The Best Ways to Save Money

Damon GonzalezBudgeting, Financial Planning, Newsletter

Some of my clients come to me with exceptional budgeting skills and others need a lot of work.  It is important to review your budget or spending plan at least once a year and make sure that you are being a good steward of your resources and spending according to your values.  Here are the best ways I have found to save money.

State Income Taxes

Move to Texas. Or Washington.  Or even Florida.  If you have a high income, a state income tax can take a huge bite out of your take home pay.  Below is the Oregon State Income Tax Rates from  As you can see, once a married couple has a taxable income of only $16,300, they are paying a whopping 9% of their income to keep all the parks beautiful.


table of state income tax rates in OR

The OR State Income Tax is one of the worst for almost everyone.  Source:

This website estimates that a married couple earning $300,000 in Oregon would pay about $26,500 in state income taxes that would equate to precisely ZERO in Texas.  This makes a huge difference over the career of a high income earner.  It is estimated that LA Dodgers Ace, Clayton Kershaw, will save $6.5 million over his seven year contract by being a Texas resident instead of being a resident of the People’s Republic of California.[1]  Michael Jordan, who still makes an estimated $90 million a year[2], finally realized he wasn’t getting his money’s worth from all the taxes he had been shelling out to the state of Illinois. He now is a resident of Jupiter, Florida.[3]

Property Taxes

If you are in a position to live in a state with no income taxes, the second way you can save a lot in taxes is to live in the cheapest home you will be happy with.  I went to the Dallas Central Appraisal District’s website at and found a random home worth $2,245,000.  The property taxes were $50,250 per year or 2.2% of the value of the house per year.  Imagine having to pay almost $4,200 per month just in taxes to live in a paid for home.  You can control your taxes by limiting the size and cost of your home.

Many people feel that a guest room and home gym are necessities.  Let’s say that each of these rooms is 200 square feet and your home is valued at $150 per square foot.  First of all, you spent $60,000 more for the larger home plus you are paying $1,320 more in taxes each year assuming the same 2.2% tax rate.  When you count the extra you pay for your mortgage, insurance, maintenance, and utilities, you may decide it is better to have a smaller home and join a gym and pay for your guest’s hotel room when they come to visit.  Some people will find the taxes are worth it for the right house in the right neighborhood for them.  I am not here to tell you how to spend your money.  I want you to see a different way to think about these decisions.

Once you buy a house, make sure that you file the Homestead Exemption and be aware of the other exemptions that you may qualify for.  Many counties lower taxes for people who are over 65, disabled, or use some of the property for agriculture.  You should also consider paying down a second mortgage or reducing your primary mortgage if you are paying for primary mortgage insurance.

colonial house

Housing is one of most people’s largest expenses. Photo Credit: Wikimedia Commons



The US Department of Agriculture estimated that it will cost a middle-income couple $241,080 to raise a child born in 2012 to age 18.[4]  This figure doesn’t include college or a wedding.  I have seen six-figure earners exit the work force to raise children.  I have seen people spend large chunks of their retirement to help out adult children.  I have seen couples destroy their retirement so that they could pay for college.  No one will argue that children are expensive.  The size of your family is an extremely important decision that will have a significant impact on your finances.  This post is about saving money, not about telling you what to do.  Many will find the sacrifices of parenthood worth it.  I can also say I know some pretty happy DINKs (Dual Income, No-Kids) with lots of discretionary income.

If you are going to have children or already have them, there are lots of great things you can do to save money.  A list in this area could be its own blog post by itself.  Here are a couple of big ideas to consider:

No matter how much money you have, consider having your children work to pay for some of their expenses as early as possible.  This will help them understand the value of money and teach them invaluable lessons.  Children don’t need their own rooms or suites in a home.  Consider picking one after-school activity at a time.  Make friends with neighbors and take turn babysitting each other’s kids.  Collect hand me down clothes and teach them frugality buy shopping at Goodwill. (I own a cashmere sweater and a Jos. A. Banks suit that I bought at Goodwill)
Spend quality time with them.  Many things kids enjoy doing are free or cheap.


The biggest way to save money in this area is to limit how much you eat out.  I know it is fun and so convenient, but for many it is a big black hole in their budget and the food is not helping their health.  In Texas, there is no sales tax on food products.  All things equal, restaurants have to charge you 8.25% more than the grocery store would because they are taxed.  You also will probably pay 15% more at the restaurant if there is a waiter to tip.  To me, the worst expense at a restaurant is the mark up they have on alcoholic beverages.  You can buy a beer at the grocery store for 75 cents or a dollar.  At most restaurants, that same beer is going to cost you $4.

I was recently looking at trying a new bar-b-que joint and was amazed that they were selling pulled pork for $15 per pound.  I can buy some very high quality pork shoulder on sale for $2 per pound!  The restaurant does smoke it for you, but I happen to enjoy smoking my own meat.  It has also become important for me to know what is in my food and that is difficult at restaurants.

The number one thing you can do is limit how many times you eat out.  When you do eat out, consider having a glass of wine or beer at home instead of ordering several drinks at the restaurant.  Drinking water is healthier and the profit margins on sugar water are really high, too.

When it comes to grocery shopping, claims she can cut your bill in half.  Check out her website for many valuable tips.  We save a good amount of money by buying lots of an item when it is on sale and storing or freezing it for future use.  You can also check prices of items online to make sure you are getting the best price.  Walmart has even come out with a new app for your phone that allows you to scan your Walmart receipt and if a competitor has better prices, you get the difference sent to you on an e-card.  Check it out.  It is called Savings Catcher.[5]


My philosophy on insurance is that insurance companies are charging premiums that will make them a profit over large pools of customers.  On the small stuff, I am self-insured with my cash reserves.  The savings I get by not insuring the small items allows me to pay cash for things when they break.  I don’t have extended warranties on any of the appliances in my home.  I don’t have cell phone insurance.  I didn’t buy an extended warranty on my car.  I don’t pay $450 per year for a home warranty.  If I bought an extended warranty on every single item I was offered it on, I would probably be paying $1,500 per year.  I would much rather save that money and replace/fix things as they break.  I also like to chose my own providers for repairs.


There are all types of deductibles.  The larger the deductible, the cheaper your premium will be because the insurance company knows you have more skin in the game.  I rarely need health care providers so it is much cheaper for me to have a $5,000 deductible on my policy and pay the few annual costs that I have out of my Health Savings Account.  For people with health issues, this is probably not a good idea.  I also recommend that everyone raise their car insurance deductible to $1,000.  I find that it typically saves a couple $200 per year when they raise their deductible from $500 to $1,000.  After 2.5 years you have saved the extra $500 in case of an accident and every month that goes by you are saving money.  In my opinion, you don’t want to make a claim on your car insurance for less than $1,000 anyways because they may raise your rates.

Waiting periods are also forms of deductibles.  With disability or long term care insurance, you can choose between a month waiting period all the way to a one year waiting period.  There is a much larger chance you are disabled for over one month than for over one year and the insurance company is going to charge you accordingly.

Lastly, I recommend most people pay their insurance policies annually.  For example, a 20 year, $1 million term policy on myself with one of the top carriers costs $1,085 per year.  If chose to pay monthly, it would $93.85 per month or 3.8% more.  Since I can’t get anything close to a 3.8% rate on my savings account, it makes more sense to pay annually.  Look at the different insurance policies you have and see how much you could save by paying annually.  You might be surprised.


I already wrote an entire piece about total cost of ownership so this will be short.  The highlights are:

Modern cars last a lot longer than they used to.

Look at the total cost of ownership that includes repairs, insurance, and financing costs.

Don’t lease a car unless you need a new one every 3 years.  I can’t think of a single reason anyone would need a new car every three years.

Consider buying your vehicle used.

Follow the maintenance schedule for your vehicle.

Realize a $2,000 repair is likely only four car payments on a new vehicle.


I hate shopping and l prefer long relationships with trustworthy companies, but I have learned that you have to shop your electric company if you live in an area that allows you to.  My guess is that electric companies have run profitability analyses and determined that even though their turnover is higher, they will make more money by offering lousy rates to customers coming off contract.  I don’t agree with their business model, but it is the world we live in.  If you live in Texas, there is a great site called  On a recent visit, I found rates were between 4.6 cents per kilowatt hour for only a three month contract all the way to 12.4 cents per kwh for a two year contract.  That is a significant range.

Unfortunately there is a learning curve to understanding the fact sheets and terms of service.  It is important that you first get records of your energy usage from your current company.  My highest bills come in the winter because my house is heated with electric heat pumps.  I was looking for a company that had low rates when you went over 2,000 kwhs to reduce my winter bills.  My current provider charges $15 each month you don’t use over 1,000 kwhs.  This is a good example of why you need to understand your usage and read the fine print.  I have found it helpful to call the sales people at the electric companies to answer your questions on the contracts.  Getting the best rate you can find on your electricity bill is usually the best way to save on utilities.

Power to Choose website results is a very useful site to shop for electricity providers.

The second best way to save on electricity is usually to use less.  The biggest energy hog is usually your HVAC system.  The further you turn your thermostat from the outside temperature the harder your unit will have to work.  I recommend that you use a programmable thermostat for each of your units and learn to live closer to the outdoor temperature to save money.  If nobody is going to be upstairs till 7PM, then there is no point in wasting your money keeping the temperature at 75 degrees all day.  In the summer time wear shorts inside and install fans in rooms you spend a lot of time in (especially over your bed).  I have found that I can be comfortable in the summer with my house around 82 degrees and 78 while I am sleeping.  In the winter time wear sweaters and warm clothing inside.  There is nothing wrong with snuggling under a blanket when you watch t.v. or read a book.  As I write from my home office, I have the downstairs thermometers set to a cool 64 degrees and am using a small 1,500 watt floor heater to keep my office warm.  It costs only $1.38 per day to keep my office nice and toasty.  Here is how I calculated that:

1,500 watt heater x .001 x .092 (my all-in electric cost per kwh) x 10 hours = $1.38

That is not bad at all and when the thing breaks I can go buy another one for only $70.  Lastly, consider getting a home energy audit.  I found it to be well worth the money and wrote about it here.  There are many places that air can be seeping out of your house or duct work that you are not aware of.

Cable TV

Cable TV is not cheap.  I know many people that have given it up and are happy with HULU plus, Netflix, or Amazon Prime.  Here I suggest you document for the next month how many hours your family watches cable and see if you are getting your money’s worth.  For some people it is a real steal and others may try giving up cable or paying $10 per month for Netflix.  I currently don’t pay for cable and pay $20 a month for Netflix.  I watch a lot of content online and get one disk at a time so I can watch the newer movies.  When you consider that an evening movie is now $14 per person, Netflix is one of the best values around.  If you really enjoy watching sports, unfortunately you have to pay for cable these days.

Cell Phones

These bills can really take a bite out of your budget.  Fortunately there are ways to save money.  The first thing to consider is whether or not you need a smart phone.  I think many people’s life would improve if they weren’t so connected.  The next thing to consider is to think outside of the duopoly and look at companies like Ting, Straight Talk, or Airvoice Wireless.  Some people will find tremendous savings with these plans.  If you want to stick with Verizon or AT&T, check to see if your company has a discount with one of them as an employee benefit.  I have seen discounts as large as 23% off a normal rate.

The other big way to save money is to keep your cell phone for longer than two years.  Before early 2014, both Verizon and AT&T’s plans gave you discounts on your phones, but charged you about $40 per month per phone for the “data plan.”  In reality, about $25 of your monthly bill was paying for your phone.  After the two year contract, you could get a new phone for free or pay a couple hundred dollars for a premium smart phone.  I hated those plans because if you didn’t get a new phone at upgrade time, you were being ripped off on your data plan each month.  Now AT&T has a Mobile Share Value Plan and Verizon has the EDGE plan that saves about $25 per line when you haven’t purchased a new smart phone in over two years.  This adds up over time.

An iPhone 5s costs about $630 and you can replace the battery yourself.  It is not necessary to get a new one every two years.  If you are with either AT&T or Verizon, call them and ask about these plans and see if you can save money.  They also usually charge you extra per month for putting a tablet on the plan.  Look to see if your phone can be used as a personal hotspot and see if it makes sense to remove your tablet from the plan.


Self reflection is really helpful in this category.  It is important to know your values and spend your discretionary money accordingly.  When I look at my own budget, I find that I get tremendous value from vacations and books.  When I reflect at the end of the year, it is usually the traveling that I remember most fondly.  I have found that stuff doesn’t make me happy.  I try to spend my entertainment dollar on experiences and learning.

I have found that vacation doesn’t have to mean flying across the world and sleeping at the best hotels.  I had a fantastic time driving all the way to Idaho in 2012.  I camped a lot and it was nice to see what is in between the major cities.  Some of my best times were in areas that I didn’t plan on visiting or knew existed until I got in the car.  Kim and I treated a four day trip to Austin this year like a real vacation and had a blast without spending $1,000 on airfare.

Your other entertainment doesn’t have to cost much either.  I pay $130 per year to be a member of my city’s rec clubs.  I probably spend 300 hours a year there playing volleyball and basketball.  That works out to be under $3 per hour.  You can also buy a nice bike for $1,500 that will provide years of entertainment and help you stay fit.  Consider having pot luck parties, inviting friend over to watch sports, and game nights.

Others may receive a lot of satisfaction from season tickets to a sports team, going out to movies, or drinking with friends at bars.  My main point is that you should align these discretionary expenses with the value you receive from them.  Find the entertainment that is a good value for you and cut out the rest.


I used to be very stressed out around Christmas time when I was expected to buy gifts for 15 people in my family.  Like most Americans, my family is well off and already has more than enough.  After a few years of wandering around Walmart buying horrible $25 gifts that most people probably took back, I approached my family and asked them to stop buying me gifts and I explained that I was no longer buying them gifts.  It was a little awkward, but it went fine.  Since then it has been amusing to hear how anxious, stressed, and depressed others are during the holidays.  December is a pretty low stress month for me and I can focus on what matters–quality time with family.  Not too many years after my announcement, my family decided to buy gifts for only one person in a drawing.  Apparently others realized that the gift giving was too much work and not enough reward.

Hopefully there was one idea in this list that will help you become more frugal.  The more you can cut out today means the more resources you have to save and give away tomorrow.  People with lower expenses also don’t need as much money to retire.