Category Archives: Spending

Personal Finance Foundation – Part 2 – Easy Money: Spend Less

This is the second part of my Personal Finance Foundation series that serves as a starting place for those who are looking for an organized way to approach their finances.  It’s easy to find personal finance articles, but it’s much more difficult to find an organized approach to personal finance.  To read Part 1 of the series, go here:

Personal Finance Foundation – Part 1 – A Starting Place (Calculating Net Worth)


Spend Less

To grow your net worth (assets – liabilities), you can do any of the following:  Earn more, spend less, or grow your money through saving or investing.  When you start taking control of your finances, finding places in your life to spend less gets you immediate wins.  For example, it’s much easier to find cheaper car insurance than it is for you to get a new job or promotion that will give you a pay raise.  A few clicks will let you choose a higher auto insurance deductible and lower premiums, while a promotion requires you to demonstrate additional value to an employer over the course of several months or years.

Focus on the big expenses when cutting spending, since this will provide you with the most significant savings.  Sure, you can pack a lunch a day or two more per week, but doing this won’t move the needle as much as focusing on big wins that will net you hundreds or thousands of dollars.  Transportation and housing are typically the largest expenses for most people, so I recommend starting your cost cutting here.

Transportation Costs

If you’re in massive debt but drive a $40,000 truck, sell the truck, buy something less than $10,000 (you can get a very reliable vehicle at this price), pocket the difference and free yourself of the monthly payment if you’re financing.  As you hopefully know, a new vehicle’s value declines precipitously the moment you drive off the car lot, and continues declining significantly the next couple of years.

What if you took the money you saved driving a modest vehicle and applied it to a credit card balance, which likely has an interest rate well over 10%?  Or, what if you took the money you saved driving a modest vehicle and invested it in Vanguard’s Total Stock Market Index Fund, which has returned 7% since it’s inception?  By the Rule of 72, a rough measure of how long it takes money to double at a given interest rate, your money would double in about 10 years (72/7 = ~10).

Another example:  If you’re currently driving a vehicle with bad gas mileage and are also driving long distances on a regular basis, you would save significantly on gas costs by instead replacing your gas guzzler with a gas efficient car.  Many cars now average 30 or more miles per gallon, so you could potentially cut your gas costs in half by switching to a more gas efficient vehicle.  At a cost of $2.75 per gallon and at a 15 gallon savings, you save $41.25 on fill ups when comparing a 30 mpg vehicle to a 15 mpg vehicle.  At two fill ups per month, this saves you $990 annually.

Housing Costs

Your largest cost cutting wins will likely come from cutting housing costs.  For example, if you’re renting a $1,400 per month apartment but are drowning in debt, you can likely find a less expensive but livable apartment, condo, or rental home that would save you hundreds per month.

Another method for reducing housing expenses is house hacking.  This is done by getting a roommate or multiple roommates to pay you rent and split expenses, allowing you to take their rent payments and apply them toward the mortgage.  If two roommates pay you $500 each (I know, that’s cheap rent today), you’ll have an extra $1,000 every month and $12,000 annually to apply to your mortgage.  House hack for a few years and you’ll greatly accelerate paying off your mortgage and avoid paying tons of interest to the bank, especially for 30 year mortgages.


When it comes to cutting costs, though, there’s a limit to how much you can cut.  Sure, you could spend your free time cutting coupons, and this is fruitful to a degree, but you could also spend your free time engaged in activities that could move the needle much more drastically.  I’ll address these activities in my next post.

Stay tuned for part 3 of my Personal Finance Foundation series!