For 6 years now I’ve been blogging about everything from debt, to budgeting, to saving, investing, home ownership, you name it. And over these years I’ve come to a few conclusions regarding money, one of which being that earning more is the fastest way to growing your wealth. This is why I sling side hustles left and right, and why I probably work way more than I should ;)
Then I read this article from the man himself, Mr. Money Mustache:
“The most important thing to note is that cutting your spending rate is much more powerful than increasing your income. The reason is that every permanent drop in your spending has a double effect: it increases the amount of money you have left over to save each month, and it permanently decreases the amount you’ll need every month for the rest of your life.”
That last line stopped me in my tracks: “it permanently decreases the amount you’ll need every month for the rest of your life.”
I had never, in all my years blogging, EVER heard it put this way. Yeah I know cutting back expenses is one of the two main components to financial sexiness, yada yada yada (the other one being to increase your income), but it never occurred to me that cutting back could have just as nice a compounding effect as investing. And for the rest of your life too! (Provided you don’t start taking up the expenses again, but the same holds true for making income too – ie if you stop bringing it home).
This hit me hard, especially now that I’ve come to realize retiring hinges heavily on your monthly expenses. You can stop working a helluva lot earlier if you only need $1,000 a month to live vs, say, needing $10,000. You may not be living as sexy a life as you’d like, but mathematically that’s what you’re looking at. And it’s been years since I really did a thorough walk-through of our expenses.
In fact, here’s a quick timeline of my financial journey:
- 15 years ago: Poor college student and was a frugal bad ass
- 12 years ago: Poor NYC resident and was a frugal bad ass
- 10 years ago: First 9-5 job and started treating myself to niceties
- 8 years ago: Started making over $60,000 and spent like I was rich! (damn lifestyle inflation!!)
- 6 years ago: Bought a house, started this blog, got married, realized money mattered
- 4 years ago: Challenged all expenses and cut them as low as possible for my desired lifestyle
- 3 years ago: Became self-employed, concentrated on earning vs spending
- 2 years ago: Had kid #1, expenses went up
- 2 months ago: Had kid #2; expenses about to go way up (once daycare starts)
- Today: Time to challenge every last expense again!!!
Now don’t get me wrong, I have been paying attention to our expenses throughout the past 6 years, especially in the “less stuff” buying department, but there comes a point where you feel like you’ve cut them as much as possible and you’re ready to call it “good enough.” There’s a balance you have to hit until your quality of life starts to go downhill – at least in terms of what you perceive to be “quality of life.” For me, this would be getting rid of things like coffee, beer, travel, internet connection (unless you want me to mail you these posts? ;)), and even my hobbies like coin collecting. Sure I could cut back on every last one of these guys, but that wouldn’t make me a very happy person. To me it’s about spending on the stuff I love and cutting back on the stuff I don’t.
But here’s the problem: If you don’t revisit your overall expenses as time goes on, especially as major events happen, you’ll continue to save/spend based on your OLD ideal lifestyle/goals vs your new ones. And this is pretty much what I’ve been doing over the past 4 years despite my life changing pretty drastically (although fortunately for the good).
So this post is as much for me, as it hopefully is for you – a huge ass reminder to stop and review all your monthly expenses. And not only to review them, but to *challenge* them. What can you get rid of nowadays that won’t bother you as much? What could you tweak/change/replace in order to maximize happiness? What do you REALLY need to live your ideal lifestyle?
After being inspired by MMM’s words up there, I’ve decided it’s time for me personally to start challenging my own expenses again. Even the ones that normally I’d be okay with, such as our house, groceries, entertainment, luxuries, utilities, services – everything. I’ll still be working on making as much cash money as I possibly can too – I still think it has the winning edge over frugality, don’t shoot me! – but it’s high time to check-in and thoroughly review what’s going out the door too if I truly want to make a run at early retirement.
And I’m starting with the usual suspects for July:
- Our iPhones — We love ’em, but do we really need to be spending $150+ every month for them? [UPDATE: We switched to Republic Wireless and now saving over $100 a mo!]
- Our cable & premium channels — TV is a must as it’s a nice break from working 24/7 (and quite honestly my wife would divorce me if I cut it), but is there a better/cheaper way to consume it?
- Insurances — There’s gotta be some savings in the half dozen coverages we have?! [UPDATE: Just nixed $30/mo off our car insurance! Working on the others now…]
[PS: Last month I challenged our investments and moved to Vanguard – not only drastically cutting expenses, but making sure our money’s aligned with CURRENT goals, not old ones there too!]
I’ll work on these first, and once they’ve been thoroughly examined I’ll move right along to the other areas in our expenses. Taking it one step at a time so that we don’t overdo it and end up giving up entirely (which helps no one). I’ll be focusing on the *recurring* expenses vs. the one-offs too, making it all the better as time pushes on… A couple hours of effort once for forever monthly savings!
I hope you guys will join me this month too :) You don’t need to do 3 if that’s too hardcore for y’all (although, is it really?), but DO promise me you’ll spend some time this week at least coming up with ONE thing you can tweak and save some money on. Or better yet, nix completely! If you did that every month you’d have rocked 12 different expenses over the year GUARANTEEING some lofty savings. A change in habits is much better for you in the long run too!
So that’s your goal for the week: Review your entire monthly expenses and zero in on *one* thing you’ll commit to improving. It doesn’t matter how big or small it is – just that you do it. And if you don’t have an accurate picture of your monthly expenses, stop reading this right now and go make that happen! You can’t track your success/goals if you don’t know what you’re playing with…
It’s go-time, baby! What are you going to challenge this month?
UPDATE: We’re now tracking the success of this mission – and how much we’ve banked because of it so far (over $4,000!) here: Challenge Everything
[Photo cred: Jeffrey Rowland]
Killer resources and apps:
- Best Budget Templates & Spreadsheets (FREE)— The best free budget templates from around the community! Including the ones I use :)
- Personal Capital* (FREE) — A great app to track your investments and net worth. You can see an in-depth review we did here from a millionaire who checks it daily 😂
- You Need a Budget (YNAB)* (FREE TRIAL, then $14.99/mo or $98.99/year) — One of the BEST budgeting methods in the space, with new users saving $600 on avg their first two months, and more than $6,000 over their first year! Check out my friend Vic’s review of YNAB here that went on to completely change his finances 💪
- Digit (FREE 6 mo. Trial, then $5/mo) — This is one of my favorite apps for automatically saving money, and I even came on board as an advisor I believed in them so much! You can see my full review on Digit here.
- Acorns* ($3-$5/mo) – Similar to Digit, this app helps you automatically INVEST money by rounding up all your transactions to the nearest dollar and then investing it right away for you. My full review of Acorns can be found here.
- Honey (FREE) — By far my favorite coupon service out there! Click the Honey button any time you're about to buy something online, and BOOM - any discounts it finds will be automatically applied at checkout. You can see my write up on them here.
- Credit Karma* (FREE) — An easy way to check and monitor your credit score AND report! See my full review of these guys here.
- My Favorite Blogs + Books < -- Click here to see all my other recommendations!