance. This means that the insurance company will evaluate the cost of your items and calculate depreciation. So you may only get $50 for your five year old television thanks to depreciation even though it will cost at least $200 to replace.
To get insurance that will cover the cost of all your items should you need to replace them, you’ll want to purchase replacement value insurance, even if it’s more expensive.
Home & Mortgage
You’ll likely never spend more at one time in your life than you do when you buy a house.
Therefore, you should do everything you can to lower the amount that you pay for your home initially as well as what you pay on your mortgage.
Depending on the real estate market that you’re in, you can negotiate for the price of your home. If the current owners aren’t willing to budge, there are other things that you can negotiate such as having the owners repair any current problems with the home. There usually is always room to negotiate unless you’re looking to buy in a hot seller’s market.
Finally, if you don’t get close to the price you’d like, be willing to walk away. As soon as you become emotionally invested in a house, you lose much of your negotiating power.
Mortgage Interest Rate
Even a small difference of .5 or 1% in the interest rate that you pay on your mortgage can make the difference of saving thousands of dollars in interest over the life of the loan. The lower the interest rate, the better.
To go as low as possible, try these techniques:
1. Work on your credit score. Before you even enter the housing market, work on repairing your credit score, if need be. Clear up any errors on your credit report. Pay off as many debts as you can, and make regular payments. The higher your credit score, the lower the amount of interest you pay.
2. Use a mortgage broker. A mortgage broker can help you find the right loan for your situation and can comparison shop on your behalf, which you might not be able to do as thoroughly as you should if you have a busy lifestyle.
Negotiate Salary for a New Job
All of the strategies we’ve discussed so far are ways to save when making larger purchases. However, just as important is earning more and getting generous perks.
You may not ever have as much power over your income as you do when negotiating a new job, especially if the company pursued you. While many people simply accept the salary a company offers, that’s a mistake. Even if you can negotiate just $3,000 more per year than the company offers, that’s $30,000 extra over the course of 10 years!
Forbes offers a number of strategies to negotiate with a perspective employer, pointing out that you can negotiate for items other than salary like vacation time and severance pay. “Think hard about what’s most important to you, including salary and anything else, from the non-compete clause to the office where you’ll sit. What are you willing to give up? What is make or break? For some applicants, the size of the paycheck may not be as important as vacation time. Severance is a good negotiating item, because it costs the employer nothing up front.”
Related: How Much Is Your Total Compensation?
Final Word on Big Financial Wins
When trying to increase your financial power, there’s nothing wrong with seeking out little wins like eating at home instead of dining out or making coffee at home instead of stopping by Starbucks.
However, to really improve your financial situation, look for the big wins that can save you hundreds or thousands just for a few hours work like saving on your insurance premiums, saving on your mortgage, and negotiating the price of your new home.
Combine these two saving tactics with making more money by negotiating your salary and you’ll be well on your way to financial independence.