You can save money by doing a lot of things yourself, not only in the house but also outside. Do it yourself (DIY) is an essential concept, a long-term mantra you must adopt if you want to live debt-free or, at least, be in control of your financial life – and personal life, for that matter. One of the best personal-finance gurus I've known for years likes to say that the most important way to save money is to gradually learn to save on the little things of everyday life, to let professionals do the bigger activities you cannot learn, and to always live within your means. I couldn't agree more. To save money, try to personally take care of expenses as varied as dining and eating out, car wash, dry cleaning and the miscellany of costs that modern-day life imposes on us.
Live Within Your Means
I cannot stress this point enough. Live within your means to prevent the sort of economic chaos that starts building up when, for example, your debt-to-income ratio falls in alarming territory – that is, above 50% or 60%, even 70%. Debt-to-income ratio equals your loan payments divided by your income, and experts recommend that anything below 40% or 30% is economically healthy. To live within your means, establish a personal budget and make sure to stick to it. List all your expenses in one column and indicate revenue sources and amounts in another column. Then, assign numerical thresholds or percentages to each expense. For example, you could say that you would not spend more than $100 on dry cleaning each month, or that dry cleaning costs would not exceed 1% of your monthly income – which means that your monthly income is $10,000 ($100 divided by 1%). Living within your means also some has some beneficial effects on your net worth because lower expenses mean a higher surplus, which ultimately increases your personal assets.
Don't Eat Out (That Often)
Eating out frequently can have a hazardous effect on your finances, says my personal-finance expert friend. There are two types of expenses linked to outside eating: direct and indirect. Direct costs relate to everything from food to tips and drinks. Indirect costs pertain to gas and parking – if you drive to and fro the restaurant. You also might be tempted to head to the movies after eating, and taste that pop corn you so relish, which could add a few dollars to your overall tab for the night.
Prepare a Family Budget
Preparing a family budget – and abiding by it – is not only economically sensible, it also instills in each member of the household important notions of frugality. This is not a bad thing, especially if you have youngsters who need to learn the rudiments of saving, earning one's own money and living within one's means. To make the exercise successful and insightful, invite each member of the household and tell him or her to list all expenses that he or she thinks the household incurs on a monthly basis. That way, you not only make sure you have a complete list of costs, you also raise awareness about certain types of expenses that you or other relatives may not know about. Next, discuss factors that typically increase each expense, and factors that generally reduce it. For example, you can tell your kids that leaving the PlayStation console on all day, or leaving lights on in their bedrooms, makes the electricity go up. Finally, go through each budget line, ask feedback about the best way to keep a lid on each cost, set monthly limits on how much to spend on each item, and request cooperation from every relative to achieve the budgeted limits.
Be "Creative" with Your Kids
You can teach your kids valuable lessons by offering to pay them if they perform tasks for which you typically pay other people. For example, washing a car, cutting the grass, cleaning clothes and doing household chores are good examples of tasks that you gradually can train your children to perform. This is a win-win situation for you and your offspring. On one side, your kids earn extra cash and learn the basics of the kind of jobs they might hold in high school or college. On the other, you save money because the pay you hand your children generally would be lower than the final tab you receive from a professional.
Take Care of Your Pool
Clean your own pool to save some cash – if you can. It is true that pool cleaning requires familiarity with chemical products, a knack for detecting detritus and other hazardous waterborne elements, attention to detail, and a host of other skills that professional pool cleaners hone over several years. If you have a passion for everything aquatic, have time, and want to learn about pool cleaning, then I would suggest you give it a try.
Jog, Jog and Jog
Cut your gym expenses – which can run as high as $5,000 a month for premium memberships at luxurious facilities – by exercising on your own, with relatives or neighbors, or your dog, if you have one. Make it fun and save money in the process. The thing I don't like with gym memberships is that you typically must sign a one- or two-year membership contract as well as a joiner's fee. (Some clubs waive that fee and do not mandate an annual contract, though.) Unless you go as often as possible, you could be losing some serious cash because the club invariably would continue to debit your bank or credit card account.
The Bottom Line
The take-away here is that there are a collection of things you can do on your own to save money and attain financial freedom. Do your homework, create a budget and go through it to see how much you are currently spending on items like entertainment, eating out, dry cleaning and fitness. Then determine things you can personally and easily do, and leave the other activities to professionals.