Step-Wise Reduction Of Your Expenses (Or, What You Can Do Today To Start Building Your Cash Stash)

A big key to saving money, for the purpose of traveling or for starting a business, is to reduce your expenses.

Many people have the idea that travel is expensive. And it is, somewhat… but only because you are removed from your normal ways of making money (i.e. job).

If you could make money wherever you go, you would find that travel (especially slow travel) often will cost less than your standard of living in a western country (US, Europe, Australia, etc.).

But, the truth is that if you are going to travel or start a business, cash is like the lifeblood of your operations. You need to have cash to do what you want to do. There’s no way around it.

Now, if you are working in a ‘regular’ job, making a certain salary, the number one thing you can do to gain extra cash is to stop spending as much money as your normally do. Begin to reduce your expenses at every corner.

The payoff will not be in the short-run. You will have to make-do with a lower standard of living… not eating at the restaurants you use to eat at, not living with as much space as before, not playing golf as often.

But the pay off will be in the long run. In other words, a year or two from now, you could have enough funds to travel to whatever country you desire, or many countries, especially ones where the dollar goes further.

This the essence of building something. You spend your energy and time on something now, for a big payoff later down the road.

Now, some people are able to reduce expenses massively and immediately, almost like flicking a switch… One day they are big consumers, and the next day they are frugal as a family in a famine. I’ve met some world travelers, for example, that immediately sell or give away all their possessions, including house and car. They do it in a span of weeks, and then they are off on their trip.

Now, perhaps you are the type of person that could do this. If so, go for it. You’ll have your stack of cash really quickly.

There’s another approach though, that is worth considering: step-wise reduction of your expenses.

Basically, it means that you reduce your fixed living expenses one line at a time, starting with the most expensive down to the least.

So, if you are like most people in the western world, your biggest expenses are (in relative order of magnitude):

  • Housing (rent or mortgage)
  • Food
  • Transportation (gas, car insurance, maintenance)
  • Health (all insurance, medications, toiletries, etc.)
  • Electricity / Utilities / Cable
  • Miscellaneous purchases (including entertainment)

If you can reduce each of these, starting with the biggest expense, you will quickly begin to save a chunk of your money.

(You personally might have a little variance in terms of what the largest expense is (especially if you have a family), but the idea remains. Find out what your biggest expense is, and make a concerted effort to reduce it.)

I know the power of this. Just a couple of years ago, I was living in a 3 bedroom condo all by myself…

Why was I doing this? Well, a large reason was that I thought I would be able to rent out at least one of the other rooms, and this would have made the rent less expensive.

The problem is that when your name is on the lease, you are stuck with the monthly payment, whether or not you find a person to sub-lease a room. And, because I was unable to find someone, I was stuck paying the entire rent AND utilities for a whole bunch of extra space I didn’t need.

You see, the monthly rate was fixed. I had taken it on when I signed the lease. This was a major expense, and a bad move on my part. Today I could literally have several thousand dollars more if I had not made this move.

Luckily, I wizened up and moved into one bedroom in shared house once the lease was done. This basically cut my housing expenses in half.

I still had a significant amount of furniture and belongings, but the scaling down in my housing forced me to sell or get rid of a HUGE amount of extra stuff. I just posted a bunch of stuff on Craigslist and people came by and bought practically all of it. (I love me some Craigslist!)

So, you see this step of scaling down my housing expenses scaled down everything else. My life became much simpler, my total amount of junk decreased, and my expenses went down significantly.

I was preparing for a later step which would take me abroad for the first time.

Again, some people might set a departure date for their travel, and plan to sell absolutely everything in one huge swoop… But I feel that this is not only unnecessary, but also causes a lot of extra stress.

I mean, what if you can’t sell your house or your car, and it is only 2 days before your plane leaves? You’re stuck.

On the other hand, if you practiced a step-wise reduction of expenses, you probably sold your house first and moved into a smaller rental unit, preferably close to your job and grocery store. Thus when you reduce your housing expenses, you move to a strategic location so that it reduces your other costs, like transportation. (A long commute to work everyday be a BIG drain on your cash.)

Now, this is something that you can start to do today, if you have ever dreamed about traveling around the world, or starting your own business. A step-wise reduction of expenses starts wherever you are, and you can begin to build the cash you need to do it.

If you find yourself desiring a different life than the one you currently have, start today by reducing your expenses. You don’t have to do it in one huge move, but it will enable you to start building the cash runway you need to launch your dream.




Published March 26, 2012

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