Today’s mantra: Managing your money—and growing your wealth—isn’t about complex day trading or bizarre get rich quick schemes, it’s about following the simple premise of “spend less than you earn—invest the surplus—avoid debt.”
Today’s action: Use this calculator to determine how much money you’d have in the future if you eliminated a few recurring expenses and instead invested them.
Did you see the math from today’s email? That’s crazy! I actually had the almost identical situation with my cable. Right after I bought my house, my parents gave me a Tivo for Christmas. I wasn’t planning on getting cable at first, but it seemed a shame to not put my Tivo to use. So I was paying $50 for cable and then $20 for Tivo. I did this for about a year before I had an epiphany.
I was paying $70 a month to watch shows the next day when most of those shows were free to watch the next day online! It was madness! I immediately canceled both and saved myself $70/month.
Another big category that gets overlooked is insurance! Insurance is easy to overlook because it’s a set-it-and-forget-it expense. It’s also easy to just go with the flow. I had both my car and home insurance bundled with Geico because everyone I knew said they had the lowest rates. Well, guess what? I switched to Farmers and saved $700 a year! That’s a lot of money!
Now I’m not saying that one is better than the other, it all depends on where you personally can get the best rate. The point is, don’t just take it lying down! Be your own advocate, ask about discounts, shop around, make sure you’re getting the best deal you can.
What if money is tight and you can’t manage to scrape up $800 for car insurance for one month? Well, you don’t have to. Take your total and divide it by the number of months you have before it’s due. For example, our home insurance is about $480 a year, so $480/12= $40. So, I set aside $40 a month to go towards my future home insurance payment. I try and overestimate since rates do go up every year.
Reducing recurring expenses has such a positive impact on your finances because they’re not just a one time expense, they’re, well, recurring. When you reduce the cost, it’s money that you’re saving for months and years. If you look back at my Uber Frugal Month Homework, by re-evaluating some of our recurring expenses and our spending trends, I should be able to reduce our monthly expenses by almost $600! Using the calculator Liz linked to, if we invested that $600, in 10 years it’d be over $100,000! In 30 years, over $684,000!
Now that’s a lot of money. It shows the power of savings and the power of compounding interest. And that’s why it’s so important to reduce your recurring expenses.
What have you found that you can cut out or reduce? Have you checked your insurance rates lately?