3 Ways to Save $400,000
Over at CNNMoney.com, there is an article about easy ways to save $400,000 that contains some very valid points. However, I think there are a few flaws with some of their suggestions and question whether it is really possible to save $400,000 using these recommendations.
Drive Less Expensive Cars.
In the article, there is a comparison between buying a $30,000 2007 Acura TSX and a $21,000 2007 Honda Accord. By choosing cloth over leather, no sunroof and a little less horsepower, they claim you can save about $180,000 if you do this over the course of your life.
However, since I believe in living below my means, I would recommend buying a cheap used car and saving a considerable amount more. It is possible to take it to an extreme and buy a car for $1000-2000 dollars that can last you a few years or you can find something really nice for around $5000-10,000 and that can last you many years. The problem is a lot of people view a vehicle as a status symbol and *need* the flashy, expensive cars.
I don’t disagree that it is enjoyable to own a nice car but that doesn’t mean it has to be expensive as well.
College: Private vs. Public
The article’s second area of savings is related to the cost of your children’s college education. You will save a considerable amount of money if you are intending to pay for your child’s education and they attend a public university as opposed to a private university. According to the article, “Research shows that students with similar academic abilities earn the same whether they attend top schools or less selective ones.”
If you recall my financial mulligan post from last week, one of the decisions that I often think about doing differently was my selection of universities. I opted for the private university and it cost far more in the long run and I honestly feel I would be in a very similar position today with an education from a much cheaper public university.
Cut Vacation Spending.
The last point made in the article is to decrease the spending on vacations by $1000 per year. If I were to cut my vacation spending by $1000 per year, that would mean someone owes me a refund. I don’t know about other people but we are very low-cost when it comes to vacations. We have not really had an extravagant vacation and I don’t see us really taking one either.
Rather than an expensive trip overseas, we would much rather spend a week or two at a nice cabin in the mountains or maybe a long weekend camping in the woods. This is an area I really don’t think we could save much money because we are already quite frugal with the vacations. However, if you find yourself taking elaborate trips every year, you may well be able to cut back a little bit and save a considerable amount of money.
Can You Save $400,000?
Based on the information in the article, I think you would be a little hard-pressed to actually realize the $400,000 in savings that they suggest. While I am in agreement with the points on driving less expensive cars and attending public universities, I think it is possible to realize even more substantial savings by living below your means. As for the vacations, I think it is a stretch to say that you can save $122,000 in total costs on vacations by eliminating $1000 per year but I think you can apply the lesson to any expenditures in your budget.
With that said, I am still a little hesitant to say that you are really saving $400,000 because this is money that I would not normally spend anyway. If you look at it that way, I can say that I am saving millions of dollars by not buying an expensive yacht or buying and furnishing an expensive home. Those aren’t things I would do so I don’t think I am really saving anything.
What do you think?