How to Save Money: 5 Areas of Your Life Where You Can Save Serious Cash

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Whether I’m teaching my staff at our Friday morning meetings or teaching “life skills” to the residents at my drug and alcohol recovery house on Sunday afternoons, the principles on how to save money are still the same. Now, everyone’s goals may be different but I usually get the same question from everyone starting out and I usually respond with the same answer. How Do I Get Started Saving Money?

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Change Your Philosophy

I never realized how important my own personal philosophy was until later in life.  It took me a long time to understand that it wasn’t only how I was making my money but also what type of money I was making. For example, the idea that profits are better than wages was revelatory to me.  Like the great Jim Rohn says, “Profits make you a fortune; wages just make you a living.” Now that doesn’t mean quit your job at once! You can try to start working part-time on your fortune, while working full-time making a living.  It’s not much fun going to work to pay the rent, but it is fun to go to work on making a fortune.  What I tell my folks is to learn to do both.

Even though it’s not what you make but what you keep that’s important, I still hear everyone say, ” I don’t have any money to invest.” So, why is that?


Many people find themselves saying, “I don’t know where it all goes?” This is probably because most people (and we’ve all been guilty of this at some point or another) do not stick to a budget. I always suggest keeping a journal of every dollar spent to build discipline. I also stress the importance of credit, maintaining good credit and knowing how to repair it since having good credit will save you money on everything from buying insurance to buying a house or car.  Prior to and simultaneously applying strategies mentioned below, establishing reserves is something everyone should do (a good rule of thumb is 6 months salary).  Also, making savings more automatic and painless so that it starts to operate on autopilot.  These are all great ways to make saving easier and start to build discipline so you can really make use of these five categories of your life to save money.

How to Save Money with “The Big 5”

#1. Taxes – According to George Antone’s book, “The Banker’s Code,” taxes and interest paid can account for 64.5% of your money, as well as two thirds of your time.  No wonder he stresses that we should become the bank instead of just being the borrower.

If you notice:

Employees                                                               Business Owners with Corporations

a. Earn money                                                          a. Earn money

b. Pay taxes                                                               b. Spend

c. Spend                                                                     c. Pay taxes

This is a big fundamental difference that certainly helps explain that large percentage above. So maybe it’s time for some new tax strategies. One of the biggest suggestions I can give is: If you’re serious about Real Estate Investing, start a business. If you have your own business (whether you run it in an office building or even out of your own home) the amount of money you can save can be tremendous.  Another one is to hire family members—this is bigger than you think, you can hire your child to be an assistant.  So instead of paying your child a non-deductible allowance, you’re now paying your child a deductible salary.  Also, children are allowed to make a certain amount each year in most states without paying income taxes.  Not to mention you would be getting help with your work and teaching your children in the process!

And last but certainly not least is one of the biggest tips of all for me, becoming a Real Estate agent.  Another tip is if you are a Real Estate professional (e.g. Real Estate Agent), you can take advantage of unlimited passive losses, which can offset earned income. This is the one of the primary reasons I’m still an agent today.

#2. Housing – This is usually everyone’s biggest expense, and let’s face it – you have to live somewhere.  However, if you’re just starting out, do you have to live in the nicest house you can afford (or not afford for that matter)? Especially when you could get an okay house and save the difference for the next investment.  If you don’t have kids or they’re not of school age yet maybe opt for a less desirable school district to save some money.

I know my wife and I along with our then-newborn son lived with my mother once I graduated college to save money. Now it wasn’t the most desirable scenario, but shared housing helped tremendously when I was first starting out. I’ve even taught my children to do the same with my oldest son living almost completely for free by renting out three of the four bedrooms in his townhome. And if you’re looking to buy a property to live in, keep in mind that in the eyes of most lenders, the maximum allowable housing expense is .29 times your gross monthly income or .41 times gross monthly income minus monthly recurring debt.

#3. Autos – Unless you’re my brother-in-law and you ride your bike to work or you share a car in the inner city, most of us need some transportation. We can all agree, a car drops approximately 30% in value when you drive it off the lot.  When I was first started to save seriously, I liked cars that were coming off their lease because I was getting a fairly new car for much cheaper and since it was a few years old, I could get a cheaper rate on my insurance, especially once I no longer needed full coverage. Another big question is Leasing vs. Buying.  To me, the lease works better for business use rather than personal.

I think the real answer here is to have a goal of having your business or investments pay for your car. Business is obvious; your car becomes a company car.  But, having your investment pay for the car is a little different and does require some discipline.  For example, my friend took out a HELOC (Home Equity Line of Credit) to buy a performing mortgage to pay back the HELOC payment and all but $50 of his $450/month car payment.  The cool part is the note has many more months remaining than the car loan. This is true arbitrage.

#4.  Insurance – There are many types of insurance, but from what I learned by selling insurance way back when was: if you’re just starting out it’s best to at least get some term life insurance to replace income for your loved ones that’s convertible to permanent insurance sometime in the future.  Once you convert it and build up some cash value, you can do a similar thing as the car deal above (e.g. Borrow from the policy at approximately 4%, and invest in something such as a mortgage at 18%, and make the spread, even whether you pay the loan back to the policy or not).

#5. Retirement Accounts – Once folks have gotten rid of their bad debt, and have some reserves put away, this is the next great place to put some money because nothings better than tax free or tax-deferred income.  And you can use your retirement funds for an investment – like your first, owner occupied residence (1 to 4 family, **Hint Hint**) penalty free if you are a first-time homebuyer (e.g. If you put $5000 in an IRA account you save @ $1000 in taxes).

Some Other “Money Saving” Quick Tips

Of course the tips I’ve mentioned above aren’t the only things you can do. I always was and still am a firm believer in having a second job and/or a cash business to help you save money by living off one check and saving the other for investing.  The same can be done if you’re married or in a committed relationship, because if it’s possible living off of one person’s income and investing the other’s, is an amazing way to start an investment portfolio.

We talk about all the ways to save money before buying, but don’t forget there are many ways to save when you buy that great investment.  What I’m talking about here is everything from honing your negotiation skills to developing creative strategies.  So, if you’re buying that next house try to ask at least a few times, “Is this the best you can do?”  When I buy a property I make 3 offers on every property: a cash offer, an offer with owner financing, and an offer where I’m bringing financing. Try to get the Seller to hold some paper on the property.  I won’t even buy a property without a Seller Assist. Try to get some repairs taken care of, or for the seller to pay your Transfer Tax.  Sometimes it’s how we buy that can save us the most money.

Please comment below with some of your favorite saving strategies or stories about how you saved money and enabled yourself to purchase your first investment!

Photo: Rafael Souza ®

About Author

Dave Van Horn

Dave Van Horn is President at PPR The Note Co. – an operating entity that manages several funds that buy/sell/hold residential mortgages, both performing and delinquent. Dave has been in the Real Estate business for over 25 years, starting out as a Realtor and contractor and moving onto everything from fix and flips to Raising Private Money.


  1. Several good points there especially regarding arbitrage and the ability to expense key items for tax benefits. I would never go for 401s or IRAs but you certainly presented a fresh perspective in saving and earning profits.

      • I will not put another nickel into either a 401K or an IRA fund. The options are pretty bleak and the restrictions onerous.

        Instead, I’m building my retirement wealth with:
        1) Rental properties
        2) Stocks (not mutual funds)
        3) Overfunded EIULs
        4) Using leverage/arbitrage where it makes sense to support any of these

        Hopefully in the future, I can get into notes as well, but right now, my assets are fully in play.

        To be clear, I cashed out my previous company’s 401K plan, which I had stockpiled for 13 years, and used it to buy rental properties. After paying the taxes and penalties (which ended up only being 37% total), my wealth is actually growing at a much faster rate than my old 401K ever did, limited by mutual funds. I’m also not constrained to seek these non-resource, higher rate, bigger cash reserved mortgages using a Self Directed IRA. The only IRA and 401K money I have left is some cash from my current money that I can’t get to as well as the small bits of a Roth IRA I set up years ago.

        401K and IRA wrappers tend to steer people into a mutual-fund-only approach, which have dismal historic results for investors. +1 to Jeff Brown for helping me get me real estate investment portfolio off the ground.

        • Greg,

          I understand your situation because I had something similar happen to me many years ago. I worked for Corporate America for about 13 years and was frustrated with the status of my retirement account. I had a 401K plan, and after 13 years of limited contributions being invested in mutual funds I was left with very little money.

          Not much later, after becoming a financial planner I discovered some of the options you mentioned above (like the over-funding of policies) but I learned a couple of other amazing strategies to invest utilizing retirement accounts as well. Right now, I’m doing some of the same strategies you listed (plus notes) both in and out of my retirement accounts. Sure retirement accounts have drawbacks and limitations, but nothing is more limiting to me than taxes – which is why invest within and outside of my self-directed Roth IRA makes sense for me.

          A good book I read called “Parlay Your IRA into a Family Fortune” by Ed Slott, gave me a lot of good strategies for working my IRA money.

          And glad to hear you’re also friends with Jeff Brown, I’m a friend and follower of his as well!


  2. Thanks Dave, these are solid tips that people not in the know wouldn’t even consider. A lot of your strategy seems to center around owning and operating your business in a financially advantageous fashion, which isn’t always an option for everyone (either because they wouldn’t really know how to execute on your tips or because they’re not comfortable creating and owning the business entity for whatever reason). Do you have any suggestions that work outside the realm of owning your own business?

    I’ve got a few tips I’ve posted in a blog article some time ago that I’ve linked below, but I’d like to incorporate other suggestions if you have them.

    • Ryan,

      Thanks for the feedback!

      Outside of owning your own business, the deductions are pretty minimal. The reason being (at least in theory, I believe) is that the IRS likes to “reward” those who create business, jobs, commerce, etc. by giving more deductions to people who do so. So besides starting a business you can also find some more deductions by getting married and having dependents, but other than that it’s pretty limited as far as I know. You can also write off mortgage interest and student loan interest.

      And I read your article, you had some pretty interesting money saving strategies. Another big one I that came to my mind was something I do pretty often, and that’s negotiating utility bills. Many times calling cable companies or cell phone providers and complaining or asking for better service (especially when giving them comparisons to other great deals companies are offering) can get you a much better rate.

      Hope that helps!


        • I also forgot to mention, this was another tip I just thought of. And it might apply to a lot of RE investors who don’t own a business. It’s taking a repair expense vs. a replacement with a capital improvement (i.e. something that adds the value of the property).

          For example, if my roof is on the way out I could keep repairing it and take the deduction that year but if I replaced the roof my deduction that year is based on the depreciation schedule on that type of property whether it’s residential (27.5 years) or commercial (39 years). So some people would rather keep repairing the roof, therefor taking the deduction for that year rather than take the smaller deduction for the replacement over a longer period of time.


        • Looking at repairs vs. CapEx is a very good tip.
          Even if you are doing a major rehab on your property you can break down a lot of things to the repair level.
          I don’t know if I would push the envelope on a roof but there are lots of 5yr property that isn’t that hard to justify as being a needed repair.

  3. Jeff Brown

    To each their own, live and let live. I’ve always wondered how supporting a $400-600+ car payment makes any sense. In 3-5 years where could that money have been invested, or what loan could it have paid down, etc.

    • I like to run a car until the wheels fall off. The last car I bought for cash came out of a line of credit on a flip house. I decided later I didn’t want to sell the place and pay the lender back,
      for that car. That job is now for the tenants.
      I am cheap, the reason I bought my first rental was so the cash flow could pay the mortgage on my personal residence. The other properties were bought to pay for private schooling for my children and then college.

      No worry as to how to come up with $40k in tuition a year. College is such a ripoff these days.

  4. Thanks Dave, you’ve inspired me again.
    Good solid points. Once my residence get back up to the value that I purchased it, we are going to downsize our housing. A luxury rental, at 2/3 the cost, sounds good to me. My other real estate holdings will give me the wealth building action I’m looking for.

    I’m sobbering up about owning my own residence.

  5. One change I see technology enabling (especially here in the city) when it comes to reducing auto expenses is car sharing. Things like zipcar or peer-to-peer services like relayrides give you alternatives, especially if you don’t need a car on a daily basis. It’s not so practical for families with kids like mine, but I can see a twenty-something person getting by without their own.

  6. Thanks for the great article Dave! Can you explain more about your philosophy and some real number examples on this:

    “a cash offer, an offer with owner financing, and an offer where I’m bringing financing”

    I’m about to go into a similar situation, thanks!

    • Hi Aly,

      The philosophy is “ask and you shall receive”. As some RE investors say,”if you’re not embarrassed telling the seller your 1st offer, it’s too high”. But let’s put this in the right context. Usually I’m trying to buy a property from a motivated seller and that means I’m always going to make 3 offers, with the price going down as the terms become less desirable. Some of this is psychological but if the seller was asking $100,000, I would say yes, I can give you full price, $100,000 with owner financing with a monthly payment of $321.64 with a 30 yr. amortization and a balloon in 10 years. This would mean I was paying 1% interest for a full price offer with a balance @ $69,938 in 10 yrs. My second offer may be $90,000 if the seller gave me a $20,000 second mortgage at 5% interest only with a 5 year balloon and I would mortgage $70,000 through a traditional bank and my 3rd offer may be $75,000 cash. You get the idea through my exaggerated example but you can design each offer to make one of them the most appealing while at the same time making them all acceptable to you. It’s really about their hot buttons, and trying to give them what they want. Hope this wasn’t too confusing.

      Dave VH

      • The all cash and full owner financing ones are pretty straight forward.
        I’m curious about doing the seller 2nd. Are you finding banks that will give you a loan when the seller is carrying back a 2nd?

        I am assuming based on the way you told the story and the numbers that this was meant to be a residential example and not commercial.

        • Dave Van Horn


          I definitely agree with you that a seller 2nd on a commercial deal is usually acceptable to the bank that’s providing the 1st mortgage to the borrower. In residential, however, it usually isn’t, especially in the current market.
          The most common work around to get that done is to bring the down payment to the closing table and go home with the proceeds, or you can use transactional funding until the 2nd mortgage is put in place.


        • Thank you for the clarification Dave.
          That makes sense. Hadn’t thought about having the mortgage in place but not consummate it until after the purchase and the 1st lien is recorded.

  7. I saved money by upsizing my housing…..

    I sold my small house on the San Francisco Peninsula ( location, location, location! ) for big bucks to a manager at Facebook. Bought a house twice as big in the East Bay for half the money, out of foreclosure. The house had been vandalized – all the appliances and both the air conditioners had been removed.

    Always the do-it-yourselfer, I sold a classic car I had laying around and bought a brace of new appliances. Then I cracked the books, went and took a test, became a EPA licensed HVAC technician. Bought the new condensers as cheap as possible on the Internet, pulled a permit, and installed them.

    I bought the new house before selling the old one. As a foreclosure, it had to be an all-cash deal. Ouch! I emptied my bank accounts, dipped into my IRA. The last piece of the puzzle was a credit card that had been sending me offers of a one-year loan at 0% – just write out the enclosed check! Well, there was a 4% transaction fee; but I considered that not bad for use of the money, potentially for a year. The especially interesting thing – the credit card was with the same bank that was holding the foreclosure. So I borrowed $25k from them and gave it right back to them :). I was amazed how fast that transaction happened without a lender gumming up the works.

    Then I quickly sold the old house. Lot of Facebook money running around the Peninsula these days. Paid off the old house’s mortgage in escrow, refilled my bank accounts and my IRA. Since I had kept the money from the IRA for less than 60 days, it DIDN’T COUNT AS A WITHDRAWAL FOR TAX PURPOSES.

    So now I live in this really large house with no mortgage. Life is good.

    – Jerry Kaidor

    • I’m impressed. Pretty interesting series of events where most folks tend to downsize.
      Just one question, what’s the rate of return of the equity in your house? If nothing else it may make sense to at least put a HELOC on the property for asset protection and liquidity.

      • That’s a good question. I’m “making” the rent that I’m not paying. The house next door is rented, I know for how much. Counting the property tax and insurance that a renter doesn’t pay, I’m making 5.2% APY. Not too bad, IMHO.

  8. Jerry,

    I agree with you, 5.2% APY certainly isn’t bad, but if you take out a HELOC at 4% and invest the in something at 15% or 20%, isn’t that better? For example if you lent out some of your HELOC money to a rehab investor at 15% (or bought a performing note that has a return of 15%-20%) the spread you would make would be much higher than 5.2%. You would essentially be making money out of equity that you wouldn’t normally be touching. Just an idea I thought you might be able to capitalize on.

    I talk about this more (along with asset protection though debt) in my next article that I think you might be interested in:


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