The Step by Step Guide to How to Save Money in 7 Steps (Part 1 of 2)

How to save money is a question that often plagues those of us who seem to run out of money before we run out of month. And too many small business owners encounter cash flow problems simply because there is no one looking over their shoulder when purchases are made.

In this 2-part series money saving tips are provided  to the home-based entrepreneur that consistently applied, will result in significant cost savings and a much improved bottom line at the end of the month.

Now before we get started, let’s get our mindset.  This link will take you to a short video on YouTube

Money Money Money

Got it? This is a kid’s song but the message is the same for adults…”Be aware of the value of money” and perhaps more hidden, “everything adds up”.

Counting money is easy to do but let’s don’t make it too easy by ending the month in a deficit. Let’s think how to save money and end the month with a profit and then counting money can be fun!

Now, down to the topic.

 

Saving Money Tip #1: Define the Problem

Every product or service you purchase you make is designed to cure a perceived problem. How we define the problem can either provide us with money saving alternatives or prevent us from saving money.

Let’s assume for a moment that while you work at home, you still need a vehicle to take mail to the post office, run errands during the day, go to the market,etc. You have been nursing that old 2004 high mileage Honda Civic but it is now on its last legs.

While on the way to the post office yesterday, you heard some strange noises coming from the rear which sounded like you were being chased by banshees. The car did not break down but the embarrasment of the screeching noise (and now the smoke  pouring out of the exhaust) caused you to take in into the repair shop this morning.

The mechanic without so much as a smile informs you that it is fixable but the repairs and labor estimate will exceed $4000.

The car is only worth $2500., tops!!

You have been wanting a new vehicle for a while now and this seems the opportunity.  What better excuse? It does not make sense to have the vehicle repaired and new cars can be financed almost 100%.

Whoa, wait a minute. think about what you are doing. Let’s back up! Our purpose is to save money, remember?

Now compare the two statements: “I need a new car” with “I need reliable transportation”.

Properly defining the problem is a step that is often overlooked in the decision making process. If you define the problem as “I need a new car” , then you have already ruled out alternatives to save money.

Think about it, the real problem is not that you need a new car, it is that you need “reliable transportation”. And depending upon your specific circumstances, where you live, your daily responsibilities, etc., this could be a bicycle, motorcycle, public transportation, subway, taxis, etc.

Properly defining the problem is step #1 to properly managing finances. I am not saying that when you have achieved the success that you deserve that you should not “treat” yourself. What I am saying is that too often we rush headlong into a decision without considering alternatives because we have not properly defined the problem. You don’t have to be a money saving expert to see that you can be a money saver simply by properly defining the problem.

 

Saving Money Tip #2: Identify Alternatives

Making decisions requires alternatives to choose from. Wise buying is all about choices. If you decide immediately that you need a new car, you really have not a “wise” decision, you have simply made a decision. Unless you are on an unlimited budget, there should be no impulse buying, i.e., buying solely on emotional appeal.

It should be stressed that while making the alternative list, alternatives should be distinct and not just variations of the product. I see what you are thinking…and NO, a red Audi is NOT an alternative to a blue Audi…at least not for our purposes.

Let’s keep the mindset, my friend!

Identifying alternatives should start with your making a list of alternatives and attempting to include all the alternatives you can think of to solve the problem. Title the list,  Money Saving List of Alternatives.

The more important the decision or more complex the purchase, the more alternatives you should have. After all, a lot more thought should go into the purchase of an automobile than the purchase of a new office chair. More thought should go into purchasing a new computer system than a new file cabinet. More thought should go into hiring an assistant than outsourcing a task.

Got it?

Notice that I asked you to title the list, Money Saving List of Alternatives.  This is because at this point, you should just have a list. There should be no evaluation…yet! This comes later.

 

Saving Money Tip #3: Separate Needs from Wants

Now that you have your list of alternatives, let’s take a look at it.

Go through the list and look for those items that are “desirable” but not necessary for survival. These are “wants”.  A “need” is an item that is essential in our lives. We “need” water; we “want” a soda.

We can now see that defining the problem in Saving Money Tip #1 as needing a new car or even a used car was a “want” and not a “need” as what is really essential to solve the problem is reliable transportation.

Since there are alternatives to a car, the car itself is not essential, not even a used car. While we may decide upon the car later it will not be because there are no alternatives. This makes it a “want” and not a “need”.

Because the words need and want are used interchangeably in our culture, people get themselves into trouble by saying they need something when they really only  want it.  Accepting this elevates wants to needs and once this is done, alternatives are taken off the table and the decision making process is cut short.

By following this simple process of separating needs & wants, we are well on our way to saving money.

 

Saving Money Tip #4: Gather Information About Your Alternatives

With the advent of the internet there is no reason to be uninformed about a purchase, most especially a major purchase.

Some people refer to this as “shopping” but in reality it is just a matter of gathering information about your alternatives BEFORE YOU TALK WITH ANY SELLER!

Why? Keep in mind that the seller is going to slant the sale in their favor and you may not get the best price. You will know this if you do your homework. This is a principle that applies to purchasing a TV as well as purchasing a new vehicle.

Quiz time: Have you decided which of the alternatives is the solution at this point? Answer: NO! Have you ruled out any of the alternatives? Answer: NO!

The reason for this is that you don’t have information on your alternatives. Stay with me and you will see the method to this madness…or is it the other way around?

In our search for reliable transportation, only the motorcycle and automobile alternatives require any extensive gathering of information.

Remember that the rule is that the larger and more complex the purchase or service you are considering, the more information is required about your alternatives. Generally, this is a quick and fairly easy process with the wealth of information on the internet.

For motorcycle research I offer two sources for the motorcycles and two for the cars to show what is available. Gather information on the makes and models that interest you. Remember that in this step, you are only gathering information, not making a decision.

www.cycletrader.com/research
www.motorcycle.com

 

For automobile research, go to ( also get the value of your old car ):

www.kbb.com/
www.edmunds.com/

 

Of course these are not the only sites or sources of information but they do get you started on researching.

As you are doing your research, be sure to take notes on other items and features that interest you. (pricing, financing, etc.). We will be doing Comparison shopping in Part 2 of this series.

Well there you have it for part 1. Let’s see what we have covered so far.

SUMMARY

In Step 1 of How to Save Money, we learned that by correctly defining the problem, we do not shorten the decision making process and open the doors to saving money.

Step 2 has us make a list of alternatives which provides us with potential money saving choices.

Step 3 has us review the list and separate Needs from Wants. remember that needs are essential items; wants are items that are desirable.

Step 4 has us gather information on the products or services so we can make a money saving comparison in Part 2.

***

Sorry but I have to cut this article short but will pickup in Part 2 where we left off. 

Following theses steps until they become routine should be an objective of any entrepreneur. Once you have learned to employ all of these steps, your decision making process will become objective and you will become a money making expert.

As an online marketing entrepreneur myself, I have found these methods to work. In fact by doing the research and just  removing the “desirable” and focusing upon “needs” the savings allowed me to set an initial  budget to promote one of my affiliates. While the project is still in its infancy, I can see the beginnings of a domino effect for profits.

Try the Free trial if you have time and you can see what I am talking about.

Profit-with-Felix

 

Well, that was my shameless profit break. See you in Part 2 to continue with these tips on saving money.

 

To your success!!

 

 

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