Life is not about working all the time just so that you can pay bills. Life is about doing what you want to do with your time. But you have to pay for your overhead. What exactly is overhead? Your expenses – what it costs you to live every day. Your basic overhead expenses are shelter, utilities, food, insurance, transportation, and taxes. That’s it. Whether you admit it or not, everything else is discretionary. Your first plan of action is to bring down your expenses in every category across the board.
Recommended Reading
Steve Siebold, How Rich People Think Paperback, (2010).
Shacking Up
First, how much does your housing cost? Let’s start with being a renter in an apartment because that is a common situation. Are you living in a fancy apartment that has a lot of amenities that you do not use? Do you realize that you are paying for all of that stuff? — whether you use it or not. Get this expense as low as possible, as soon as you can.
Housing is an enormous expense, especially if you rent rather than own a house with a fixed mortgage. Think hard; how can you reduce the cost of where you live? If you have your own business, can you live there? Can you ditch the apartment, and just rent a room in a house? Can you handle roommates? Figure out this money drain as soon as you can.
Utilities
Phone, gas, electricity, water, garbage pick up, and all other municipal services are part of the deadly overhead monster as well. Remember, the key to being wealthy is having your overhead paid for by your investments instead of your labor. So, be diligent about the monthly bills.
Scrutinize the phone bill. Call the phone company. Get the bill down. Change phone companies to get the lowest possible bill for the most services. Ask your neighbors and other people who live around you who they are using for their cell phone, internet, streaming, etc. Try to get as many options as you can based on what deals your neighbors are getting.
Look at the electric bill. Are you being charged for things that you do not understand? My water bill includes garbage charges. I discovered that the city was quietly billing me $10.00 every month on my water bill for something called “excess capacity”. So I called them to find out what that charge was and found out that I had an extra green garbage can for yard clippings. Apparently, I was only entitled to one, but had always had two, even though I did not know it. I returned it and saved $120.00 for the year. But I had already lived there for six years and thus gave them $840.00 for a garbage can!
Instead, I could have bought ten stocks of a good company for that amount, at $84.00 a share. That could do a 5:1 split and I could have ended up with 50 stocks of a favorite company. That could start also throwing off dividends and I could have made an income stream just from those dividends, etc. All from finding out what “excess capacity” meant. So you tell me…
Be diligent about this stuff! You may think you are only saving a few dollars per month, but that few dollars adds up when you are talking about every category of expense. And it becomes huge when the savings is calculated across the time frame of a year.
Further, you are developing the habit of getting the most value out of every dollar you spend. In fact, you can save more money than you think in the area of utilities if you carefully scrutinize each bill every month, to make certain you are not being charged for stuff you don’t need or use or want.
Transportation
The most important thing that you can do here is to pay off your car so that you have no monthly payments. Remember it is your monthly overhead that forces you to work, in order to cover living expenses. If you are making a large car payment every month, then off to work you go! You have to pay for the thing that gets you back and forth to work. You are working for your car; not exactly a great way to live.
Do what you did before. Open up all the statements that you ever received from your car finance company. Look at the amount that you are paying in interest and determine how much time you have left in the payment slavery category. Commit to paying the whole loan off as soon as possible. Then drive your car forever and don’t get another car until you have enough cash to pay for the next car outright.
Many people subscribe to the car lease philosophy. The idea here is that you get a new car every time the lease expires. If you lease the car through your corporation, then you get a tax deduction for the payments. But the downside is that you have lease payments every month. I know people who are paying $700.00 a month for a car lease. That type of payment schedule will keep you running back and forth to work for as long as you live.
A tax deduction should not be a reason that you run back and forth to work. A tax deduction is the classic example of the tail wagging the dog. Don’t sacrifice your time because you have a huge lease payment and get a deduction for it. Don’t be like that. Put yourself and your time first and things second. Get yourself free by not having high overhead. Focus on financial freedom so that you can do what you want to do with your life.
Food
You have to eat. It is a necessity and part of your overhead. Again, the strategy is to eliminate unnecessary expense and waste. The number one strategy is to learn to cook so you don’t have to eat out too much. Also, notice and make a list regarding food you throw out at the end of the week.
For example, I used to buy bananas by the bunch. Growing up, there were five kids. So a bunch of bananas always got consumed. Once I got serious about looking for ways to keep our money, I noticed that I was throwing out bananas every week. So I put it on the list that a bunch of bananas were too many. I started buying four. We actually consume that amount and I buy four bananas per week now. I saved about $2.00 per week just from not buying too many bananas. That adds up to $104.00 saved per year.
That is a new pair of shoes. Or better, a few more stock shares! This is how you get a lower food bill simply by noticing and eliminating waste. And get new shoes, too. Or an increasingly larger dividend stream!
Do not laugh at these small savings. Being frugal with every dollar is a life time habit that will set you up for phenomenal financial success.If you keep looking for ways to save, soon you will be able to afford anything.
Make sure to read the book below under Recommended Reading. “How Rich People Think” is one of the most eye opening books I have ever read. The difference between the way the rich think, and how the middle class think, is startling. If you find that you are saddled with middle class beliefs, practice to begin incorporating the better, world class, ideas into your thinking. Change is an art form. This book tells you, over an over, in a multitude of ways, where the change begins.
Continue reading to see how to reduce one of the biggest overhead that you must manage.
Recommended Reading
Steve Siebold, How Rich People Think Paperback, (2010).
