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The big expenses!

The big expenses!

Th bigger expenses

I previously posted about the small changes you can make each day that can help you save money and eventually gain financial independence. The small changes like a daily coffee or eating out for lunch each day will always add up in the long run and they are good to adjust in order to reduce expenses, but let’s face it, if you stop drinking a daily coffee for €5, you won’t break the bank. That will not be the reason you will save hundreds of thousands in the next 10 or 15 years.

The big things matter more. There is no point in saving €150 each month on a coffee when you are going to spend 2 or 3 times that amount on a car loan. Not just a car loan but finance on a car that you can’t afford and shouldn’t even have.

Lifestyle inflation is a common phenomenon, especially in your 20s. You are new to work, you are earning money that you never had before and you are working hard and climbing the ladder which includes healthy raises. The expenses creep up because you buy a newer car, and move into a bigger house in a nicer neighbourhood.

If this is your situation, focus on the bigger picture first. Saving more money by downsizing your house, and trading your car in for something cheaper or ever a bike. Fail at optimizing these bigger expenses is what will stop you becoming financially independent.

FIRE-ish example:

I live in an apartment for €860/month. A few months ago, I started looking at other places to live in around the €500/month mark. This means €4,320 extra savings each year, leading to a compounded amount of €61,578 in 10 years.

At the same time I cut out my beloved diet coke. One per day at €1.70 leads to saving €1,241/year which compounds to €7,283 at the end of 10 years.

As you can see, there is a marked difference between these 2 changes. The one I should strive to alter first is the housing. It will lead to massive savings in the next 10 years. That €61,578 will grow even further if left compound over another 20 years. It becomes a whopping €238,289 without any further contributions.

Compare this to €28,182 as the final 30 year tally of not drinking a daily diet coke. Now that is still a large amount to have at the end of the savings period, but I think everyone would agree that it would be nicer to have the larger amount!

People spend too much time sweating the small day to day expenses that they can try change. They lose sight of the bigger expenses and can easily let 5 years slip by, making little to no impact on your net worth.

Imagine you manage to sort out all the big expenses; your house is downsized or you move somewhere more affordable, you get rid of your all too expensive car and trade in for a cheaper but reliable one that you buy in cash. You are in a great position!

NOW is the time to start sorting out the smaller things. Once the bigger expenses have been optimized, you can try to adjust your spending, to increase savings and speed up your wealth accumulation, and to reduce your yearly expenses, so that you can reach financial independence that bit sooner.

Back to the diet coke. In order to have 1 per day during retirement will require €31,025 of a nest egg to provide the €1,241 each year to pay for them. At current savings rate, this will add an extra 1 year and 8 months to my retirement date. Is the diet coke still worth it? Maybe not…

What about the house? Stay in a nicer spot for €860 or save the €360/month? The €500 each month would require €150,000 in the nest egg to afford it. Consider the €860 each month, you will need an additional €108,000 to provide a passive income to cover this, or an extra 6 years of saving before FI. YIKES!

Pick out where you can accept saving money and go all in!

Look at the big picture:

  • Optimize the bigger expenses first
  • Optimize the smaller expenses next
  • Invest the savings

I am Steve, the author and owner of Fire-ishwhere I try to share my story and help people towards Financial Independence with small tips and tricks that add up. Follow me on Twitter at @fire_ish and on Pinterest. I am trying to grow my readership so if you enjoyed this post, please share it!


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    I'm 28 and living in Ireland. Only starting my path to Financial Independence, Retire Early or FIRE! Join my progress and please let me know your thoughts, suggestions or general comments!

    7 thoughts on “The big expenses!

    1. How come you choose to live in or around Dublin? It’s a pricey place.

      Also having the choice of getting a flat white at a cafe is a luxury and you tend to get that with urban jobs – I would.love that choice as I work in a large shed in an industrial park.

      Saving money on coffee might.mean you are doing a job that pays €20k more a year- – since how else could you afford to run the coffee shop with only poor people as customers?

      1. I am living in Dublin because I am training here. It’s the only place in Ireland I can do my current job. I am here for the next 4 years, then I can make the move somewhere cheaper once the training is complete. That’s the plan, get out of Dublin as soon as is viable.

        That’s very fair. I am a little envious of you. Remove temptation and thou shalt not be tempted 😂

        I totally get your point, only most people spend money on coffees, etc and are living paycheck to paycheck. Little to no savings. Fair enough if you want to indulge when you have your safety net, but indulgences like that shouldn’t be the norm. It also seems that “poor customers” are very common in these over priced places as well.

        1. It’s six of one half a dozen of the other.
          If you live and work in Dublin you might be able to avoid owning a car – that’ll save you big buckucchinos!
          How many people in my office walk to work out of about 100? Maybe 10 – and that’s in Summer!

          Dublin has its own problems and there is a reason I left Ireland back in 2005 – cost of living and it’s no better now than then!

        2. Totally agree! I can see myself moving after I am finished training!

          Out of interest, where did you end up?

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