One can never achieve Financial Freedom or even become a millionaire if all he earns goes to his expenses. And that’s how my life for almost fifty years, spending all I got thinking that tomorrow I will earn another one. Later did I know that I could build a fortune that can support my lifestyle, even without working. That’s is why it is important that we learn how to earn money, and in addition, we should learn how to keep it and make it grow. I have to be broke, lose everything before learning the lessons of life.
Benjamin Franklin, in his book The Way To Wealth, shows that we can either live by diminishing our wants or augmenting our means. But I realized that my financial recovery will be much faster if I will do both at the same time.
In this first part of the two-part series, I will discuss about “diminishing our wants.”
Following the 10, 10, 10 and 70 formula, I have to make sure that the 70% of this allocation can sustain my family needs. I have to be certain that this allocation is enough to cover. And if I will be able to find ways to reduce or cut down more expenses, I can add that savings to my savings.
The first thing to consider when diminishing our wants or cutting down expenses is to know if an expense falls into one of the two categories: WANTS or NEEDS. Shelter, food, clothes, water and electricity, and fares are in the NEEDS list. But even though, these require more careful evaluation that they are not incurring additional expenses due to extra features and extravagances. All other expenses fall into WANTS including the morning coffee from McDonalds, additional TV channels, video games, jewelry and sports equipment.
Let’s take a better look.
Food is necessary, but you have to make sure that you are not eating dinner in a restaurant every night. You can save money on foods if you do your shopping and cooking by yourself. We are all too busy for cooking, right? But you can do your shopping and bulk cooking during the weekend. Keep the cook foods in lunch boxes, ready to heat up for a meal.
Cloths are needs, but you have to make sure you are not buying expensive clothes just to look nice. Find ways to save by not buying too much. Learn to be a minimalist. If you are a sportive person doing jogging during the weekends, you don’t have buy too many shoes, many shirts, many jogging pants and other things that having too much, you don’t even know they existed in your closet.
If you are renting your apartment, make sure that you are not paying too much on spaces that you don’t need. Water and electricity are needs, but make sure you are not wasting much of these. Find ways to saving with these necessities like turning of the lights when you can have enough lights if you open your window curtains, or taking a shower rather than having a bubble bath on the tub. Doing little things can help minimize your expenses on water and electricity.
Time change, that’s for sure, same goes with lifestyle. There are items that were considered before as WANTS but now can be considered as Needs. Smart phones, tablets and laptop computers are good examples. It is now common that people expect that they can reach you on your mobile. These are great tool when properly used. With your smart phones, you can bring your library with you and read your books anywhere – while on the bus or train, while waiting for your appointment and other things. Also, once purchased, they can last for three to five years if you are careful enough. But even though they are very useful, check that you are not buying what you cannot afford.
Computer and Internet connection are very useful nowadays for the kids to help them on their researches for their school works. It’s our way as well to cope up with the advancements of the information media. Expenses can be minimized by getting the only the basic service.
Don’t be tempted to buy when shops mark their items on sale for a limited time. That is a great marketing ploy to make you have a quick decision, a sense of urgency as if there will be no more of it after the time limit. The item may look to be at a low price, yet if you don’t need it or will not be using much of it, that will still be a waste of money. If you really need the item, check if you can find an alternative to have almost the same thing, but can be purchased on a lower amount. Be mindful with your purchases. You have to check if the item can be a tool or simply an extra gadget.
Maintaining a car is a big expense. If you think you can live without a car, get rid of it. With a car, you are paying gas, insurance, maintenance, and parking fees if you don’t have your own parking space. Parking penalties as well if you forgot to pay your parking ticket. If you are living in a busy city where parking spaces are limited, your car can be towed for illegal parking that will cost a lot of money. I know you are a very busy person, but try to avoid making and accepting phone calls while driving. Penalty for this offense is expensive, and if they require you to go for seminar, you will spend more money. Include the day(s) you have to be in the seminar, since you will be absent at your work, you will not get paid of your salary.
Bank penalties are expensive. You can minimize this unnecessary expense if you make sure that you have enough funds to cover the automatic payments you have. If you can have your bank accounts online, it would be easier for you to check at least once a week to monitor the funds available.
There you go! I discussed the first option that is diminishing our wants. These are the things that I looked as I am looking for ways to save more money. Of course, there are some more ways to look for ways to save that you can explore. With the things discussed in here, I am sure you will save money that you can put in your emergency fund or investment.
Go to this link to read the other article about augmenting our means.
Do you have any other areas that you think you can reduce your expenses? Comment below what you think.
Looking forward to reaching your goal to become a millionaire and find your way to your financial freedom.