The 3 essential steps that have been most impactful over the decades:

Don’t Sweat the Small Stuff– When it comes to SAVING money, focus on the big ticket items, not the small day to day purchases. If you think a $5 coffee is going to have any noticeable impact on your budget, one of two things is true; you aren’t making enough money and should focus on growing your income or it’s a microscopic expense that isn’t worth worrying about. The best thing you can do is to find an affordable housing option. Most people would be fine with less space than they have. I’ve had a variety of living situations in my life, ranging from a small shared apartment to a 6,000 SF house. If you live in a smaller home, you will save hundreds, if not thousands of dollars every month on your direct costs (rent, mortgage, utilities, insurance, etc), you will also be far less tempted to buy other items you don’t need. If you have a big house, you’ll buy things like two dining tables or an 18-piece cookware set. I moved out of places and realized I had thousands of dollars worth of houseware items that have never been used. The kicker is, the best housing situation I’ve ever had when I’ve been the happiest was a moderately priced apartment downtown where I could walk everywhere, I saved a fortune and loved it. I go to a coffee shop everyday, It costs about $2,000 per year. I’ve made friends at that coffeeshop, met my girlfriend, wrote a book, and had a lot of fun. $2,000 didn’t even cover insurance at my last house. A small change to your housing or car can offset all your day to day impulse purchases.

Just In Time Fulfillment– This is a concept in the supply chain and distribution industry where you attempt to keep inventories low to minimize waste. Businesses try to save money by only purchasing inventory as they need it to limit the risk of overstocking, they also limit the expenses of storing and managing inventory, saving on real estate, insurance, theft, damage, etc. In you personal finances you can do this by waiting to buy things until you actually need them. Every other answer here will tell you to purchase things in bulk and buy items out of season at a discount. This strategy my get you a slightly lower purchase price on the item, but carries the unintended consequence of buying items that go to waste. With food products this is especially important because it spoils quickly and you will be tempted to eat it before it goes bad. This will cost you extra money and calories, damaging your health and your wallets. You could spend $1,000 at Costco then three days later feel like you don’t have any food. Whether you buy a box of 4 cookies or 40, you are going to eat them in a couple days. Wait until you actually need something, then buy only what you need. You can save thousands of dollars this way without having to trek through warehouse stores and stockpile items in your garage.

Invest Your Savings– You can stack cash for years and never reach financial security. Saving alone won’t work, it’s not my opinion, it’s a math equation. Saving cash alone won’t be sustainable in retirement. If you saved $1,000 cash every month for 40 years, you’d have $480,000 in retirement, which isn’t enough for a middle class lifestyle, especially after inflation. If you put just $500 per month into a retirement account that grew at 10% annually, you’d have over $2.6 million. You could save half as much money and end up with over 5x as much money. A lot of people think that they can’t afford to invest or don’t have enough money which isn’t true. If you don’t have a lot of extra money, it means you can’t afford not to invest.

For extra content on this topic, check out my new book Money Moves!

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