You know all the common savings tips: cut the cord on cable and your landline phone, pack your own lunch for work, stop buying $5 Starbucks lattes, quit smoking, have your spouse cut your hair.
All good advice worth taking. But if you’ve heard it before, you’re either already following it, or choosing not to do so. So what else can you do to save money, beyond the easy and the obvious?
Try the following ideas to move the needle on your savings. They aren’t necessarily easy—but they can save you thousands of dollars a years, and in some cases thousands every month.
1. Move Overseas
You can live a better quality of life overseas for a fraction of the cost of living. I know, because I do it.
The thought never even occurs to the average American, but today most knowledge workers can telecommute. That means they can live and work from anywhere in the world, no longer shackled to the high-cost-of-living city where their employer is based.
My wife and I live entirely on her teacher’s salary, funneling all of my income into investments. Investments that generate passive income, helping us near financial freedom in our 30s.
Meanwhile, we visit an average of ten countries a year. Or at least we did, before the coronavirus pandemic temporarily skidded international travel to a halt. We spend several months of the year in the US visiting family, and the rest in South America.
It helps that my wife’s employer provides us with free housing. But even if we had to pay for our own, housing in many parts of the world costs far less than in the US.
2. Score Free Housing with a Live-In Flip
Imagine you buy a fixer-upper that costs you $1,500 per month as a mortgage payment, or $18,000 per year. You spend the next year fixing it up in your spare time, as a fun and profitable hobby. You then sell it for a modest profit of $20,000, giving you effectively free housing for that year.
If you keep the property for at least one year, you pay the lower capital gains tax rate on your profits rather than the full income tax rate. Better yet, live in it for at least two years and you can avoid capital gains taxes on the first $250,000 ($500,000 if you’re married) through the primary residence exclusion.
Known as a live-in flip, this model lets you use owner-occupied financing with a low down payment, and lets you tinker and upgrade the property on your own schedule.
3. House Hack
If you don’t like working around the house, you can also score free housing through house hacking.
That could mean the traditional multifamily model of house hacking, of course. Or you could get more creative, and find ways to house hack single-family suburban homes. A few ideas include housemates, renting out storage space, renting out parking (whether for cars, boats, or RVs), setting up a basement- or above-garage apartment, building a detached “granny pod,” or something else entirely.
Because if you want to reach financial freedom in five years or even ten, you need a massive savings rate. Aim to live on half your income at most, and better yet, aim to save and invest 60% or 70% of your income.
That kind of rapid wealth-building leaves no room for “average” or “normal” behavior like blowing 30% of your income on housing.
4. Ditch Your Car
Once again, it’s hard to achieve a 50%, 60%, or 70%+ savings rate when you’re blowing nearly $10,000 a year on a car.
When I lived in the US, my wife and I each owned a car. Six years ago when we moved overseas, we decided to try out sharing one car between us. It worked just fine, and when we started looking to move to our second country abroad, we bounced around an even more “radical” idea: foregoing a car entirely.
We knew it would require living in a walkable area, and we kept this factor in mind as she interviewed with international schools. Eventually we found a school and city where we could walk or bike to restaurants, grocery stores, bars and cafes, and other amenities. On the rare occasions when we travel further than a couple miles from home, we take an Uber. If we want a long weekend away, we rent a car for the weekend.
I thought I’d feel trapped or isolated without a car. Instead I feel liberated, never having to hassle with parking, car insurance, car accidents, filling up the tank, car washes, or cleaning out the car.
But it requires lifestyle design, choosing a place to live with intentionality.
5. Move to a Lower-Tax County or State
Your savings don’t have to come from simply spending less on lattes and housing. It can also come from saving money on taxes.
State and local governments tax you in many ways, but the three largest include income taxes, property taxes, and sales and excise taxes. To compare apples to apples, you need to take all three into account as the “total tax burden,” as some states charge less of one but more of another.
Seven states charge no income taxes: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Two more (New Hampshire and Tennessee) don’t tax earned income, but they do tax investment income—an increasing problem, the closer you get to financial independence.
Five states charge no sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.
Property taxes are typically set at the local level, but there are still obvious trends between states. Take a look at this interactive map of property taxes by county:
Combining all three tax types, the states with the lowest total tax burden are Alaska, Delaware, Tennessee, Wyoming, and Florida. The highest taxed state (New York) siphons off roughly 2.5 times as much of residents’ income each year as the lowest tax states (Alaska). That comes to a difference of many thousands of dollars a year, which is precisely why so many Americans are moving from high-tax states to lower-tax states.
6. Switch to a High-Deductible Health Plan & HSA
If you’re relatively healthy, there’s no reason to spend top dollar on health insurance. With the money you save on monthly premiums, you can pump it into the nation’s best tax-sheltered account: the HSA.
Health Savings Accounts (HSAs) offer triple tax protection. You can deduct every dollar you contribute in the year when you do so, then the money grows and compounds tax-free, and then you also avoid taxes when you withdraw the money. In other words, you get both the tax advantages of a traditional IRA and a Roth IRA, in one single account.
Instead of losing the money forever by handing it over to a health insurance company, you keep it—and invest it to compound tax-free.
Skeptics say “Yeah, but you have to spend the money on health-related expenses.” To which I reply: “Do you have any doubt that you’ll incur hefty health-related expenses in retirement?”
Consider HSAs a second retirement account, except with better tax benefits. And no need to wait until 59 ½ to withdraw from.
7. Score Free Accommodations While Traveling
No one says you have to blow money at a hotel or Airbnb when you travel.
You can stay for free through home swaps, through petsitting, through housesitting, and a range of other creative ways to score free accommodations when you travel. Yes, it takes a little work up front to learn how to do it. But it can save you thousands of dollars each year on travel.
8. Pay for All Discretionary & Variable Expenses in Cash
Do you know why nearly every retailer in the world accepts credit cards, eating the 2-4% fee charged by your card company?
Because saps like you and me spend more when we swipe plastic rather than counting out cash bills.
If you want to spend less each month on variable expenses like groceries, clothes, coffees, restaurant tabs, happy hours, and so forth, try leaving your credit card locked in a drawer at home. Go on an all-cash budget for all of these variable expenses, and compare your spending at the end of the month to your regular monthly spending. You’ll be amazed at how much more reluctant you’ll be to part with money when you have to count out each bill.
Try the cash envelope budgeting system. Before you complain that it sounds “old fashioned” or “low tech” or “inconvenient,” remember that’s exactly the point: to make your spending more tangible. Which works as a psychological trick to help you manage your budget like an adult rather than a teenager with her daddy’s credit card.
9. Eliminate PMI
Private mortgage insurance (PMI) can cost you over a thousand dollars each year, yet does nothing for you. It protects your mortgage lender, not you.
Consider paying down your mortgage to 80% of your home value, then contacting your lender to remove PMI from your monthly payment. You may well save over $100/month by eliminating PMI alone, which says nothing of the life-of-loan interest savings and the shorter payoff horizon for your mortgage.
I got serious about reaching financial independence when I was 37. I hope to reach it by 42, no longer relying on active income to pay my family’s living expenses.
The only reason it’s even a possibility is our extraordinarily high savings rate, which we achieve through many of the tactics above.
It’s neither simple nor easy to build a seven-figure net worth in just a few years. It requires lifestyle design to plan out your ideal life and budget from top to bottom. Most of you won’t seriously consider the “radical” ideas above. And most of you won’t become millionaires within the next five-to-ten years either.
What creative ways are you exploring to save more money and build wealth faster each month?
Join the discussion with a comment below.