This post in an introduction to a new series on the blog: Simple Swaps. The first post will debut next week — be sure to check back in!
Today, I logged onto my Personal Capital* account and learned that my household averages 93 financial payments in a month, or 1,116 transactions in a year.
* affiliate link — you can read about my daily routine with Personal Capital here.
According to Next Gen Personal Finance, the average U.S. consumer makes 70 financial payments in month, or 840 payments per year.
What if — it were possible to easily and painlessly save just $1 on every single transaction? If you are an average American consumer, you would easily and painlessly save $840 per year. In the case of my household, we would save $1,116 per year.
What if you could save $2 per transaction, or even $5 per transaction? The average American consumer would save $1,680 or $4,200 per year, respectively. My household would save $2,232 or $5,580 per year.
My point is — most households participate in several hundred (even thousands of) financial transactions every year. Sometimes, it’s not necessary or possible to save money on a transaction. For instance, our household tithes every month as an act of worship, and we also have various charitable causes that we like to support — we’re not looking to reduce our spending in those areas.
However, in most cases, it’s possible (and desirable) to save money in a transaction. You can:
- Eliminate transactions that don’t matter to you (for instance, you can cancel a subscription that you never use anyway)
- Get a discount (through a coupon, a sale, or negotiation)
- Substitute the intended item for an item that costs less
I think all three strategies are important for reducing one’s spending, but today I’d like to focus on the last strategy — substitution.
I think we can probably agree that not all substitutions are created equal. For instance, if I suggested that you could save $5,000 a year by simply eating oatmeal for every meal all year, you probably wouldn’t be very enthusiastic about implementing that suggestion. The negative impact on your quality of life would negate the benefit of potential savings. In my opinion, the ideal substitution is: equal (or even higher) quality than the original item and easy to implement. And in my experience, there are *many* opportunities to make simple, effective swaps that actually *increase* our quality of life while also resulting in financial savings.
Of course, most individual swaps won’t save you hundreds or thousands of dollars each year. But as I mentioned earlier in the post — the cumulative effect of simple swaps can net you hundreds or thousands of dollars each year. For instance, the Simple Swap in next week’s post has the potential for $24 in savings per year. Is $24 a year a lot? By itself, maybe not. However, what if you could painlessly save $24 on every financial payment in a year? You could have $20,160 in your account at the end of the year.
Again, I’m not suggesting that it’s possible to save $24 on every transaction. Many transactions aren’t even $24 to begin with. My point is — if we can make a habit of reducing our financial costs by even $1 per transaction, we can save several hundred (or even several thousand) dollars in just one year.
How many financial transactions do you have in one year? If you have no idea, I recommend giving Personal Capital* a try! It’s free and easy to use.