In order to have money left over to invest towards retirement, retire early, or just to build wealth, chances are you’ll need to figure out a way to save more money. Of course, cutting that $2 daily cup of coffee will add up in the long run. However, that $2 is probably just a very small percentage of your overall spending. In addition, you’ll end up brewing your own cup of coffee, which will save you money, but there’s the added cost of all the time that you’ll spend every morning grinding the beans, waiting for the coffee to brew, and cleaning up your pot. Not to mention, if all that work doesn’t energize you, you’ll have further depleted your mental power before you even start your work.
Saving money is something I struggle with every day. Living as a single person in a major city with a good job, it is tempting to splurge on food, drinks, and activities. After all, I've put in a lot of hard work and time to get to where I am today. At the same time, I realize that I need to save more money in order to save for retirement and to possibly provide for a family one day. I also realize that all the processed food and alcohol available is not good for my health and does not bring me much additional satisfaction.
When figuring out ways to save more money, I believe in the pareto principle. Look for the 20% of your purchases that contribute to 80% of your total spending. By focusing on your highest spend items, you’ll most quickly decrease your spending and increase your savings. Remember, savings is just your income minus your spending. The lower your spending, the higher your savings.
Top 10 Items to Consider
Below, I have listed the ten items that you should consider reducing or changing. Of course, this list won’t apply to everyone, but my goal is to get you to think about decreasing your expenses strategically, efficiently, and effectively.
As I mentioned earlier, you need money left over to save and invest. I recommend looking at the items that you are spending most of your money towards first. When you are cutting your expenses, it may also be helpful to think about whether or not each of these expenses will increase or decrease your wealth (in most cases it will decrease). Finally, think about whether or not these expenses truly add value to your life. Understanding these principles will certainly provide stronger motivation for you to make savvy financial decisions.
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