Today’s post is from JT of Just Making Cents. He draws upon over 15 years experience on Wall Street and also his experience being a father. He shares money hacks, how to save, and parenting tips. JT has a wealth of information on all things finances and he is one who practices what he preaches. Do check out his blog and show him some love.
How to Save $500 in 15 Minutes (and Achieve Your Dreams)
My old roommate used to do something…unusual. He used to smell his floss tape after it ran through his teeth. And one particular tooth always elicited a big pee-yew!
Going through your budget can feel like flossing sometimes — you know it’s good for you, but it still feels like a chore. And chances are, there’s an expense or two that keeps stinking up your finances. Do you know which one it is?
Find the Stinky Expense
The stinky expense has three core characteristics. Once you learn them, they’ll be hard to miss. Hold your breath:
1. It isn’t a necessary item like food, clothes, or shelter. You can live without the stinky expense.
2. It’s recurring. You pay for it either monthly or annually and it’s automatically charged.
3. You can cut this expense in 15 minutes.
So while coffee may cause your breath to stink daily, it’s not a stinky expense. Cutting this recurring coffee habit is at least five minutes of struggle a day to refrain from buying the coffee. That’s 1,825 minutes a year whistling past Starbucks — that’s too much willpower to qualify as a stinky expense. Remember, stinky expenses should only be 15 minutes of work.
Likewise, your electricity bill may be recurring and can be cut in 15 minutes, but last I remember, you need electricity to live. Critical things can’t be stinky expenses.
Keep looking for them. The financial benefit of cutting them far outweighs the time you spend to do it. When you spend 15 minutes cancelling, you gain hundreds of dollars a year.
What’s That Smell?
Here’s a list of stinky expenses. It is by no means comprehensive as companies are always inventing ways to get you to pay them every month:
1. Cable, Netflix, Sky TV, Virgin Media, Sling TV, premium channels
2. Gym membership (who says you have to spend money to get in shape?)
3. Magazine or newspaper subscriptions
4. Boxes stuffed with stuff, like Birchbox
Notice something? They’re all monthly based services priced at a flat cost. Getting rid of the stinky expense cleanses your budget better than any other cost cuts. Here’s why: Because it is a recurring expense, once you cut it, it is now a recurring benefit. You’ll be putting money in your pocket month after month, year after year.
Chances are, they’re automatically charged to your credit card. So you forget about them. They just become a part of your life. The problem with stinky expenses is that if you don’t floss your financials regularly, you don’t think twice anymore when they charge you. They hide behind the shiny enamel.
Let’s say you only cut your cable TV from $130 to $90 a month, which is $480 a year. What does that amount to over the years?
If you assume that $480 per year savings is invested in the S&P 500 and compounds at 7% return a year, over a decade it amounts to $6,632.
(You’ve cut this expense, but do you know how to track it?) Go here
The money is great, but here’s the real power of getting rid of these things, particularly your cable bill. These subscription services (with the exception of the gym) are consumption items. For example, if you have cable, you’re likely spending hours a day watching TV. Those are hours you can’t get back. While you consume the stinky expenses, they consume your time.
The average person watches over 5 hours of TV a day. So if your work and commute gets you home at 6 pm, you have your TV on from the moment you enter your house until you call it a night at 11 pm. Chances are, you’re watching TV while you’re eating dinner.
What if you spent that time learning and creating instead?
What would you do if someone waved a magic wand and gave you 35 extra hours a week?
1. Always wanted to learn how to paint but never seemed to find the time? You could paint an entire museumgallery within a year.
2. Want to write a novel? If you write 500 words a day Monday through Friday, you’d write about 130,000 words a year. Basically, you could write 1 to 2 novels a year.
3. Want to be a world-class musician? They say it takes 10,000 of deliberate practice to be world class at anything with specified parameters. With these extra hours, you could be among the best in the world in just 5 and a half years.
4. Learn a foreign language. Or two. That should be enough time to establish fluency.
Or maybe you just want financial freedom.
As Joleisa will tell you (and show you), blogging is one of the best ways to do that. But it’s not just throwing up 500 words on a web page. There’s a purposeful approach you must have, and if you’re willing to spend time learning how to do it, you could gain that financial freedom.
(Want to make this year your best one yet?) Here are 4 tips.
Last year, I cut my cable to just basic TV. As a sports fan, I thought I would wither away without ESPN and my sports packages. Guess what? Sure, I missed it, but not as much as I thought I would. Soon I forgot about it. With my newfound spare time, I started Just Making Cents and it’s been one of the best decisions I’ve ever made. That it made money within the first six months was amazing, but even more, it reawakened my love of writing and opened my eyes to new possibilities and friendships.
You can take the first step of your own journey in less time than it takes to make a salad.
In 15 minutes of work, not only do you have more money in your pocket, which in turn boosts your retirement, you’re taking large leaps toward accomplishing your lifelong goals.
Nothing stinks about that!