Great Savings Tip #89 – Synergy

Combine forces and save.

Today’s tip: Synergy

This post is #89 in our Great Savings Tip series, designed to help you find ways to spend less and save more. For more ideas see our Great Savings Tips page with a complete list of all our tips. Here is today’s tip you can put to work immediately:

A Definition

Tip #89) Synergy. At first glance, the definition for synergy sounds confusing. Merriam Webster’s defines it as, “a mutually advantageous conjunction or compatibility of distinct business participants or elements (as resources or efforts).”  And according to Wikipedia, “A revenue synergy refers to the opportunity of a combined corporate entity to generate more revenue than its two predecessor stand-alone companies would be able to generate.” What’s all that mean on a personal level?  It’s turns out to be simple—by combining people or pooling people or resources you can literally save thousands of dollars and do it while living a better lifestyle.

Cut your rent.

Saving money is easy if you are willing to share.

Slash Your Cost Of Living

Think of an example.  Say you want to rent an apartment and your after-tax income amounts to $2000 a month.  If the apartment you want costs $1000, you’d be spending 50% of your income on rent (i.e. $1000 divided by $2000 = .50 or convert to percent equals 50%).  Now, assume your friend, Jim is willing to share the cost of a nicer apartment with you 50-50.  Let’s say the cost of the nicer apartment is $1200 per month so your share is $600 ($1200 times ½ equals $600).  Suddenly, your projected rent expense goes from $1000 a month to $600 a month. As a percent of your income, $600 represents 30% ($600 divided by $2000 = 30%).  In other words, by joining forces with Jim, you can save 20% of your income (i.e. 50% – 30% = 20%), use that 20% for other purposes, and live in a nicer apartment on top of it.  In the course of one year, the savings will add up to $400 times 12 months or $4800.  Share an apartment with Jim for just three years and you’ll save $14,400!

The Layers Of Synergy

Clearly, some people won’t like the idea of sharing a living space, especially if they have been living on their own for quite some time.  However, the advantages of synergy go beyond saving rent in a situation like this one.  Consider the cost of utilities: If your water, sewer, power, phone and cable bill are thrown into the equation, you could easily save an additional $100 to $200 a month by splitting the cost. That would amount to an additional $1200 to $2400 savings per year.  Again, if we share expenses for just three years the resultant savings are somewhere between $3600 and $7200.  Now, take the higher number, and add the savings from rent and the total savings is $14,400 plus $7200 or $21,600—potentially enough to make a down payment on a small home or condo.

Join Together and Save

Synergy saves.

The savings really add up over time and that impacts lifestyle.

Again, the idea behind synergy is to join forces or elements and save.  Another example might be bundling your cable TV, phone and internet services.  Buy all of these components individually and you’re bound to pay more than a package that combines two or three of the services together.

Here are 9 more ways to synergize your finances:

(1) Share a ride to work. Cut gas, insurance and repair bills in half by splitting your driving duties.

(2) Trade babysitting services or share a nanny. Instead of higher priced daycare exchange baby-sitting duties or jointly hire a nanny.

(3) Share storage space. Have extra space and friends who don’t?  Figure out a joint sharing agreement.

(4) Share your wireless. Can’t afford wireless?  If you’re neighbor has it and the signal strength is good enough, offer to share the cost.  You may want to check with your internet provider first  to be sure you’re not in violation of their rules.

(5) Rent a room. Rather than share a whole house or apartment, cut expenses by renting out a room.

(6) Share traveling expenses. Going on a trip?  Lots of hotel rooms have two queen beds.  If you don’t mind sharing a room you can cut your hotel bills in half.  Just plan for some “private time”.

(7) Buy bigger quantities in bulk and share. Join up with friends and buy the biggest quantities you can to reduce the cost.

(8) Trade rental movies. If you and a neighbor each rent a movie you could exchange them and get 2 for the price of 1 entertainment.

(9) Trade your expertise. Accountants, cooks, carpenters, hair cutters, lawyers or anyone with a special skill can offer their services in exchange for other services they need.

(10) Make larger meals. If you make bigger quantities and plan to use the leftovers for lunch or to freeze them for later you can “synergize” your time.  Time has value so anything you can do to cut the amount you spend on basic chores will help improve lifestyle.

Greater than the sum of the parts.

You can achieve greater heights by joining forces. This is synergy.

Stay In The Game

As you begin to think about synergy and its built-in advantages of savings, you can start to understand why single parents or people who have lost a partner through divorce or death have more difficulty maintaining their standard of living.  When you find yourself facing circumstances like these, consider joining forces with other like-minded people to help stay ahead.

Keep In Touch

Thanks for joining us for our Great Savings Tip series. If you missed any of our tips you can find them by clicking on the “Zero-Based Living” drop down menu at the top of this page. You can also register with our site and we’ll send you an automatic notice for all our new posts. Thanks for stopping by and have a great day!

By Bob Anderson

© 2011 Javabird LLC.  All rights reserved.

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For a complete list of our Great Savings Tips click here.

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