Small changes can have a large impact on your pocket book. Perhaps the most famous example of this is the Latte Factor, a term made popular by David Bach in his book Start Late Finish Rich. The Latte Factor is an example of how giving up a $4 cup of coffee every morning can turn into hundreds of thousands of dollars if you invest the money instead of buying coffee. Of course it assumes you invest “x” amount of money every month for “x” number of years at “x” percent interest. The numbers don’t matter so much as the concept. You can make a big difference by making small changes.
5 Small Changes That Can Make You Big Money
In addition to (or instead of) giving up your morning latte, you can make these small changes to your financial life and have a large impact on the bottom line.
Use a high yield savings account. Many savings and checking accounts offer a minimal interest rate, often less than half a percent. You can easily find a bank that offers high yield savings accounts that will triple or quadruple the interest rate at many banks. Over the course of the year you can earn hundreds of dollars by letting your money work for you.
- Where to find high yield savings accounts: Check out these high yield savings accounts to search for the best interest rates.
Transfer your credit card balance to a 0% introductory offer. The interest rate on credit cards usually ranges from the high single digits to the mid 20% range. If you carry a large balance on your credit cards, you could easily be paying hundreds of dollars per year in interest alone. Consider opening a credit card with a 0% balance transfer offer and enjoy up to 12 months of 0% interest on your credit cards. Send in the same amount every month that you were paying on your credit card with the high interest rate and you can erase your credit card debt in much less time. Here is more information about how 0% balance transfers work.
- Where to find 0% balance transfer credit cards: Check out the best 0% balance transfer credit card offers.
Pay lower expense ratios. Expense ratios are the fees that mutual fund companies deduct from your investments each year for their services. You may not think that a percentage point would make a big difference on your investments, but given enough time, the difference can easily be in the tens of thousands of dollars. Make sure you examine your expense ratios and try to shop for low cost index funds or mutual funds with low expense ratios. Some brokerages that offer a wide variety of low cost mutual funds and other investments include Vanguard, Fidelity, Charles Schwab, and T. Rowe Price.
- More information about how expense ratios can erode your investments: Affect of expense ratios on investments.
Improve your daily driving habits. Does this sound familiar? Press the pedal to the floor, slam on the brakes, repeat? Making small changes to your driving and vehicle maintenance habits can save you wear and tear on your vehicle and use less fuel. Fewer visits to the mechanic and fewer stops at the gas pump equal big savings.
- More driving and maintenance tips: How to save money on gas.
Use a programmable thermostat. Programmable thermostats are a great way to moderate your energy usage. Instead of heating or cooling the house when no one is home, or trying to remember to turn your thermostat on and off, or remembering to change the temperature for certain times of the day, use a programmable thermostat. You can set the thermostat to heat and cool your house based on when you will be home, when you are sleeping, or other times when it makes sense to have a different setting. Programmable thermostats cost around $30 and can often pay for themselves within a couple months.
- More information about how to save on energy costs: Inexpensive ways to reduce heating bills, 7 Free ways to reduce heating bills, Freeze Your Air Conditioning Costs.
Small changes can bring big results
You don’t need to take on 2 extra jobs to earn more money and you don’t need to live like a monk to save money. Sometimes the answer is as easy as making a few small changes and applying them consistently to your financial plan. Over the course of a lifetime, these changes, and others, can result in thousands of additional dollars in your pocket, instead of someone else’s.