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Tip #30: How I’m saving $25,000+

Ramit Sethi

This is Tip #30 of of the Save $1,000 in 30 Days Challenge.

Today, on this last post of the Challenge, I decided to write down some of the ways I’m saving money in 2009. Alone, each doesn’t seem like much. Together, they add up to a rough estimate of about $25,000 of savings in 2009 — a surprisingly high number.


Remember, these are tips that work for me. The key has been to take my lifestyle, then fit these tips into them — not try to force 59835321 changes in spending on day 1. Sure, I’ve changed my behavior, but it’s been a slow process of many years. If you’re just starting to save money, I encourage you to take your current behavior and set small milestones…like optimizing what you’re currently doing, before you decide to change your entire financial behavior.

All right — let’s get to the tips.

1. Whenever possible, I buy airfare for family and friends so I can earn significant amounts of points (usually they reimburse me). In 2008, I maxed out the number of points I could earn on my credit card — and I didn’t even travel that much. Since I earn points for each dollar I spend AND each mile that’s flown, one trip to Europe or Asia adds up to thousands of points that I can redeem for trips (like this $600 trip I paid for using points). Note that this only works if you have no credit card debt, a credit card that pays for miles/dollars spent, and you travel a fair amount. Total savings: $1,500/year.

2. Any time I purchase something over $100 (roughly), or any time I travel, I review the deals offered from my credit card, insurance, and workplace. In particular, when you’re traveling, the deal doesn’t end when you get to the check-in. As any Indian father will tell you, you always tell your kids to wait in the car while you go check in at the front desk (this is because you bought a room with 1 bed for a family of 6). The trick is: Always ask the front-desk if they have a “complimentary upgrade.” Many times, you’ll get bumped up to a suite. Same with car rentals. Total savings: $100/year.

3. This seems like a minor point, but if you don’t have all your account information in one place, it’s a huge barrier to finding deals and among them. Personally, I hate having to search around for all my account logins.

Total savings: Hard to say.

4. Any time I buy something online, I take 20 seconds to search for “Bloomingdale coupon” or “JCrew coupon,” which usually saves me 10%-25% off. Easiest thing in the world. Total savings: $300/year.

5. I call all major service providers (cable, cellphone, insurance, etc) and negotiate them down once a year. They hate me for this. I love it. If you’re not comfortable with this, find a friend (just look at your Facebook for someone named Raj or Ramu) and offer them 50% of whatever they save you. Total savings: $800 per year.

6. When I buy major purchases like cellphones, cars, or even coats, I buy the best and hold it for the long term. That sounds obvious, but most people who buy really nice stuff like to buy nice stuff all the time, meaning they never keep something for the long term. Here’s a video on holding things for the long term that I did with more details. And here’s a writeup on the technique of only buying something new when you get rid of something old. Total savings: $500 per year.

7. I work on entrepreneurial side projects that are fun and may someday be profitable. For example, I didn’t start to make money (in fact, I lost money on it for the first 3 years because I didn’t want to serve ads), but now it’s generating a modest amount each month. Many people are greedy and try to make money too quickly, but is there a project you’d do for free, for years? Would other people care about it?Total savings: Hard to quantify, but I’ll ballpark it at $10,000/year.

8. I perform regular maintenance on my car. Extremely regular, with extreme documentation, so that when I sell the car, I’ll be able to show how incredibly anal and weird I am about documentation for big purchases. Compare this to the owner of a used car who has a car in fair condition (not great) who, when you ask about maintenance, shrugs and eats a bagel. Who would you rather pay an extra $1,000 to? Total savings: $200 (I’d estimate it’s actually about $3,000, but you have to spread that over the next 15 years, which is the ballpark of how long I plan to keep the car).

9. I just set up automatic withdrawal to my savings account. This is the simplest and most effective technique of all. If you set up $100/month to your savings account, you will save $100/month. Yes, there are a lot of people who can’t afford that much. Those people are probably not reading this blog. Instead, you’re probably wasting that money on stupid things like eating out, dry cleaning, and late fees, but you just don’t realize it. $100/month turns into hundreds of thousands of dollars over a lifetime, and you can set up an automatic transfer.

In my own ING savings account (now called Capital One 360), I’ve set up multiple sub-savings accounts, including:


(To the 238593285932 people who are going to write me asking how to set up sub-savings accounts: In ING Direct, log into your account >> Open an account >> Orange Savings Account >> Orange Savings Account (from the drop-down). Create the nickname, etc, and you’re done. I don’t know about other accounts.)


The trick is automatic transfers. You’ll work around the amount in your checking account if money is transferred automatically to savings…but it’s incredibly hard to be proactive about taking money you earned, and seemingly ‘giving it away’ to your savings account. We know we’re more motivated by loss than by gain. Sidestep the entire argument and make your savings automatic. Total savings: $1,000/month.

Next steps: Well…we’ve reached the end of the line of the 30 tips to save you $1,000 (see the other tips here). Guys, it’s been a thrill. I spent about 150+ hours writing these tips and was blown away by the response. Tens of thousands of people participated and saved hundreds and thousands of dollars. So thank you for joining in. If you’ve saved using my tips, please let me know how much you’ve saved.

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  1. avatar

    What percentage is $25,000 from your salary?

    I plan to save 30% this year

  2. avatar
    Fabulously Broke

    I plan on saving 50% of my net income this year.. it’s my new challenge. Dunno how that’s going to work out, but I love that you’re a PF’er.. but not a hardcore “eat toilet paper rolls’ …

    I do agree with saving on the big things which is the gist of your post along with automatic savings. People economize on lattes but then go out and buy a fancy iPod or a car for more than what it costs to have a latte every day for a month.

    Who’s the other major bank you use? I’m moving to the States soon and I want to go with ING almost exclusively, but am sure I will need another bank.

    Fabulously Broke in the City
    Just a girl trying to find a balance between being a Shopaholic and a Saver…

  3. avatar

    can you explain more about using a wiki to manage passwords, (i.e. security?) and also about password services. These sound like great time saving ideas, but I have concerns about security and am curious if you have suggestions on specific service providers. Thanks!

  4. avatar

    I didnt exactly participate in the challege, but we do the majority of these things already, and they work.

    This year, we paid off all credit cards and car loans, totaling more than $20K. We now save a little more than 40 percent of our salary every month, and we have an emergency fund.

    At first it seemed like a punishment, but you learn you don’t need half the junk you waste money on…you just think you do. And letting go of all of that “want” is freeing…maybe even better than the cash savings.

  5. avatar
    Ben Bleikamp

    For password storing I use

  6. avatar

    Terribly dumb question, feel free to strike me down as necessary. When you break your ING into subgroups do you earn earn the same APR for the total amount or for each sub group? Wait mathematically does it even matter?

  7. avatar

    A figure like $25000 is meaningless unless its a percentage. Last I heard, thats about as much as a large portion of America’s population makes in the entirity of a year.

  8. avatar
    Ramit Sethi

    What if I said it was 5%? 10% 50? How would that change things?

  9. avatar

    It would change things because it would mean save 5%, 10%, or 50%, not save your entire income.

  10. avatar
    Mike Roberto

    #5 – “If you’re not comfortable with this, find a friend (just look at your Facebook for someone named Raj or Ramu) and offer then 50% of whatever they save you. “

    Are you seriously saying that I should try profiling my Facebook friends?

    I agree on your tactic of negotiating, but if you’re not comfortable with it – get comfortable with it.

  11. avatar

    take advantage of holiday deals/specials/sales for yourself when you can. Example: My wife and my favorite restaurant is Outback. During this past holiday season Outback was giving you a bonus $20 gift card “for yourself” for every $100 you spent in gift cards. Well, we don’t go out to eat a lot, but when we do it’s Outback a lot of the time (since we don’t go out to eat a lot it’s hard for us to NOT go to Outback when we do, ha). So it’s pretty much a guarantee that we’ll spend $200 at least at Outback in 2009. So I bought $200 worth of gift cards (but for us to use) and I got $240. Just a small example on how to make a guaranteed 20% on my investment. The key though is only using deals like this when you would NORMALLY use them.

  12. avatar
    Ramit Sethi

    Ballpark, I would encourage 10% – 25% of your salary. I cover this in more detail in my book coming out in April 09. And if you’re wondering if it’s net or gross, just remember: More is better.

  13. avatar


    Thanks for taking the time to compile this list. You’re documentation and implementation of the tips is very informative. I’ve passed along your blog to a bunch of my friends that are just starting to figure out that saving money is cool. Thanks again and keep the good information coming!

    I also agree on the more is better.

  14. avatar

    Raw numbers don’t help people but a percentage can be more helpful. It levels the playing field

  15. avatar

    For #9 – Did you meant to say savings – $100/month or $1000/year (or $1200 a year?). Your example uses $100 a month so just wondering how it came to $1000 a month or if I’m missing something… ‘Cause that’s some savings at 10x and I totally want in on that if it exists.

    Thanks for all the tips. I’ve enjoyed my no (or low) spending days.

  16. avatar
    Ramit Sethi

    Oh, cuz I’m saving at least $1,000/month into ING. Sorry, the $100/month was just an example, and I can see how it’s confusing.

  17. avatar

    David: your APR is the same regardless of how many subgroups you put your money into. If you have 1 account with $1000, it will make the same total amount of interest as two accounts, each with $500.

  18. avatar

    How do you account for ING’s limit of 6 withdrawals a month?

  19. avatar
    Ramit Sethi

    Any bank has that…it’s a federal law. In general, you shouldn’t be withdrawing from ING more than that, anyway! It’s a savings account, not a checking account.

  20. avatar

    “Compare this to the owner of a used car who has a car in fair condition (not great) who, when you ask about maintenance, shrugs and eats a bagel.”

    HA! priceless.

  21. avatar

    I’ve been saving approximately 50% of my salary for the last three years. The first year of working before that, I spent nearly everything, then thought of what I needed to change. (Although I also bought a preowned car that year, which I paid off). What I do is simple: I try to minimize all long-term costs: cell phone, rent (I did move to a cheaper place; in NYC that can make a big difference; 8000$ a year), insurance, food at work, and don’t go out for dinner more than 1-2 times a week. I don’t restrict myself in buying nice clothes, which is the one area where I really enjoy spending money. Figuring that I save e.g. 2000$ in coffee per year if I make it myself, it really does not impact a lot if I spend 500$ on clothes every couple of months.

  22. avatar

    Thanks for keeping up with the tips! I had already been doing quite a lot of these things but it is nice to have new ideas.

  23. avatar

    Point #1 also may work if you buy tickets for your friends and they’re reliable enough to pay you back. Reliable-friends-who-pay-back…that needs to be added to the list of how it will work.

  24. avatar

    Give Keepass a try for password storage. You have choice of AES or Twofish encryption for the database file it creates. I use this with a service to sync it across all of my computers, so it is always available to me.

  25. avatar

    Well, I am automatically saving 19% in forced savings and that’s not counting what I put in my 401K (another 7% plus company match) and the 4.85% I am funneling to emergency savings.

    #6 is my favorite tip. I don’t have a 4 year old phone but I will after this contract. Get the best phone you can get for free and reactivate the old one and sell the new one on eBay. That paid for 4 months or so of my cell phone service (approx $40 a month after work discounts.)

    Honestly, I feel I’m doing okay. Not sure I’ll ever be rich but I am on my way to being comfortable.

  26. avatar


    How should I read tip #2? An Indian father saving money by ordering an expensive room via last-minute upgrade rather than reservation upfront?

    P.S. thank you for the airmiles tip. Most of my friends don’t bother with airmiles as they don’t travel that often. However if we bundle them in 1 account… Fantastic tip!

  27. avatar
    Stefan P

    Hey Ramit,
    Nice work. Could you provide more detail on tip #8? What specifically do you document besides keeping all oil change records and maintenance worksheets etc. Anything that a person could do on their own?

  28. avatar

    I love your policy on automatic transfers to savings account, Ramit.

    I went a step further and made my employer pay me into the savings account (this transfers once a month, which is the minimum on the account for extra benefits) and pay myself a budget of 20% every two weeks (below the limit of 5 debit transactions per month), some of which goes straight into a discretionary account for fun spending. Now I get paid bi-weekly which is a huge relief and I save 60% of my salary by default. You’re right, you never miss what you never see.

    It’s a bit of an adjustment, but once you’re accustomed to a more frequent but lower pay packet it’s sweet as, I’ll never look back.

  29. avatar
    Sunday Links | Centsability to Wealth

    […] at I Will Teach You to be Rich wrote about how he plans to save $25,000+ in 2009.  In it he offers up nine ways in which he plans to either lower his expenses or increase his […]

  30. avatar

    I like tip 6. Most people I know either buy a lot of cheap stuff or a lot of expensive quality stuff. I think buying a lot of cheap stuff should be saved for the shopaholics and I, as a saver, have always preferred buying top quality, long-lasting items and keeping them for as long as possible.

    Great post.

  31. avatar
    Clayton Hughes

    Just wanted to inform readers that storing all of your password information on a website is a TERRIBLE TERRIBLE idea.

    Look into local files that are encrypted and thoroughly tested to be strong and safe. Open Source is a great bonus, as it will have the most opportunity for its workings to be seen (and thus improved).

    KeePass and PasswordSafe are two programs that come to mind.

  32. avatar

    I understand the not spending money on eating out or late fees, but how are you getting around spending money on dry cleaning? DC is one of my monthly expenses I would love to trim.

  33. avatar

    A lot of this stuff is common sense, and the fuel hedge, c’mon. Moving money from one account to another isn’t ‘money saved.’ It’s the same money, in a different bank account.

  34. avatar
    Ten for Tuesday (January 20, 2009) | AllFinancialMatters

    […] 4. How Ramit is going to save $25,000 in 2009. […]

  35. avatar
    Kyle Cherrick

    A few years ago I opened an Emigrant Direct Savings Account. Does it have the same ability to have sub-accounts or accounts with “nicknames” as ING?

  36. avatar
    Ramit Sethi

    I’m not sure, but I don’t think so.

  37. avatar

    Thanks so much for the information on sub-accts etc for ING. I have been considering an ING acct for quite some time but haven’t done anything about it. I also wanted a way to make sure I knew how much money I was setting aside for various endeavors so your information was incredibly helpful!

  38. avatar

    I’ve done #4 as well. The best way to save is on travel expenses. I saved 300 one time b/c I googled for coupons using the name of the company (i.e. “orbitz”) followed by coupons.

    Another good example is to use search engines that compare prices for you. (i.e for products and for travel) Once you identify the product, these sites research whether you are getting the best deal. These sites will often consider the cost of shipping and taxes. However, you should be careful when some dealers sell a product for cheaper because they may not have it currently in stock so you may experience a delay in getting the product.

  39. avatar

    As always, thanks for the laugh AND content that makes me think “That’s something I can use”.

    My husband is Assyrian (not Syrian). Both he and his father were born and raised in the U.S. However, they both still have the trader/barterer Middle Eastern blood flowing through them. Every time you talk about doing it like an Indian, I nod my head and say “yep”. 🙂

  40. avatar
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    […] ING Direct Orange Savings Promotion – Make $25 for free and get a sweet savings account. November 23, 2009 aballeezy Leave a comment Go to comments My favorite financial blogger, Ramit Sethi, has an unbeatable system of managing and automating his finances. Ramit sets up accounts within his bank account for his house down payment, future car repairs, and even for his future wedding (he doesn’t have a girlfriend yet) and direct-deposits portions of his paycheck directly into these accounts. More on this topic can be found at his site: How I’m saving $25,000 in 2009. […]

  41. avatar
    Susan Louise

    The average family uses 25,000 miles of toilet paper per year!!!

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    she just uses the Eco Potty Wipe and places in the laundry
    mesh bag. When the bag is 1/2 or 3/4 full just pull the drawstring
    and throw right in the wash!!

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