The value of cutting your expenses

If you do one thing this week, do yourself a favor and go to www.mrmoneymustache.com and start reading his stuff.  I have been reading this blog for the past few months and it is very inspiring to say the least.  If you like that site, check out this one on reddit.com.

One of the things you will learn from both of these sites is the importance of cutting your expenses immediately.  Sounds like a no brainer of a concept doesn't it?  Unfortunately this is a very hard thing to do for most people especially when they are young.

Having a bunch of expenses is like having a chain around your ankle trying to get to retirement.  You are bringing in a good amount of cash but you never seem to move towards your goal very fast.  No matter how much you try to pick up the pace with raises or bonuses, the pace doesn't pick up.  Why is that?

You are neglecting your expenses.  Your expenses are making you work harder.  Why is that?  The more expenses you have, the more money you have to make.  The more money you make, the more taxes you pay.  Granted, some expenses can be written off as tax deductions but most cannot.

For every dollar spent when you were in college, you had to make 1.10 to afford it.  Now that you are out of college, you have to make 1.15 to spend that buck.  It only gets worse as you get higher in the tax bracket.  Not to mention the fact that inflation is making that same dollar weaker over time.

Hopefully this is making sense to you.  Making 1.10 to be able to spend a dollar vs 1.15 to spend that same dollar doesn't seem like much but it is especially when you start piling on the debt.  You will find yourself fighting a losing battle before you know it. 

How do you get ahead of the game? Cut your expenses anywhere you can afford it.  The sites I mentioned above have a ton of ideas to help you do this.  Some are good and some are extreme though.  I suggest trying some of the easier less painful ideas like changing insurance providers before trying some of more extreme ideas.

Once you start the process of cutting expenses, the snowball will keep building.  Once you get your electricity bill down, you will want to get your gas bill down.  Once your gas bill is down, you will start thinking about cutting your own hair or baking your own bread.

Before you know it, you will have shaved off a few thousand bucks.  I figure I have knocked at least 2,000 bucks off of my yearly expenses in a 6 month period.  That is appx 2,300 bucks I wouldn't have to make if I wanted to go the route of working less or more importantly 2,000 I can put to paying off loans or investing.

Speaking of investing.  Do you know how much money you would have if you cut 2,000 out of your budget and invested it for the next 30 years.  Given a 7 percent increase in the stock market, that 2,000 would be appx 200,000 bucks. 

Its starting to look like that luxury car upgrade can wait one more year doesn't it?









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