I’ve wrote about how saving a significant amount of income paves the road for financial independence. It may not happen overnight and sometimes I have a hard time grasping that. I want to get there fast, but cutting corners could set me back along the way. Therefore, I look for ways to be patient and let things run its course. Saving consistently over time is an inevitable way to reach financial freedom. However, on the other side of savings rate is looking at what you’re spending money on. Monitoring your expenses and spending is just as important as monitoring your savings rate.
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I’m constantly looking for ways to save, even if it’s a little a day. Cutting expenses by a dollar a day is an enormous $365 a year that I save. That pays for 2 months worth of car expenses (insurance and gas). Therefore, saving a few dollars here and there is powerful. For example, I normally spend $35 – $40 a week eating out for lunch, which is a whopping $1680 – $1920 a year that I spend on lunch alone.
Not food costs, just lunch. This isn’t including dinner,breakfast, or eating out in a restaurant occasionally throughout the month. My income is $55,000 a year, if I save $1680, it’s an increase of 3% in my earnings at my disposal. I sure could use that money!
Valuing Your Money Spent
I’m a proponent of using time and money to your advantage, not detriment. Eating out for lunch saves me time to the alternative of making lunch the day before. The sacrifice is that I have to spend money to save the time. If I actually put my earnings into perspective, I could knock out a sandwich in 15 minutes and add fruit to bring to work the next day.
It probably costs me $1 max to do so. So if I spend $7 for lunch vs the alternative of spending 15 minutes and $1 to make it, that means that the 15 minutes I spend is worth $6. That’s $24 an hour that I’m spending! It’s pretty darn close to how much I make at work per hour.
I can’t say that spending money on Chipotle is equivalent to one hour of me working. Therefore, I feel like I’m overpaying for the services I’m getting. I don’t want to overpay, I want to underpay and get more than what I pay for. So I adjusted and started bringing my lunch to work.
I can proudly say that I didn’t use any money for 5 days straight (from Saturday September 3rd to Wednesday September 7th). Watching my bank account go up has been rewarding, to say the least. It’s been working wonders in cutting my expenses. I also have a $30 a week budget for going out / miscellaneous expenses.
I’ve never hit that limit so far and that’s just extra money that I can use to invest. Investing is a huge passion I have because it’s so competitive and real-time. It’s my analysis vs another person’s analysis and that gives me more joy than passing my going-out budget.
Watch What You’re Spending Money On
One of the reasons why it’s so hard to save is because of lack of monitoring. There are numbers that are essential that you should know from the moment you wake up. How much you can spend per day, what percentage of your income you need to save to retire in x years, how much time you want to spend working, working out, or relaxing, etc.
Without a plan, there’s no direction. Without direction, it’s hard to get to where you want to go. This is one of my biggest regrets in my college days. I was hustling and bustling 100 miles per hour to get to where I wanted to go. But I didn’t review my goals to make sure the direction is the right one.
There’s multiple avenues of where my money’s going that I’m tracking. I’m tracking how much I’m spending money on electricity, gas, food, and miscellaneous expenses. I always add in an “miscellaneous expense” category to my budget because for 1) I need a cushion and 2) life will never pan out exactly the way you plan.
There always seems to be something that I spend money on throughout the month that I never plan out for. This month was a battery and a coolant cap for my car. Next month will be something completely different.
3 Ways Expenses Can be Cut
I know a couple of friends who leaves the AC on even when they are at work. They also leave power plugs left in the power plugs even when they’re not using it for the next couple of days. I unplug my microwave power plug before I go to work and unplug unnecessary plugs that I know I won’t use for days.
Believe it or not, leaving plugs on actually uses electricity, although by little. I spend $33 a month on electricity by using around 140 kWh (Kilowatt hours). According to the EIA, the average usage in the US is around 911 kWh per month. I try not to use electricity if I don’t need to.
Use Cash Back Websites
I absolutely ADORE cash-back websites. I use Ebates whenever I’m doing online shopping to make sure that I can take advantage of deals. Ebates is a cash-back website that gives you cash back for things that you were going to spend money on anyways. The savings can be small or huge, ranging from 1.5% cash-back to 21% cash back.
I used eBates to purchase my website on Bluehost which lowered my cost from $46 for the year to $36 for the year. If I add in a 2% cash back that I get from my credit card company, that’s savings that I just can’t ignore. To date, I’ve gotten $147 in cash back, which is money that I wouldn’t have seen otherwise.
They do have a $5 minimum threshold before you can get paid in Paypal or check, but I think it’s worth it. If you join eBates they also give you a $10 bonus just for signing up. You’re getting paid to get paid more, it’s a great service that you should take advantage of!
Look for Alternatives
The great thing about business is that there’s ALWAYS more than 1. There’s more than one way to get the value or utility that you are looking for. If you’re looking for a phone, there’re Google, Apple, Samsung, Microsoft, and many others who are competing for your hard-earned dollars. For lunch, you can always pack your own instead of going out.
If you’re looking for buying in bulk, there’s Costco, Sam’s club, BJ’s Wholesale Club, and many more. This doesn’t just apply to products, it applies in investing as well. There’s always more than one company doing the same or similar thing to another company. Escaping competition is hard and not prevalent these days. A patented product can easily be loopholed around it.
The lesson in all of this is that doing your research can reward you. Looking at alternatives is time consuming but the money and headaches saved can be well worth it. With the internet, it’s not as time consuming as before but you still have to know which resources to look for, which sources to trust, etc.
Remember, you’re the one spending money, you’re the one with power. Looking for ways to increase that power even further helps with your bottom line and get the most bang for your buck.
Tracking what you’re spending money on is becoming essential. You can’t afford to not know where your money is going. Looking for ways to use less, using a cash-back earnings website like eBates, and looking for alternatives can be a great way to save a little extra cash. Not spending any money for a week is a different thing that what I am used to doing, but after a while I’m sure it will be second nature to me. The more I’m used to doing it, the better I’ll be at cutting expenses!
Readers, what’s your guide to spending money? How do you look for ways to save? Let me know in the comments below!
My goal is to enable your success in personal finance so that you can realize the American dream. The first step is starting today!
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