In an earlier blog, I asked you to estimate how much money you need each month and how much you’d anticipate spending if you were no longer working. If you’re able to reduce your expenses, you can minimize the distance between you and your goals.
The easiest way to have lots of money is to keep what you earn. The less you spend, the more you have. Even something as simple as bringing a bag lunch or making your own coffee instead of buying a $7 latte can add up to big savings. If you don’t believe me, believe Benjamin Franklin, who said, “Beware of little expenses. A small leak will sink a great ship.”
Start by keeping a spending diary for a month. It’s not as hard as it sounds if you use your credit card for every purchase. Your credit card company most likely offers a report that will categorize your expenses. You can export that report and add details. Even if they don’t offer a report, you can download your statement and do the same thing. Find every item on the list that could possibly be eliminated. Add up those items and multiply by 12. That’s how much you can save in one year!
Years ago, I went out of town for a month and forgot to pay my cable bill. When it arrived the following month with a double payment due, I realized that I was shelling out almost $200 and I hadn’t watched TV once during that time. So I cancelled cable and became a member of The Coolidge Corner Theatre in Brookline. For $200 a year, I get free movies Monday through Thursday, plus free popcorn. Now I can see first-run movies, have a free night out with popcorn, and support a great local venue all while saving $1000 a year!
Be creative about cutting things from your budget. Make it a fun challenge and see what you can substitute that will save money while enriching your life.
As you eliminate the expenses, keep putting out the money. If you give up lunch, put the $15 a day that you would have spent into a special account. Add the $7 for your latte and the cigarette money that you saved by quitting. Add to that the $50 per month you saved by doing your own manicures and the $100 per month you saved by cancelling your cable TV. The thousands of dollars that you save can become your downpayment for a property that will support you into old age. I promise that the excitement of pursuing that goal will outweigh the minor inconveniences of the things you’re trimming out of your budget.
It’s fun and challenging to find new ways to save. Discount travel, free cultural concerts, shows, and movies, volunteering at your community theater in exchange for free admission—these are fun ways to save money that will introduce you to interesting people, new activities, and adventures. What creative ideas can you conceive? Now that you're saving money, learn how to buy investment real estate!