A sad truth is that today, many Americans don’t have enough personal savings to allow for a financially worry free retirement. A common misconception amongst many people who are struggling financially is that in order to makes ends meet, one must seek more income. I would agree that more income is one solution, but not the only solution. Furthermore, an alarming majority of working adults are living paycheck to paycheck regardless of income. This scenario reveals that income is likely not our problem, but rather our spending is to blame.
Fortunately, you don’t need a financial planner to implement one strategy that can dramatically impact your future financial freedom. I coin this “The 10% solution” and here is how it works.
The first step is to attempt to reduce all expenses by 10%. This may actually be easier than you might think once you get the creative juices flowing. Below are some suggestions.
- Shorten the length of showers to lower your water bill
- Keep the temperature in your home 1 or 2 degrees cooler in the winter and 1 or 2 degrees warmer in the summer
- Whatever you are currently spending on groceries, deduct 10% and then stay within that budget. It is easier to do then you may imagine.
- Don’t carry a lot of junk in your car. For every 250 pounds you haul around, your car loses about a mile per gallon.
- Haggle with service providers for cable or Internet services. If you tell them you are considering using a different vendor, they will often offer incentives for you to stay with them.
- Review your insurance policies and see if you can get a better rate.
- Reduce entertainment expenses by considering free forms of entertainment. An example of this would be getting free movies from your local library vs. a movie rental store.
A leading reason people don’t like to reduce expenses is because they feel as though they are sacrificing something they need. Herein lays the problem. Most things we spend our money on are not things we need, but rather things we want.
If you are serious about creating wealth, regardless of your income you should look to reduce expenses. Cutting expenses is a smart way to uncover money which you can use to build an investment portfolio.