2 Ways I Cut My Monthly Expenses

PC

In my last article, I go over exactly why it is so important to save as much of your income as possible. There are many ways to start saving more, but the most impactful way to save more is to minimize fixed expenses.

I am not saying that you have to get rid of your Netflix or Amazon Prime subscription. What I am saying is that we need to look at all fixed expenses in our life and see if there is any way possible to reduce this. So, instead of canceling your Netflix account, see if you can share with your mom, dad, sibling, friend, coworker, or anyone willing to share with you.  

The entire premise of reducing fixed costs should not lead us to become more unhappy. It must be realized that there is no true correlation between people’s level of happiness and amount they spend. So before you think, “I would never do that!” or “I could never give up ‘x’ “, understand that there must be a sacrifice in lifestyle if we are to save enough for financial independence.

(1) I Moved Back In With My Parents

In 2013, I had finished working my first year in the corporate world. I was living on a high note because of my new found income that I never had before. I had lived my entire college life away from home and when I returned home after graduation, I found it impossible to live with my family. I couldn’t stand the constant invasion of privacy and the inability to live the way I wanted.

I felt trapped living with my parents and needed to move out, at least that is what I thought. I was convinced that I needed to buy an apartment since renting would have been a less wise financial decision. I eventually found a small co-op studio apartment for sale in Forest Hills, Queens, New York. The studio’s purchase price was $150,000 and was far outside my price range. I spent most of what I saved that year and needed, even more, money from my parents for the %20 downpayment.

I did not fully understand how way over my head I was and I should never have bought the apartment. I didn’t NEED to move out of my parent’s apartment. I only did because I was able to afford the mortgage payments. The real problem in buying a piece of property are all the hidden costs that go into closing. Besides all the closing costs, I spent even more money on furniture, appliances, and other home goods. I was convinced that I was going to live in that studio for the next several years.

After living in that studio apartment for a year, I had accumulated dismal savings. On top of my $1,100 a month mortgage payment, I had the internet, water, and electric bills that increased my monthly costs by another couple hundred dollars. Before moving into my apartment in Queens, I figured I would be able to save at least %20 of my income every month. This was based off what I would call, a ‘gut’ feeling.

Every month, I would plan to save just a couple of hundred of dollars and would feel proud of it. However, every so often, there was an issue that I had to take care of that forced me to dip into my savings. One time, the pipes in my bathroom had burst and cost me $600 to fix all the damages. My laptop broke a couple months after, so clearly, I had to get a new laptop! In the same year, my vehicle was broken into and fixing the windows cost me another $500. There was always something that came out of the blue and ‘forced’ me to spend the money I intended to save that month. I am sure there are other people who can relate to these problems and can never save the amount they plan to due to unforeseen circumstances.

I learned, that no matter how hard I tried to budget and plan, I placed myself in a situation where I would never be able to save enough because any single costly emergency situation could potentially wipe out my savings.

Once I understood the situation I put myself in, the answer was simple: I sold my apartment after 2 years of living there and moved back home!

Moving back home may not be an option for many people, but is something I strongly recommend. If this option is available for you, I strongly urge you to reconsider living at home with your parents. It isn’t the ‘coolest’ thing to live at home for now, but it sure is ‘cool’ to retire early.

I Bought a Bike!

my bike

*And there it is! Such a beauty! :)*

In New York City, the monthly subway fare costs about $120 a month, which comes to $1,440 a year. Investing $1,440 a year (assuming a 7% annual return) would turn into more than $25,000 in 10 years. Just riding the subway to work every morning was one of my most expensive daily tasks. I bought a bike for $300 from my friend and haven’t regretted the purchase since.

Along with eliminating my monthly subway costs, I also canceled my gym membership.  Since I was biking over an hour a day on the way from and to work, I no longer needed to have a gym membership.

By making a simple change in the way I get around the city, I have reduced not only my commuting cost but even eliminated my gym membership in the process.

Buying a bike may not resolve everyone commuting costs, but it is worth considering if there are any ways to reduce commuting costs using alternative methods. Maybe a co-worker lives near you can you can split carpool costs. Perhaps, there is a bus or train that would provide a much cheaper commuting method than driving to work.

However, if your work is within a distance that makes biking to work an option, then you should definitely consider all the benefits of riding a bike.  Not only are there significant commuting costs that are reduced, you will become more healthy just by simply going to and from work. The benefits of being healthy are that healthcare costs will be significantly lower in the future and health has endless benefits all on its own.

Reduce Fixed Expenses!

There are always ways to reduce fixed expenses. I understand that not everyone has the ability to live at home with their parents or the ability to bike to work. Whatever the situation may be in your own life, take a close look at all the payments you make every month and try to see what can be reduced. See if there are ways to transform costly monthly expenses into no costs or lower costs. Below are just a few examples of ways I have thought about to reduce fixed costs:

  • Change cell phone providers to a lower cost one. Maybe MetroPCS or Sprint
  • Cancel your cell phone plan.
  • Get a roommate (or three) to cut rent costs.
  • Move back home with your parents to cut rent costs
  • Never move out of your family home until you are financially prepared
  • Share subscriptions with friends or family
    • Amazon Prime
    • Netflix
    • HBO NOW
    • HULU
  • Cancel TV/Phone entirely. Most things can be watched on the internet.
  • Buy solar panels to cut long-term electricity costs
  • Move closer to work to cut commuting costs
  • Move further from work to save on housing costs, if you live in a large city.
  • Refinance student loans with social financing platforms or personal loans
  • Change insurance companies for more competitive prices
  • Cancel Your Gym Membership. Find a cheaper alternative.

These are just some basic ways I have thought about reducing expenses that are recurring in our lives. The most expensive fixed costs people tend to have is related to rent or a mortgage payment. Therefore, we must focus on reducing housing expenses as much as possible or never move out of your parent’s house in the first place.  

I realize that some of these changes require a change in lifestyle or even require ‘effort’ for people to achieve. Now, I know there will be people that read this article and refuse the idea of biking to work or moving back home. However, if we remain comfortable committing a large percentage of our after-tax income to paying fixed expenses, we will never be able to build a significant amount of wealth.

Start being creative and think about ways to reduce any fixed expenses in your life!

-Jackson
P.S. Please like, share, comment, and subscribe.

8 comments

  1. It amazes me how easy it is to fall into the “American Dream” – college, job, house, spouse, kId with accumulation of STUFF throughout. It took me a while to awaken but living the dream now after early retirement. I recommend checking out Early Retirement Extreme for good ideas on saving to leave the rat race and instead live doing things you love. Another good one is Your Money or Your Life.

    1. I definitely agree. I hope we can all find a way to live a happy life without signing up for debt to obtain stuff.

      Thanks for the recommendations! Reading Early Retirement Extreme right now, and I’ll definitely check out Your Money or Your Life

  2. Hi Elizabeth! There are some pretty safe investments if you are looking for a 7% annual return. A good way to get a minimum of 7% growth is to invest in the overall market. You may want to look into investing in a major index fund. Look up other funds that closely follow market trends. Or if you believe in a particular industry, you can invest in specific industry funds.

    A good example that I know of is a ticker symbol “SPY” that closely follows the S&P 500 index. This Fund has consistent positive returns over its lifetime.

    https://www.google.com/search?client=ms-android-sprint-us&q=NYSEARCA:SPY&stick=H4sIAAAAAAAAAONgecRozi3w8sc9YSm9SWtOXmPU4OIKzsgvd80rySypFJLiYoOyBKT4uHj00_UNC82MMgwqDA14AKdnATY8AAAA&sa=X&ved=0ahUKEwjJwbfTzpPTAhXl8YMKHZ_oAREQlDMIMzAD&biw=412&bih=651&dpr=3.5

    Depending on how you think the market will fair (and how long you have on your time horizon) will determine when you want to invest. If you live in the US like me, then you might want to see how Trump’s presidency affects the market before investing in a Market Fund.

    I know that a lot of analysts that believe the current market is overvalued. Just google “stock market overvalued” to see for yourself if we are in a market bubble.

    There are plenty of platforms that let you invest. Vanguard is a good traditional financial account that has been around for a long time. Or you could try a newer app like ‘TouchStock’ or ‘TradeHero’ with much lower fees. I am forced to use ‘e-Trade’ because of my firm.

    Hope this helps!

  3. Hey! What kind of investing account has a return of 7%? A roth? Where do I sign up?

Leave a Reply