Lately I have been thinking of my income and expense, seeing what goes in and what goes out. I couldn’t help but start to think that there are two ways to increase your financial moat to reach financial freedom in a shorter fashion. Those two options are increasing your income and reducing your expense. Without speaking on behalf of increasing your income, what if you already had a bare bones budget in your mind? Are there ways of thinning down still? Are there hidden pockets that one can slim down on? Let’s see what I’m talking about.
Budget background
I am not talking about slashing any expense that you have, as one should think about value you receive over the items you spend your money on. I have a house that is a perfect size, that’s safe and is fairly easy to clean, entertain guests and relax at the same time; as well as focus on blogging and work of course : ). I have a car, that is more than likely more than what I need, but will last a very long time and with family dispersed everywhere, will more than likely be required at this point in my life. I have health, auto and house insurance, which are necessary. I buy groceries from different places and try a new restaurant every now and then (which is very fun, adds an element to my relationship with the girlfriend and brings friends together occasionally). It then truly dawned on me. One needs to take a look at your expenses that add no value to your happiness. It makes no sense to pay premiums or large amounts of your cash on these items. I know what you are thinking – Lanny, you are a dumbass, this is easy to get. Sometimes yes, but sometimes, no. So what did I do and what challenge am I laying on myself?
Thinning the budget challenge
I took a look at my last three month’s worth of expenses, in which my savings rates were 63.61%, 66.74% and 65.74%, respectively (see why we aim to save 60% of our income), to find out what I spent my money on that literally provided no real happiness or value to my loved ones and me. First, I am very lucky to be able to save such an extreme amount of money, but this is for me to achieve the financial goals that I have placed in front of me. Secondly, I already thought that I trimmed my budget down to the bare bones that I could! Seriously, if I found a nickel on the floor, I would have scratched my head wondering how I missed even that! So what did I find when looking at my income and expenses for the last 3 months and see what I can do for the budget going forward to open up the moat wider, in order to save & invest even more.
1.) A bare-bone budget is real – After reviewing what I spent my money on, the amounts are very thinned down to begin with, I’ll definitely admin that. I have kept expenses in line and consistent, I can’t truly have a savings rate within 3% of eachother without doing so. There were 4 bigger events during these months that definitely are not “typical” but (heck they even may be typical, as more people involved in your life means more big events) were related to birthdays, anniversaries, a weekend trip to Chicago and a wedding. So some higher expenses there, no doubt. However, expenses that were well worth it, all were amazing.
2.) Expenses that add no happiness value – However, upon reviewing, though they have been kept in line/consistent, there were in fact expenses that added no happiness or value to my life. What were they? You may ask. You’ll laugh. Auto insurance, house insurance, property tax and I could even say – my fitness pass. Yes, there were quite a few expenses that I truly don’t pound my chest and say, “Hell yes, that is amazing!”. What do I mean by these adding no true happiness or value? Well, I should slim down my auto insurance and negotiate that even further, as I really have no care in the world on who provides my my auto insurance, just as long as I’m covered where I need to be and it’s as cheap as possible. This is the EXACT same as my house insurance. Property tax? This one does not make me happy, especially given that I am in Cuyahoga County, Ohio; aka the worst county in Ohio for anything tax related. And the one interest piece was my fitness pass. Do I enjoy it? Yes, but that’s because I enjoy working out. I do more running outside, indoor strength work outs (pullups, pushups, abs and even indoor cardio) as a frequency where my gym membership doesn’t get used. However, the caveat with my gym membership is that my firm pays me $240 at the end of the year for having one, so it ultimately costs around $16/month. But what do I do about these?
3.) The Challenge – Yes, I want this to now be a challenge. The last thing I have found out about reviewing my budget going forward is that I need to challenge myself even further. Therefore, in the short-to-mid-term, I am going to try to push down a few of these expenses. Though one of my 2016 goals was to reduce my auto insurance to where it is now – I am setting a new challenge that by mid-2017, I want my auto insurance to be no more than $50/month, which would save me around $17 per month going forward. This doesn’t take much effort and will mean an annual savings of $204. Next, I will call and talk to home insurance carriers and see if I can bundle and/or negotiate my current rate, with a proposed savings of 5%. After this, I will talk to my gym for my membership to see if I can negotiate, at least on a short-term, to see if there is anything they can do from there. Property tax will take more planning, as I may have missed the window here.
The ultimate realization – again not talking about increasing your income, just yet – is that even when you have a budget that you think is bare bones, take a second look or have someone else look at it. Bert and I had a discussion the other night on this and I would say it truly helped. It definitely helped having that extra pair of eyes that may not see something you do. So just when you think you can’t thin it down – look at what you are spending money on that doesn’t add value/increase happiness to yours or anyone else’s life that is within yours. You may have to wipe the blur from your eyes, trust me!
Conclusion & Challenge to you!
With that – I want to challenge the readers to think of new ways to negotiate and bring down your expenses! Why? Because if you are in this pursuit of financial freedom – this is one other method you can do to deploy this into the field. See what you negotiate. Bert had an article to negotiate everything that you can. Why? Because it’s your money and it’s up to you to make the most of it. Heck, you can even say this relates to my older article that every single dollar counts. Why? Because it just does! Drill down your budget on things that don’t make you happy, so that you can let more of what makes you happy into your life. Shouldn’t it be that simple? Go on and challenge, everything.
Please comment below on methods and ways you will negotiate and reduce your expenses. Definitely leave comments regarding what I said above and your tactics that have worked, so that I can use them : ) I’ll give you a shout out in a post, I promise! Feel free to comment on anything else and/or let me know what you think. Good luck and open that moat!
-Lanny