Remember my announcement last week of our new Challenge Everything Savings account? Well, this is proof right here of how POWERFUL this idea can be if you really apply yourself. And it doesn’t require any major change to your normal routine either!
[In fact, this $6k doesn’t even include any expense savings money which is the core of what we’ll be personally stashing ourselves. Meaning this number can be even greater if you were to add it into all the other forms of “spare change” which we’ll get to in a moment…]
Here’s a snippet of the correspondence I’ve been having with a fellow reader of this site:
I have 4 areas of savings:
1) Extra principal towards my residence and rental property mortgages
2) Traditional savings
3) SEP IRA
4) Cash — I don’t spend any of my change, $1′s or $5′s. You would be shocked at how quickly this adds up!
Let’s break down how awesome this is…
1) Extra principal towards residence and rental property: Yes, brilliant! The more you pay off, and the sooner you do it, the quicker those dang debts disappear and the less money you spend over time in stupid interest. And you don’t have to put in a lot extra either if you can’t afford to do so. Try rounding up to the nearest $100th like I do, or nearest $50th if that’s too much, and it’ll all go to accomplishing the same goal in the end. You’ll hardly notice the difference.
2) Traditional savings –– Not sure how this differs from all the other savings she does which we’ll see in more detail in a sec, but more savings on top of other savings all sounds good to me!
3) SEP IRA — This tells you right off the bat she’s self-employed as that’s what many of us use with our small businesses – the SEP IRA. We don’t know if she maxes it out or not which is a smart move to make in order to capitalize on all the tax benefits, but regardless it’s a great thing to do. Especially as we don’t get our beloved 401(k) matches anymore like we did at the 9-5, ugh…. That’s FREE MONEY FOR THE TAKING people! Y’all better be grabbing that if you have the option of it!
4) The “spare change” trick — This one was my favorite, and the reason I wanted to share with you today. Again, cuz it just re-emphasizes how simple and easy this stuff can be if you put the plan in place ahead of time. You always want to have a purpose for your money whether it’s cash you’re already expecting to get (ie, a paycheck) or it’s cash that comes unexpectedly. You should always know where it goes before you even get it, thereby avoiding any crazy expenditures or lifestyle inflation. And it’s of course okay to splurge on something outside of savings, but the difference is you consciously decided that action before the money came a trickling. Though it’s not always easy to do. (I’m just as guilty not following this at times…)
Here are two great articles on this by blogger friends who explain it much better, and thoroughly, than I:
I got to talking more with this new reader friend of mine (turns out she’s a currency collector too and subscriber of my coin blog! Woo!) and she elaborated more on this “spare change” idea:
You ought to try my savings idea……. I sock away a minimum of $6,000 a year from change, $1’s and $5’s + misc receipts (b-day cash, refunds, found cash, etc.). My clients have had the same success rate as me — and you never notice that the money is gone! In fact, where did it go before I started saving it???
Exactly…. where does it all go? And notice she says “clients” there too – that’s because she’s a CPA and recommends this to everyone she helps as she goes along :) When was the last time your CPA hooked you up with fun savings tricks? Haha… (okay, that was a dumb question – they help save us money all the time on stuff – especially during tax time!! But you get the point…)
So this $6,000 comes from spare change (I’m guessing coins), ones, fives, birthday money, refunds, found cash (*ahem*) and any other extra money she receives. Sound familiar? If you weren’t convinced last week when I unveiled this plan, I hope you’re getting closer to it now. $6k is no joke. And remember, it doesn’t even include any of the monthly savings from the expense-cutting missions either! Which alone will be a hefty number when all is said and done…
Needless to say, I’m pretty invigorated here. I only have 15 cents in the account right now as I’m waiting for all the bills to hit (I found a dime and a nickel on my walks this week, haha… who throws away money???) but I’ll soon be xfering over the differences of all these new bills vs old ones in it shortly. And I’m officially going to try and beat out this $6,000 number too :) That’s enough to max out your ROTH Ira and still have some cash leftover! Hubba hubba!
Hope this helps motivate y’all this fine Monday morning… Keep collecting that money!
UPDATE: My friend who saves this $6k every year saw this post and sent me a little back story on it – thought you’d find it interesting :)
I began this process only saving change which totaled about $1,000/yr but once I made the commitment to save $1’s, $5’s and what I call “extra” cash, the amount just skyrocketed…… probably due to my focus on it. And yes, I only carry $20s so if I buy a bottle of pop, it may end up costing me out-of-pocket $20 ($1.50 for the bottle of pop and $18.50 for my savings) since my area prefers to give $5s as change.
(I also use my debit card a lot to pay for purchases, electronic payments, etc. For each use of it, $1 is transferred from my checking to my dog’s savings account to pay for her medical insurance and expenses. She is an English bulldog and is susceptible to expensive medical bills!)
But the whole goal of this method of savings was to make me conscious of how much money I was wasting before implementing this system. If I can save an additional $6,000+ a year and not even feel it, then I really wasn’t in control of my cash receipts/expenditures in the past. And accumulating cash this way is actually fun and exciting for me….. I enjoy it! Everyone has a vice and mine is collecting cash!
PS: Did you list your one item for the week yet on Craigslist?
[Photo cred: c_ambler]