Let’s discuss how I was able to save $9000 in one year on a very low income of $19,000 living in Los Angeles.

These are the same strategies that eventually helped me save $100,000 in just over 4 years (as I also learned to increase my income) and begin investing in real estate for passive income and financial freedom.

OVERVIEW

According to a recent study done by the Federal Reserve Survey of Consumer Finance, the median U.S savings rate is just $5,300

Bankrate found in a study that only 4 in 10 Americans, or approximately 40% of Americans, are able to afford a $1,000 emergency expense.

Most of us know it's important to save money so you can be investing and building financial freedom for yourself down the road.

The problem is that knowing what to do and doing what you know are two very different things

MONEY FACTS

When looking at the purchasing power of a dollar in 1970 compared to today, $1 in 1970 is equivalent to $7.53 today.

That is over 7X!!!!!

We all know that incomes have not increased 7X since 1970….

MY STORY

When I moved to LA I struggled financially - I was living paycheck to paycheck and prayed every day that nothing major financially would happen…

I believed the reason I couldn’t save money was because I was barely making any money and I was living in one of the most expensive cities in the country….

Not to mention the fact that when I first moved, I arrived with $400 and no job.

THE SECRET THAT HELPED ME SAVE MONEY

Eventually I was able to start saving money, and it wasn’t because I was making a lot more.

In fact, I was able to save $9,000 in just over a year while only making $19,000.

These reason I was able to start saving was learning these 9 different strategies and implementing them into my daily life.

This is what allowed to not just “know what to do” but finally “do what i know”

TIP #1 IDENTIFY YOUR SAVINGS TARGET AND BREAK IT DOWN

If I were to ask you what your savings goal is this year, what would you say?

$1,000?

$5,000?

$10,000?

Let's assume that your savings goal is $9,000 this year.

For many of you, that may seem like a lot of money to save

What is the goal was $750 per month?

How about $24.66 per day?

Saving $24.66 per day or $750 per month seems much easier than $9,000, but they all come out to the same amount

One of the keys to ACTUALLY saving money (and achieving ANY goal you have) is to
get very specific on what the goal is and break it down into very small pieces / mini goals

This way you get rid of the overwhelm and it seems more realistic

I used this exact same strategy to help myself earn over $100,000 a year

For years I was stuck making $30,000-$50,000

The thought of getting to $100,000 seemed overwhelming as it was 2-3X what I was making currently

When I broke it down by week it started to seem more realistic

$100,000 / 52 weeks = $1,923 / week

When I broke it down by 6 working days it seemed even more obtainable

$1,923 / 6 days = $321 / day

Making $321 per day didn’t seem quite as challenging as $100,000 per year

TIP #2: USE THE 48 HOUR RULE

Most people know it’s important to have a budget (and most have created a budget at some point)

Yet few people are able to follow it and actually save money.

One of the reasons why it can be so challenging to save money (even when we create a budget) is because you have brain chemistry that is preventing you from following through with your budget.

These chemicals in your brain are linked to impulse spending and buying things that aren’t absolutely necessary.

These are the 4 brain chemicals that prevent you from saving money

• Dopamine
• Endorphins
• Serotonin
• Adrenaline

Dopamine

So the first hormone is dopamine and this is known as the feel good hormone and this hormone is responsible for making you feel really good about the anticipation of something.

Endorphins

The second hormone is endorphins and this is the hormone that is responsible for feelings of well-being and pleasure.

Serotonin

The third hormone is serotonin and it regulates mood and happiness and also affects your emotional decision-making skills

Adrenaline

The fourth hormone is adrenaline and it’s responsible for giving that feeling of rush and excitement.

You have to understand that these four brain chemicals are actually causing you to make impulse purchases and decisions that aren’t in your best interest financially.

But there is a way to combat these brain chemicals

That is the 48 Hour Rule

The 48-hour rule states that before you make any purchase that isn't absolutely necessary for survival, you must wait at least 48 hours before actually making the purchase.

The reason this is so important is because waiting 48 hours gives your brain chemicals enough time to settle making it easier to make more conscious decisions for your best interest and goals (and not just your emotions)

Studies show that we actually get the greatest enjoyment out of the anticipation of buying something versus the actual purchase of an item.

TIP #3 SETUP AND AUTOMATE A WEALTH TAX

As we just learned, we have a lot of brain chemistry that keeps us from actually saving money.

In addition, we also have a constant need for immediate satisfaction (another obstacle to saving money)

A third reason saving money becomes so challenging is because of present bias

Present bias states that when we are faced with two different decisions of something now versus something later, typically we go for the decision that brings us the most pleasure in the immediate moment.

This is why it becomes so challenging to save money for future large purchases (down payment on a home, wedding, etc) or even saving for retirement

We all know it’s important to save for these things, but because they are often in the distant future, we get distracted with smaller in the moment purchases because of the immediate pleasure they bring.

The good news is, psychologists have found a way to overcome present bias and that is through automation.

When we strip ourselves from the ability to choose between now or later, it makes it easier to make the best decision

One strategy I used that really helped me finally start saving money (even on a low income) was creating an automatic “wealth tax”

The idea of the wealth tax was to have a percentage of my money taxed for my future wealthy self.

Each month that money was automatically deposited into an account that wasn’t easy to access.

This is turn meant I had less available money to spend (so even if I wanted to make an impulse purchase, I was less able to do so)

How much you “tax” yourself is your choice, but my suggestion would be to start at a minimum of 10-20% of your income so you have a chance at retiring one day.

According to the bureau of labor statistics the median income is $51,480

If you were to setup and automate a “wealth tax” of just 10% and have it automatically deposited into a bank account you would have $5,200 by the end of the year

That is over half way to our $9,000 savings goal!

It’s going to be important that you have a strong budget in place in order to make this happen.

Be sure to check out some of my other articles and videos on “How To Budget Your Money The Right Way (And Retire In Less Than 10 Years)”

TIP #4 THINK ABOUT HOW MUCH TIME IT COSTS

One of the strategies that really helped me finally start saving money was thinking about purchases in relationship to time.

It’s easy to drop $50 to $100 on something because overall it doesn’t seem like a lot of money compared to many other purchases we have to make.

When you think in terms of how much time it costs you, it can take on a whole different feeling.

According to a recent study, the median wage per hour was $16.32 in 2020.

Let’s say you are thinking of making a $100 purchase.

While $100 may not seem like a massive purchase…

When you consider the fact that you have to spend over 6 hours of your time to buy this item, it starts to take on a more painful feeling.

6 hours is practically a full working day.

So instead of asking “is this item worth $100 to me?”

You should ask yourself “Is this item worth 6 hours of my time?”

Time is much more valuable than money, and one of the few things we can never get more of.

When we think about having to give up our time for something, it may make you reconsider your decision

TIP #5 ASK YOURSELF “WOULD YOU RATHER GET PAID INSTEAD?”

Another trick that helped me start saving money was asking myself this questions

“Would I rather get paid instead?”

We’ve all been there….

You walk into a store and see the newest phone (or any item that matters to you)

All of a sudden you get a rush of brain chemicals making your feel great and you want to buy that item

Let’s say that the new iPhone costs $1100.

You have the money and are able to buy it.

But let’s say when you go to register to make the purchase the employee asks you..

“Instead of buying this item, would you take $1100 to not buy the item?”

If you’d rather have the money, then you don’t need the item.

Asking yourself “Would I rather get paid this amount instead?” is a great way of preventing unnecessary purchases.

TIP #6 GET A SPENDING BUDDY

Getting a spending buddy can be a great way to work towards your finance goals…

Now you may be thinking, “A spending buddy? Won’t that take me away from my goals?”

I’m not talking about a spending buddy that you go out with and YOLO.

I’m talking about a spending accountability partner.

One that keeps you progressing towards your goals.

One of the best ways to guarantee you hit those savings goals is to get an accountability spending partner and utilize the 1% rule

The 1% rule helps control impulse spending and states that if a purchase is larger than 1% of your gross annual income, you need to contact your accountability partner and get approval first.

Example:

Let’s say you make $40,000 a year and are wanting to buy the brand new iPhone that’s $1,110.

$40,000 * 0.01 = $400

Since $1100 is greater than $400, you’d need to get the purchase approved by your spending buddy.

Oftentimes it’s easy to justify to ourselves why we must purchase something (after all we have those brain chemicals working against us)

However, it can be harder to justify to your accountability partner and get them to approve the purchase (especially if they know your goals)

I’ve found that having this partner really helps, especially if you are prone to impulse spending or buying things that aren’t necessary for survival.

PRO TIP: if you want to take this to the next level, add in the 48 hour rule with the 1% rule and accountability partner. If you partner approves the purchase, you must then wait 48 hours before you can actually buy it. This not only ensures what you are buying is necessary, but it also allows your own brain chemistry to settle and reassess if you ACTUALLY want it

TIP #7: DETERMINE MISSED OPPORTUNITY COST

One strategy that can really help you overcome present bias and save A LOT of money is determining the missed opportunity cost

Determining the missed opportunity cost has been the most effective strategy for me in saving lots of money fast

Here’s how it works

Example:

Let’s say you want to buy the new Iphone that is selling for $1100

Instead of buying it, if you were to take the $1100 and invest it in an SP500 Index Fund earning an average of 10% return….

Without putting any additional money into it, your $1100 would be worth $22,000 in 30 years.

What this means is that your $1100 Iphone isn’t really costing you $1100, it’s actually costing you $22,000.

That’s when I ask myself “is this Iphone worth $22,000 down the road?”

TIP #8 CREATE A CASH ONLY DIET

In a 2008 journal of Experimental Psychology, researchers found that there is a vast difference in how much people spend based on what they use to spend their money with

They found you’re a lot more likely to overspend on things when you use credit cards vs cash and that is because credit cards separate the time from when you make the purchase, to when you actually pay for the item.

In addition it also mixes all of your different purchases together so it's harder to equate what your balances comprise of.

In this particular study they had two different groups of people throw a thanksgiving party and purchase food.

They found that those who used credit cards on average spent $175 while those who used cash only spent 145.

Some other interesting discoveries are that those who use credit cards are more likely to purchase unhealthy items and that people who pay in cash have a better relationship with the item they purchased than credit card users

Always pay for things in cash

TIP #9 DON’T MAKE A BUDGET

Another great way to save money is by not making a budget…..

“Wait, how can not having a budget help you save money? That’s the point of a budget”

I talk a lot about budgeting and the importance of it on my Youtube channel and in my blogs…

But the reason I say not to make a budget is because for many people budgeting isn’t really the real problem.

The problem is their income.

Many finance “gurus” and financial experts spend a lot of time talking about the importance of cutting out the $5 Starbucks coffee

Yes, technically if you save $5 a day that will be an extra $150 in your pocket each month (and any extra money is awesome)

However, if that coffee brings you joy during the day, you may want to consider figuring out how to make more money

This was the mistake I made for many years.

For the first 4-5 years of living in LA I played financial defense - I only focused on how to cut a few extra dollars out of my week.

My real problem was my income.

So instead of trying to find another $5 to cut, I decided to try and double my income.

As I went from $19k a year, to $30,000-$50,000, and then eventually to over $100,000 a year, my savings account skyrocketed.

I found the best way to focus on increasing your income is through side hustles or creating a side business.

I talk all the time about side hustle ideas on my Youtube channel and also in my blogs so be sure to checkout some of my other articles and videos

While there are endless ways to make extra money here are a few ideas to get you started

• Utilize a skill you have (teach music, an instrument, math, english, dance, sports, etc)
• Create a service based business (one of my favorite ways of making extra money - do yardwork, clean cars, clean apartments, teach people how to lose weight, babysit, dog walk, etc)
• Sell things online (Odds are you have lots of stuff you don’t use. Use sites like spinlister, fat llama, craigslist, facebook marketplace, more
• Rent out your space or stuff (apps like airbnb, turo, neighbor let you rent out your rent, garage space, your place to other people to use)

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Let's build that dream!

Shaun