In the last few steps we’ve laid all the groundwork to set ourselves up for success to achieve our mission. You should by now have a great overview of all your expenses, how much comes in, how much goes out and very soon you will be setting yourself some more detailed, time bound goals to work towards to. But to get you truly started, create momentum and feed the desire – that hopefully you are feeling by now – to see some positive results, now is the moment to take a very first step towards change. Therefore from today onwards you will by limiting one expense consistently for a whole month.
Does that mean cutting it out all together? Maybe, maybe not. You need to decide what works for you (I know! as always…). It might be that looking at your expenses you have suddenly become aware of how much you spend on your smoking habit, and since you’ve always wanted to give up smoking, now might be the moment. So yes, that would mean eliminating that expense altogether. Or maybe you’re surprised at how much you spend on nights out in the pub on Friday nights with friends. If you don’t want to give up those nights of fun, maybe you can make a commitment to staying in once a month, or going home just that one drink earlier and reducing the expense without cutting them out completely.
So decide whatever it is that works for you, your situation and your spending. For a whole month you are going to cut down on one expense, but no more. Don’t take it to the extreme by reducing all expenses or focussing on too many categories. Remember in step 1 when we talked about New Year’s Resolutions and how many people give up on them after only a few weeks? That is partially because of the fact that any new habit of doing something or no longer doing something is a big change and hard to continue if it requires a lot of effort. Focussing on one expense requires more than enough effort already, so just stick to one for now.
After you make that one area work, you can always move on to another one after. Chances are also that you are likely to cut back on a discretionary expense. Remember… the ones that add fun to your life. Imagine what happens if you try to save too much on these expenses: life might just become a little too boring in which case you are unlikely to see things through.
Step 14 – Limit one Expense – in detail
- Take out your expenses register and have a close look at all of your expenses. This step might sound easier than it is, but you want to identify the right expense or category here, to make sure that you achieve this step and build that momentum that will propel you forward.
- Start looking at your various expense categories. You might want to pick a discretionary expense, as these are easiest to control and influence, although this doesn’t have to be the case. Maybe you can pick a variable expense that you know you can easily work on if you make an extra effort. Below are some suggestions
- Smoking habits – is this the moment to quit?
- Alcohol or nights out – can you limit the number of nights out, or time spent in a club?
- Car expenses – can you leave the car at home more often and walk / cycle / take public transport?
- Meals out – can you set a limit on the number of meals out or money spent in restaurants?
- Utilities bills – do you always leave lights on everywhere and can you start turning off lights and heaters more?
- Those are just some ideas, brainstorm a list with more ideas, then pick ONE that is best for you and that you feel 100% committed to making work.
- Look at your average monthly cost for this particular expense and predict how much money you would be able to save in one month. If you want you can write this number down on your phone, in a new area of your notebook, as a Facebook update, etc so that you are reminded.
- Very important: you are trying to save money here, and end up with some money at the end of the month (you’ll find out why in step 16). Any money you save by cutting down, KEEP it! Don’t give up smoking to then spend that money immediately on beers or meals out!
- If you want, grab a little glass jar and every day put in the money that you have saved that day. For example, say you are giving up on your Starbucks coffee on your way to work. Every day that you don’t buy a coffee, let’s say you know you save $2. At the end of each workday, drop $2 in your container, and see it building up.
- For the moment you want to do this for a whole month, after that initial month, you want to keep it up if you feel it worked for you. If not, pick a new expense and see whether that is a better one. If the first one did work for you, decide whether you feel ready to add in a second expense you can save on.
Okay there you go: your first real action step on you way to financial independence. Keep up your mission, your commitment, and make sure to cut down your one expense. Don’t fret or give up all together if you lapse one day. We are all human, and those things happen. So you “accidentally” bought a Starbucks coffee today.. So you didn’t save those $2 today.. Try again tomorrow. Nobody is perfect or indeed becomes perfect overnight, so don’t be too harsh on yourself and see tomorrow as a new opportunity.