If you’ve ever attempted at adulting, you may have taken a crack at reducing your expenses and improving your monthly savings. Some of you may have been successful at it, while some of you may feel like you can never manage to save much.
✋I'll be the first to admit that I’ve tried to improve my monthly savings numerous of times throughout the years with barely any success.
No matter how much I tried to cut costs and reduce my spending habits, I felt that I was perpetually living from paycheck to paycheck, and barely saving any money at the end of each month. Even when my salary increased, I didn’t feel like I was saving much more money than I had in the previous years. I could never get to the 🥔root🥔 of the problem.
WHAT I DID RIGHT
A few years after I first started working, I began to meal prep in order to lose weight. Although saving money wasn’t the driving factor behind the meal prepping, I was packing lunch every day and cooking dinner most nights, which naturally reduced my spendings on dining out during weekdays.
I was saving more money, which encouraged me to save in other categories. I cut some streaming subscriptions and stopped hiring monthly cleaning services.
I thought I was making great strides in reducing my monthly expenses.
WHAT I DID WRONG
I thought I was making great strides in reducing my monthly expenses. Yes, I just repeated the same sentence twice in a row.
While I applaud my younger self for trying to improve my spending habits, I was focusing my efforts a bit inefficiently. The expenses I was cutting, while always helpful, weren’t the bulk of where my money was going to. So the impact of those efforts didn’t make meaningful improvements to my overall monthly savings.
It’s like finding the road blocked by rocks, but moving them off the road starting from the smallest pebbles when I should have focused on moving the large ones and continued on my way.
MY LARGEST MONTHLY, RECURRING FIXED COSTS
What I didn’t put enough emphasis on was reviewing the largest monthly recurring fixed costs that were draining my paychecks before I was even able to spend on other purchases. These costs didn’t change month to month, no matter how much I tried to save elsewhere.
Housing (condo & utilities)
Condo expenses included mortgage, HOA fees, property tax and home insurance. Utility expenses included electricity, gas, internet and Netflix.
I had a roommate who moved in after I purchased the condo. Out of consideration for the friendship, I charged a flat, very low (well below-market rate) rent, which was inclusive of utilities. Mistake #1. This meant that I would have to cover any increased usage of our utilities expenses, which fluctuated during hot and cold seasons of the year. Additionally, over the years, I didn’t increase rent from its already-low rate. Mistake #2. My condo’s monthly HOA fees grew drastically over the years due to higher maintenance costs, and every increased cost in the monthly HOA fees was a direct reduction to my savings.
My housing costs were probably the quickest and easiest opportunities to cut from. By increasing my roommate’s share of the housing costs to a more fair-level, I could have increased my monthly savings by a few hundred dollars immediately.
New spankin’ rental car
As a young professional, I wanted to reward myself with a new sporty whip to couple with this new chapter of my life. But I didn’t want to deal with the maintenance of the car, so decided leasing was the way to go. As 🥔a-peeling🥔 as it is to drive a fresh new car, monthly car lease payments go straight down the drain, because at the end of the lease period, you walk away with nothing. To make matters worse, car insurance premiums for young drivers with new cars are astronomically high. Hundreds of dollars a month that had no returns.
Gym (personal training)
I had a personal trainer at the beginning of my weight loss journey. The monthly costs were extensive (ranging $400 - 500 per month), and it continued for years. In the grand scheme of things, I came away from it successfully reaching my weight loss goal, so you can say that it was worth it from the health perspective. However, financially, it was entirely out of my means.
TAKEAWAY
Focus your cost saving efforts on the largest expenses first. It’s nice to feel the sense of accomplishment in cutting back smaller costs here and there, but ordering Chipotle instead of Sweetgreen a few times a month to save a few dollars won’t get you very far if you have large cost obligations looming over you each month.
You want to prioritize reducing the largest, recurring costs because they will be the absolute ceiling on how much you are able to save, no matter how much you try to cut elsewhere.
There’s nothing wrong with expensive purchases (i.e. car lease or personal trainer), but it needs to be within your means, or you’ll need to aggressively cut back on other categories in order to maintain your savings rate.
Relentlessly slash the expenses that don’t bring you happiness, so that you can allocate your money to the things that do.