Monday, October 12, 2015

The Small Expenses Can Destroy Your Dreams

For years I have heard the "money gurus" say not to worry about the small expenses. They say reduce your large expenses and that is your path to financial independence. They also tell you to make more income to get to FI.  

I agree that you should reduce the large expenses as best you can. However, there are only so many large expenses and after you cut them, you get to a point where you can't cut them anymore or it will affect your quality of life.

Not everyone is able to make more income for many different reasons. Of course, you should always be striving to better yourself in your career, but not everyone can or wants to take on a second job. So you work within the means that you have. 

Telling you not to worry about the small expenses is a bunch of baloney. Those small expenses will sink your goals faster than the big ones.

I am sure you have heard " Don't buy your coffee out every morning instead make it at home because it is so much cheaper". For example, let's just say that a cup of coffee at your local coffee shop costs you $3.00 a day. If you used a K- cup machine each day before you go out the door, that cup might cost you $.46 a day. Over 365 days, the coffee out would cost you $ 1095. The coffee brewed in your K-cup machine will cost you $ 167.90. That is a savings of  $ 927.10 and that if just for one cup of coffee.  That is a significant amount of money. If you don't want to pay for K - cups, just make a pot of coffee in a regular brewer. You will save even more. 

This is just simple math and can be applied to anything you buy. Let's say you go out to eat once a week and spend $ 40. for your family of three to do so. That is an expense of $2080. per year. You can probably make that same meal at home for under  $15. That would cost you $ 780. for a savings of $1300. 

Whether you eat at a restaurant,  grab fast food, or pick up a pizza,  you will save significant amounts of money by cooking at home. I know it's fun to eat out and we do it occasionally but not weekly. On those occasional outings, we pay cash. If we didn't have the cash to eat out, we would never be eating out.  If you have credit card debt, you should not be eating out at all until your debt is paid off. That interest never sleeps. It just keep piling up. It is detrimental to your well being and your finances until you pay it off. No one likes to live with stress and everyone would like to be financially free of bosses telling them what to do. But you can't get there by borrowing money. 

That might sound harsh to some but face it, it is the truth. If you want to retire some day whether it be early or not, you have to pay off your debt and start upping your net worth. If you don't, you will either be working until you die or be retired with very little money to pay for the basics. I don't think anyone wants to live like that. 

So I will be showing you how we cut the large expenses and the smaller expenses to get where we are today. There is no secret to it.  It takes discipline and hard work but if you make a game out of it, it can actually be fun.

So join me on my continuing journey to up my net worth and how we spend as little as possible each month to save even more to reach our goals.

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