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How much did you spend on groceries last month? How about on your cell phone bill?

These days we’re able to charge nearly every little thing to our credit cards or set them for direct withdrawal from our bank accounts. Month in and month out, the one thing that happens for sure is that we’re bilked by the companies that constitute our material world.

Would you like the comfort of watching your favourite television show in High Definition? No problem. That’ll just be $80 a month for the service and another payment on top of that for the 60” television you’ve financed.

In a world where basic needs get subordinated to ridiculous luxuries, it’s logical to look for a way to get ahead.

Our simple method for beating the game is this: Be Your Own Biggest Expense.

What does that even mean?

It’s simple, really. For most people, their largest expense might be a mortgage, some vehicle payments, their rent, whatever it may be. You need to flip the script. Your goal should be to make your biggest expense your payment to yourself.

There are a few action steps you can take to make this possible, whether you’re starting from zero or already have a healthy savings rate:

Pay Yourself First

  1. You’ve probably heard this one before. It’s one of the simplest tactics you can use to boost your savings rate. If you pay yourself immediately upon receiving any sort of income, you guarantee yourself that you won’t fall short of actually doing it. Make it a priority.
  2. What many people do is wait until the end of the money and see if “anything is left over” to put away for the future. The problem is that there’s rarely anything left in this scenario. The reality is that if you put your savings and investments on the backburner, they’re likely to stay back there.

Go From Small To Big

  1. Your future is in your hands with how much you decide to invest today. Conventional advice suggests 10% of your income going toward your future. The problem is that 10% is too small. You can begin with 10%, but if you want to really supercharge your savings rate and build your future, you should be working up much higher than that.
  2. Every month or two when you get used to a certain savings rate, build up by a few percent. So, if you’re at 10% now and that seems okay, try going to 14%, or 16%. See how that goes and keep making it happen

Shrink Your Expenses

  1. One of the easiest ways to find extra cash in your budget to put toward your future is to tackle your current monthly expenses and find ways to decrease them.
  2. Are you paying too much to your telecommunications provider? Do you actually watch all of the cable channels you are paying for? See about decreasing the package size.
  3. Are you paying too much for rent? Make the case and write a letter to your landlord. Ask for a rent reduction.
  4. Decreasing your fixed costs to live has two benefits: a) You have more free cash flow to devote toward your investments, and b) You need less passive income to cover your expenses and thus become financially independent.

Track Your Expenses

  1. After you have a month (or better, a year) of data, you are able to recognize spending patterns. You can see where you’re shelling out the majority of your loose change and make a decision on whether $40 a week to your local pizza delivery guy is worth earlier financial freedom.
  2. You become the driver in the vehicle of your life. You no longer sit passively near the back of the bus as large corporations with massive advertising budgets dictate to you how you should be spending your money. By simply being fully aware of how you spend your money, you can in fact become master of your life by deciding where your dollars go.

Increase Your Income

  1. Most people at some point in their lives receive a pay raise either through a boost in their hourly rate or through a bonus/windfall of some sort. You need to use that increase to elevate your savings rate.
  2. If you build another pipeline of income, all of that additional cash flow should be laying the pipeline of your Get Rich dream. It is not for going out for dinner or to a movie.
  3. Do NOT use a pay raise to increase your “standard of living”. Extra money should be dedicated to Getting Rich, if that is your goal (we will assume that it is since you’re reading this). Too many people squander the incredible opportunity presented with “found money” by buying a new home, car, or simply pouring it down the drain of their generally materialistic lifestyle.

So to take us back to our original point about becoming your own biggest expense, all you really need to do is follow the list above – which is far from a complete number of ways to increase your dollars given to your future self.

Opportunity Cost

There is a perpetual trade-off in life between any one thing that competes with another. It’s the same tension you feel sitting down at a restaurant where you have two favourite meals. Choosing the Chicken Parmesan dish with a side of garlic mashed potatoes and mixed vegetables means you won’t be having the Meat Lover’s pizza. Likewise, when you spend $34 on a new DVD on Blu-Ray, those are thirty-four dollars you will not have to invest and grow to Get Rich.

Recognizing that there is an opportunity cost expressed with each dollar frivolously spent allows you to recognize areas in your consumer life where you can take control.

By becoming your own biggest expense you can take comfort in knowing you’re putting your money where it means the most; with yourself. Your future is in your hands quite literally each time you hand over a piece of paper or plastic. Choose your expenses wisely.

Thanks for your time.

The Get Rich Brothers

Are you your own biggest expense?

Pictures courtesy of pixabay.com 

7 thoughts on “Be Your Own Biggest Expense

  1. Pingback: Get Rich Brothers
  2. J McD says:

    Thanks for this informative article. I’ve been paying myself first for years but recently fell off the bandwagon. This was the reminder I needed to get back on track.

    1. J,

      Paying yourself first is the most important step you can take on the path to Getting Rich. Rather than falling all the way off of the bandwagon, you can always decrease the amount you are paying yourself for a period of time if you find your finances getting stretched. Once things even out again, you can bump the payments back up. For instance, if you typically pay yourself 15%, you might drop it down to 8% for a month or two if you really feel the need and then push it back up to 15% (or more) once you’re able.

      The main thing is to keep that cash flow heading in your direction.

      Take care,
      – Ryan

  3. Andrew says:

    Thanks for the great advice. This article is really eye opening.

    1. GetRichInCanada says:

      We appreciate the feedback. Making personal finance accessible for everyone is what this is all about.

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