Is a Dollar Saved Really a Dollar Earned?

“My problem lies in reconciling my gross habits with my net income.”
Errol Flynn (1909-1959)

Life is full of trade-offs. A lone wolf carpet cleaner trades the eventual “big bucks” sale of a large business empire for the freedom from employee headaches. But if you go solo, you must make alternative financial arrangements to fund your retirement. It would be foolish to depend on Social Security and the selling of your beat-up equipment to provide for your golden years.

The quick answer to the question of how to build your net worth is to charge more for your services. And there is no doubt that most carpet cleaners, especially owner-operators, can and should raise their prices. But an even more important, and often overlooked, step is to cut your spending.

All of us love to buy, acquire and own. The possession obsession is shamelessly promoted as patriotic, encouraging you to “support the economy” by purchasing houses, cars, boats, snowmobiles, vacations and so on. Following this endless acquisition trail is enormously enjoyable…and incredibly destructive to achieving financial freedom.

The next time you are tempted to blow $50 frivolously, reflect on how many hours you had to work on the wand just to enjoy Andrew Jackson as discretionary income. Remember, that $50 arrived in your pocket after all your business expenses and taxes. Think what this same money invested over time could mean at retirement: Investing $50 each week, assuming an 8 percent average annual return, will give you $73,487.42 in 15 years.

I’m not suggesting a frugal and monastic existence that denies you and your family all the creature comforts and pleasures of life. But ask yourself two questions before any purchase:

  • “Do we really need it?”
  • “Do we really, really, really want it?”

    If the answer to either question is yes, then go for it! But all too often we spend like we eat, impulsively and/or out of boredom, without realizing true enjoyment.

    Here are a few relatively painless ideas on cutting your spending from my newly revised special report, “Cleaning Up: Building Personal Wealth in the Cleaning Industry.” (For a free e-mailed copy, write me at For the spendthrifts, I’ve also included an estimate of how much money some these ideas will net you in 15 years, assuming you invest your savings regularly and receive an average return of 8 percent.

    The Little Stuff Adds Up
    For example, just by avoiding the constant forays to 7-Eleven to buy cold drinks and snacks you can easily save $45 a week. And look at all the time you will save by avoiding the “Stop-and-Go Shuffle.” Pass on 15 years of high-sugar sodas and you’ll add $65,995.93 to your net worth (and enjoy better health too).

    Take Nothing for Granted
    Advertising is a big budget item that could benefit from being put under your cost-cutting magnifying glass. For example, many carpet cleaners have dramatically downsized their Yellow Pages advertising and not seen any downturn in business. Saving $300 per month on Yellow Pages advertising adds $101,281.89 to the pot.

    Hold Their Feet to the Fire
    Insurance agents are shameless in their efforts to emotionally tie you to them while you pay through the nose. So stay friendly with your agent, but also do a price check on all of your insurance policies every year. The Internet allows you to do this effortlessly.
    One of my clients told me, “I just switched my van insurance and saved almost $500 per year. With my business insurance I saved another $800. It really pays to shop around.” Playing hardball with his insurance providers will add $35,297.75 to this carpet cleaner’s retirement fund over the next 15 years. Of course, before you switch remember to factor in both the insurance company’s stability and service when verifying that the new policy meets your needs.

    Fast Food is Very Expensive
    Sure, I love junk food too. But Americans are more overweight and unhealthier than ever before in history and much of the blame goes to the fast food we choke down (one recent study states that 64 percent of all Americans are 10 pounds or more overweight). Calculate the return to your PIP (and your waistline) if just twice a week you pack a healthy lunch instead of visiting the nearest fast food joint.

    Take Nothing for Granted
    Periodically re-examine your fixed costs. By putting my health insurance “out to bid” (and raising our deductibles) I saved more than $400 each month. Put your financial calculator to work on what that amount will mean for my golden years, assuming I invest it all wisely.
    Your home mortgage and your long distance phone plan are two other areas with big “re-negotiation” possibilities. (Hint: Term life insurance from reputable companies has become extremely competitive recently. By switching insurance companies I shaved more than $700 off my annual premium, and with improved coverage too.)

    Get Off the “Latest and Greatest Merry-Go-Round.”
    Billions of advertising dollars are spent every year to convince us to discard the “old but serviceable” and buy the new. You will literally save millions over your lifetime by resisting this pressure. For example, my two cars are six and eight years old. Both vehicles start, run and look just fine. I have no plans to replace them. The hundreds of dollars saved in monthly car payments alone by avoiding temptation will add dramatically to your net worth.

    Avoid Consumer Debt
    There is no legal investment you can make that will come even close to simply paying off your credit card debt. Sure, use your credit cards for convenience (and to rack up those frequent flier miles) but pay them off on time every single month. Can’t do it? Then don’t buy what you are yearning for. It is that simple; nobody ever said achieving financial freedom was going to be a cakewalk.

    As a lone wolf, you have freedom from employee problems. But be sure to add financial self-discipline to your life now so that you’ll enjoy financial freedom in the future. Remember, the old saying is wrong: A dollar saved is really equal to $10, $20 or $30 earned!

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