There is a money management philosophy that I like to live by.
“Make Money. Spend Less Than That Amount. Save and Invest the Difference.”
I’ve covered (and will continue to cover) these topics in the blog going forward, and I’ve talked about “making money” and how I’ve optimized my income over the years. I’ve also talked, at length, about how I regularly invest and save money. I want to turn my attention to “spend less than that amount.” Specifically, I want to talk about how you can easily reduce your expenses, so that you always earn more than you spend.
I think I’ve done a great job of reducing my expenses over the years. In my adult life, I’ve never had a month where I’ve spent more than I’ve earned. This feat is not the result of luck, nor is it an accident. I’ve worked hard to make sure my expenses are low, even as my income has doubled over the past five years.
While this is not an exhaustive list, I think there are 3 easy ways to immediately reduce your expenses.
Four years ago I was spending $100 a month on cable/satellite (Dish). We canceled out cable subscription in favor of using Netflix and Hulu ($21.98 per/month). Just simply giving up cable has saved me $936.24 per/year, or $3744.96 total over the course of this endeavor. Cutting cable is probably the lowest hanging fruit when it comes to trimming expenses.
Shop at the Right Grocery Store
Everybody has to buy groceries. Often, people will go to the the local grocery store, or big box store, regardless of price. Here is a piece of advice. Buy your groceries at Aldi. Aldi, by far, is the most cost efficient way to purchase food. I’ve been shopping at Aldi for the past few years, and It’s saved me hundreds/thousands of dollars. Here is an example. Strawberries at Aldi are $2.00. Strawberries at the local grocery store are $5.99 for the exact same size container of strawberries. Everything is more expensive at the local grocery store. Recent experiments done with Aldi suggest that it can save around 20% off of your grocery bill. If you spend $100 a week on groceries, you can save over $1,000 annually by shopping at Aldi.
Cook at Home
For the first time in history, Americans are spending more money on restaurants than on groceries. Research shows that if people were to simply cook at home, they would save about $9 per meal. The person consumes 21 meals a week (breakfast, lunch, dinner each day). Let’s say that you eat 1/2 of those meals at a restaurant during the week (e.g., Starbucks for breakfast, lunch with colleagues, dinner out on weekends…etc.). If you were to cook those meals at home, instead, you would save $94.50 per week (10.5 meals * $9 in savings). That would equate to $1,134 of savings per year.
Don’t wait to begin reducing your expenses. There are simple things that you can begin doing immediately that could ultimately save you thousands of dollars each year. Do you need the 500 channel satellite package, or can you live with using Netflix and Hulu ? Do you need organic bananas, or can you live with the $0.49 bananas at Aldi ? Finally, can you manage to cook more at home, in lieu of eating out most meals ? If so, these simple lifestyle decisions that can help you down the path of financial security.
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