Cutting Small Expenses Can Make You Rich

Cut your expenses and that should be the mantra you should adhere to. It is not what you make but what you spend. Yes, we all want to make big bucks as quickly as possible and retire early but that is not always possible, unless you happen to win a lottery and become rich overnight. Can you believe that 70% American are living from paycheck to paycheck? You might think that those little small things you are spending money on every day are not worth considering and it is prudent to concentrate on big ticket items. But my friend, you are wrong.

Have you ever heard of the Latte factor? It is the money you spend on small items every day that add up to a considerable chunk at the end of the year. Invested wisely, that money can grow to your wildest imagination. I am not suggesting that you give up your favorite coffee and spend your day miserably. But you can certainly find small items here and there that you spend money regularly and cut the expenses on those items, let us say, 50%.

Start an expense book and write down every penny you spend everyday for one month. At the end of the month, add up all the small items, like coffee, candy, snacks, muffin, power drinks, power bar, etc. Unless you are one of those prudent money savers, you will be really surprised at how much you have spent over a 30 day period. Now, here is what you need to do. Budget your coming month’s small item expenses at half the level you spent in the last 30 days. At the start of the month, Take 50% of the money you spent on small items in the last 30 days and put it in a newly created savings account. Do it for one year and at the end of the year, take the money and buy some index fund.

Besides saving on small items, you should also have a monthly savings from your 401K, if your employer is offering one. It will save you big on taxes till you retire and start withdrawing money from it. If your employer is matching your 401K contribution up to certain percentages, it will be like throwing away money of you are not taking advantage of that match.

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