Disclaimer: If you don’t have a spouse or a long-term roommate, just skip this article.
We’ve talked a bit about expenses in our articles Personal Cash Flow and Get Your Finances on Track and how beneficial it can be to minimize them every month. There are hundreds if not thousands of little tips and tricks out there on how to do this. The smartest, most lasting, and easiest one that I’ve found is learning how to do haircuts from home. Since my wife learned to cut my hair a few years ago, it has saved us north of $2700. What I like even better is the time it saves us, the flexibility it allows us in our schedule, and the fact that at this point my wife is a better barber than at least half of those I go to on the rare occasion that I have to.
Whether you want to do it to save time, free up your schedule, or free up some extra money to save or invest, here’s how to do it:
- Buy a set of clippers. If you buy these ones using the American Express Platinum card, you can have them delivered to your door for about $14 after the rebate (less than the cost of a haircut). They last a good three to three and a half years if you take 10 seconds to brush them off and put oil on them after each use.
- Find a good instructional video on how to give a fade.
- When you need your next haircut, have your spouse/roommate/etc do the best they can using the video. Once he or she is done, have an actual barber touch it up.
- Repeat until you no longer need to have a real barber fix it. This will probably take about three to four attempts.
- Pay yourself $15, and then pay yourself another $15 every time you get your hair cut at home.
If you’re a Marine, this will save you a little over $700 annually, assuming you get a haircut every week and it costs you $15 after a tip. If you’re in a branch that requires it less frequently, obviously you won’t be paying yourself that $15 as often, but you’ll still be saving yourself both time and money. Again, the time it frees up for me is at least as beneficial as the money it saves me.
Three ideas on how to safely and effectively use your bonus money every month:
- Index: Use Robinhood to put your money into the S&P 500 (or an index fund of your choosing) every month free of charge. Don’t worry about trying to time it, just buy the same ETF every month and watch your money grow over time. By doing this, you will naturally buy more of the ETF when it’s at a lower price and less when it’s at a higher price. This is known as dollar cost averaging. Using the S&P 500 as my index, dollar-cost-averaging the amount of money I saved on haircuts since June of 2017 is now worth about $3300 after expenses and capital gains taxes. It would have been $2500 if I had just set it aside. Setting up your Robinhood account to put $60/month into VOO is a quite easy way to do this.
- Dividend Stocks. Certain stocks will give you a small kickback known as a dividend every so often as an incentive for buying and holding their stock. The amount of the dividend is expressed as a ratio of the current price of the stock. For example, a 2% quarterly dividend of stock X valued at $100 would result in a $2 dividend for every share of stock owned every three months. These can be received as cash and are often re-invested back into the company. As with all investment products, ensure you do your due diligence and do NOT buy a stock based on any single metric, including dividends. Buy a healthy stock that you think is a good investment that also happens to have a dividend. This is a great way to slowly but surely make your money work a little harder for you over time.
- Dividend Index. Certain ETFs and mutual funds are made up exclusively of stocks that pay out dividends. While these funds typically have a slightly larger expense ratio, there are a few ETFs out there with a relatively low expense ratio that still offer exposure to dividends. Examples include VIG, VYM, and SCHD, all with an expense ratio of 0.06%. Again, do your homework prior to investing in one of these funds, but be aware that a dividend fund can give you exposure to dividends while keeping you more diversified than you would be with a single stock.
Do you have your own creative ways to save? Let us know!