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Save Money – The $100 Per Day Challenge
Once you get serious about achieving financial independence, you will quickly shift how you relate to the money flowing through life. You will realize that you need to save money if you ever hope to accumulate assets.
Save Money - The $100 Per Day Challenge
Here is an example from my own life. When I finally decided to leave my job and live off investment capital, boy did things shift. With financial freedom on the horizon, I vowed to improve my financial situation by $100 per day for as long as I could. This could be through savings, more earnings, or anything else.
Here were the results:
- Car Insurance. Living overseas, dealing with insurance can be quite a bit trickier. Instead of understanding the baseline policy I was required to buy by the Croatian government, I simply bought a supplemental policy from a U.S. firm. However, I now dug into the policy coverage of the baseline coverage and realized that I was massively over insuring my vehicle. Don’t get me wrong: I don’t think one should ever skimp on insurance, particularly third party liability insurance. (You don't want a lawsuit to even possibly bankrupt you.) However, I realized I had duplicated millions of dollars in liability insurance. Simply cancelling the supplemental policy saved me $1300 per year. Boom. That’s thirteen days at $100 per day.
- Note, given that my car was worth 16,000 and I had a $500 deductible, the insurance I cancelled did insure me against the theft of my car or it being totaled. However, recognizing that I had enough assets that losing 15500 (16000 minus the deductible) wouldn’t be a catastrophic loss, I decided the odds of losing that amount was worth taking for USD 1300 in after tax money per year. This is an example of how once you accumulate enough assets a solid financial buffer, you can take greater risks to build up assets even more quickly. If I had been living in a location where car theft was a significant issue, I might have make a different calculation by the way. This is an example of ninth grade math at work. My downside risk was a maximum of $15,500 and I got an immediate $1300 return for taking a fairly low risk. By the way, these types of calculations are exactly what people who invest in options (a type of derivative) make all the time.
- Random Insurance. I next noticed that I was paying USAA for a mystery “auto touring” policy. Something like $28 per year. I wasn't insuring anything with this payment. I won't even bother to explain what this was for. It was dumb, and I cancelled it.
- Lame low interest rate. I moved $40,000 that had been sitting in a Vanguard Money Market Fund over to my bank. The difference in interest rates was about .006—that is, six tenths of one percent. That’s a small difference, but added up to $240 per year – and took me maybe twenty minutes to compare rates and transfer the money as my accounts were already linked.
Here's what we have so far. Rationalizing my insurance saved me roughly $1500 a year. A quick movement of cash from an uninsured money market fund to an FDIC insured bank account yielded $240 (though some of this will be lost to taxes).
Other Tricks To Cut Costs
How else can we save money.....?
- Driving. I calculated that I was spending roughly $5 per day on gas commuting to and from work. Once I started thinking about this, it started to grate. So I began catching rides with colleagues where I could. I’d walk to where it was convenient for them to pick me up (a nice early 15 minute stroll), and then we’d actually get a jump on the work day by chatting on the way in. Beyond the cash, it also saved wear and tear on the car. This wasn't a huge savings, but I enjoyed the lifestyle shift of morning walks and chatting with colleagues during our 25 minute commute.
- Orphan Snowboard. I remembered an ancient 1980s snowboard that I bought at a winter swap meet during high school. It was gathering dust in my parents' basement. I had my dad take a few quick pictures and email them to me. From Croatia, I posted the board for free on Craigslist as a vintage item for $600. Within a couple of days, I had a bite from an avid collector. We settled on $300.
Now It Was Time To Get Aggressive
- Cable. I’d hardly been watching cable for the past two years, instead watching shows online (even buying them from Amazon or Apple iTunes). In Croatia my cable (including HBO!) was only costing me about $18 per month. But, hey, you don’t get from here to waking up every morning brewing your own coffee concentrating on your next entrepreneurial or investment venture by lazing away gazing at the idiocy of most of Hollywood's output. I killed the cable. Frankly, I hardly noticed it was gone.
- Union Dues. Not wanting to be a free rider, and having watched my dad go on strike when I was a kid, I paid my State Department union dues for over 10 years. However, with roughly a year to go before leaving State, I decided I had paid my fair share in thousands of dollars in union dues, and cancelled this membership. Boom: another $430 freed up. Integrity is more important that money. However, I had definitely paid my dues, and every penny counts now that we are making the jump. (I was hesitant to include this because I do believe in not being a free rider, but this is what I did--so let's be honest!)
- "Water Club." Work "water club" dues were $5 per month to pay for bottled water delivery. Cancelled. $70 per year saved.
Can YOU Save Money With The $100 Per Day Challenge?
So there you have it. In a matter of two weeks, I found about $2800 in savings or new income without any real changes to my lifestyle. That works out to 28 days straight finding $100 per day.
What about you? Are you ready to take the $100 per day challenge? How many days can you go unlocking at least $100 per day? I think you might surprise yourself.