Save 1000$ on Shopping

1. Reduce the number of shopping trips

Dedicate one day in week for shopping. Don't buy anything on other days. The reason for this is to reduce your exposure to temptations. At the moment when you decide to buy something, you are at risk of buying something else that you don't need and that could be even harmful (alcohol, junk food, ...). Therefore, reduce the number of shopping trips and you will reduce the number of temptations and save money.

2. Buy from the list

Before shopping make a list of things that you want to buy. Buy only things that are on the list. Make the list even if you want to buy only one thing. By the way, buying one thing is a waste of time and sign of bad organization. At each buy you spend some fixed amount of time (going to the shop, waiting to cross the street, ...) probably at least 5-10 minutes for shops that are in your neighborhood. Imagine that you go shopping seven times a week that takes 35-70 minutes. Shopping three times a week will take 15-30 minutes. The difference is about 30 minutes. Find your hourly wage and calculate how much money you can save only on your time (probably about 5$ per week).

3. Make a don't buy list

If you have problems with buying things that you don't need, make a list of forbidden things (alcohol, junk food, ... ). Before buying anything read a list of things that are absolutely forbidden. Make a promise to yourself or someone else that you will not buy such things.

4. Track your expenses

Note each thing you buy and its price. That will help you to memorize prices and find things on which you spend the most of your money. Using this book keeping, you can search for shops with the best offers for you. For example, you might find that groceries costs 2$ less in another shop in your neighborhood. That might sound little, but shopping 3 times a week, will result in saving 312$ per year.

5. Reduce shopping list

Go through your shopping list and ask yourself for each item "Is this item really, really necessary?". If the answer is no delete it from the list. After that you could delete the most expensive item from the list. With that you will delay spending money.

You can now calculate how much money you can save. 312$ on better deals + 300$ on free time + 350$ on things that you don't need. In sum that will be 962$ per year.

Are you frugal or miser?

Yes, yes. I know that you are not a miser. But let's first take a look at what does being frugal and being miser actually mean. Frugality means using or spending no more than necessary. On the other hand a miser is a man that lives poorly in order to pile up wealth. So we can conclude that a frugal person spends no more than necessary, while a miser spends less than necessary. On the other side there is a spendthrift who spends more than necessary.

I believe that all of us are sometimes miser, sometimes frugal and sometimes spendthrift. Probably we are more on the side of being spendthrift. Whenever you buy something cheap compromising functionality you need, you are a miser.

In the process of organizing your personal finances, there is a risk of acting as a miser. Be aware of that. The point is to get things done, not to spend as little as possible.

But don't worry too much. You don't need to be perfect. You will certainly make mistakes, but that is OK as long as you keep your eyes open.

What are DRIPs (Dividend Reinvestiment Plans)?

DRIP (or DRP) is an abbreviation for Dividend ReInvestment Plans. DRIP is an investment plan that allow us to reinvest dividends (to use dividends to buy more stocks) without paying brokerage commissions. Some DRIPs allow purchasing additional stocks, also without paying brokerage commissions. Usually (but not always) DRIPs don't charge commissions. On the other hand the company might give you a discount of 3-5%. To sign in to the DRIP you should already have at least one share of the company on your name. Some companies request owning a minimal number of shares in order to sign in to their DRIP (for example HP). Therefore, you must use a broker to buy the first shares, or buy them directly from the company. Note that not all companies allow direct purchasing. Usually a company that allows direct purchase allows DRIP.


DRIP doesn't necessarily mean that you can purchase shares directly. So what is the point if you have to go to the broker anyway? The benefit is in the possibility to invest and reinvest small amount of money and in the fact that you will avoid the brokerage fees on subsequent buying. For example, if you have a share that earns 3% dividends, and you have shares worth $100, then you will receive $3 dividends. The company will send you a check but you will not be able to reinvest it (due to commissions). Using DRIP the company automatically reinvest your $3. Another advantage is ability to purchase only a fraction of a share. For example, if one share worth $5, then you could buy 0.6 of share reinvesting the $3 dividend.

Being able to invest small amounts of money, you can build a portfolio and diversify your assets without having thousands of dollars. Another benefit is dollar cost averaging. Investing regularly fixed amounts of money will result in buying less shares when their price goes up, and more shares when their price goes down.

Another benefit of DRIPs is possibility to invest automatically. You could arrange that your bank send 50$ each month to the company of your choice. Using this technique you will free some of your time and invest on autopilot. There is a great chance not to invest if you have to think about it. This way you will have to invest your time only once.

The problem with DRIPs is that you will have to invest a certain amount of time in research. You have to find the companies that allow DRIPs. After that you will have to buy the first share. That means that you have to find a low commission broker, or to find a way to buy a share directly. That process you will repeat for each company you chose. There is a little bit of work, but you could tune your system to work without you.


Places to find DRIPs

DIRECTInvesting
DripWizard