Lowering ones expenses can be a way to increase net worth. It’s not the only way, of course. It really isn’t the one place where most time and effort should really go. That would be focusing on one’s career and/or business, as generating income is a foundation of building wealth. However, if you aren’t saving money, you’re essentially running in place and wasting much of that effort on generating income.
Who wants to run the rat race in place, making no progress?
So, I’m thinking that it’s time to drop the hammer on expenses!
There are many ways we can cut expenses, which of course matters if we actually take these cost reductions and apply them directly to savings. A good way to do that is to do the following:
Track Your Expenses
This one may not be a way to directly save money. Instead, it’s a way for you to be informed about how you spend. This data leads to insights, and you can make adjustments accordingly.
I track with Mint, which has worked pretty well for me. Many others track with Personal Capital, which has received some positive attention on other sites. However you decide to do it, if you choose the right platform, you can learn a lot.
Here are two examples:
If I buy lunch outside during the workday, I’ll generally pay around $10. Working in a nice downtown location, this is what it typically costs. Now, it’s good to have convenient food nearby the building in which I work. But that could really add up in terms of expenses. If you work 250 days in a year, that equates to $2,500 on lunch!
That’s not exactly how much I would spend, but it’s easy to see how this could happen. Instead, how about bringing lunch 3 days a week and going out 2 days. For the latter, you could do this when socializing/networking. Let’s say the days you bring lunch you’re spending $5 to prepare and bring the food. Over the course of the year, shifting to this proportion of food from home (60%) can lower your overall expenses by $750 over the course of the year!
Not bad, right? Plus, you can probably have more control over the quality of the food you’re bringing – meaning healthier food too. Health and wealth are connected as we know!
For example, I noticed that some of my transportation-related costs were really adding up. Instead of paying for downtown parking, I’ll try to take public transport more often. This could save around $50 to $100 per month; annualized, we’re looking at $600 to $1,200!
Bottom Line: If you want to drop the hammer on expenses, track them! You can get some valuable insights into how you’re spending your money, and you can make adjustments accordingly. Savings can really add up.