Financial independence involves raising the bridge (increasing income) and/or lowering the water (decreasing expenses). You can get there by taking either approach, but the path is MUCH shorter if you work it from both ends. We’ll talk later about raising your income (this takes a bit more time). Lowering your expenses, however, can begin RIGHT NOW.
A key factor to financial independence is not so much how much we make, as it is how much we keep.
There are a number of measures we can take right now to lower expenses. A first good step is to look at those (discretionary) expenses that are on auto-pilot. That is, we’ve subscribed to a service for which we are charged (automatically) each month.
Where I’m about to go some might consider sacrilegious. Chill – It takes guts (and many small steps) to achieve financial independence 🙂
We are too often “tricked” into the sales pitch (or excuse) that “it only costs $90 per month.” Let’s do some math. What is $90 times 12 (months)? Because I hate math, let’s just simplify and say this equals $1,000. That is $1,000 per year for that small expense. Let’s keep going…What is $1,000 times 10 (years)? $10,000. The question we must ask ourselves is “Am I willing to invest $10,000 in that small expense?” Make no mistake, those 10 years will pass (much faster than we think). Would we rather have the $10,000 to invest for our retirement, go on an exotic trip, pay (cash) for a portion of our child’s education? I certainly would rather have the $10k for those “options.”
What might that small expense be (for you)? One of them, for me, was cable TV. I’ll talk (freak some of you out) about others later.
One day I came home from a hard day’s work and saw my family sitting around the one-eyed monster (TV). I said, “Why am I working to pay for people to sit around my house killing time.”
I had recently talked to a good friend of mine (Mike) who conducted a science experiment. He put one of those antenna things on top of his house and was receiving digital signal “over the air” for several networks (including ABC, CBS, NBC, FOX and MORE)! I like to tinker with stuff, so I did my own science experiment (put up an antenna). And, it worked!!! I cut the cord with the cable provider almost a year ago. We no longer pay for air. I mean, it is free, all around us…
Yes, for a few weeks there were some “awe dads” to the effect of “you are ruining my life.” Being fair, there were some available options…Someone else in our household could pay for cable service, but it was NOT going to be me.
A common/fearful question is “will I miss the big games?” NO. The channels we receive broadcast (via crystal clear digital signal) the Superbowl, World Series, Olympics, etc. To be fair, we do subscribe to Netflix for a mere $7.99 a month which provides a TON of additional content (TV series, movies, documentaries, etc.). And, there is a bunch of free content available over the internet.
In summary, if we think short-term “it is only $90 per month” we are losing sight of the bigger picture (and impact on our financial future). The suggestion here is to take a look at your discretionary expenses that are on auto-pilot. It becomes too easy to let a company draw on your net worth. Frequently (every few months) review these to determine if there are opportunities to reduce or eliminate any. Doing so is a crucial step towards shortening your path to financial independence!