What if I told you life was pretty simple if you want to become financially independent? Would you believe me? What if I told you by eliminating two things you could exponentially accelerate your path to financial independence? Would you be skeptical and not believe what I am saying? I know I would for sure be skeptical to listen to anyone who told me if I did two things I would be able to become financially free at a much younger age.
Well my friends, you are in luck. Time to share the secret sauce.
What’s The Secret Sauce?
Okay, before sharing the secret sauce let me make one thing clear. These things aren’t secret. I did not come up with these by myself. This has been talked about in many financial independence books and podcasts well before I started this blog or TheYoungRetireeBy33 Instagram page.
Now for the secret sauce. Figure out what your two largest expenses are in your monthly budget and ATTACK THEM! That is right. It is that simple.
Do you know what your two largest monthly expenses are? If you don’t know what those expenses are, take 30 minutes right now to figure that out. Let me give you a little help because many studies have been done about this.
For the majority of people (90%+) their two largest expenses are housing and transportation. There is a chance food expenses are higher than transportation for some, but typically largest expenses are housing and transportation.
Cool, I Know My Two Largest Expenses, Now What?
Good, have them figured out? Now determine how to eliminate or significantly reduce both of these!
How to eliminate housing expense? Ah, I thought you would never ask 🙂 house hacking is by far the single greatest thing one could do to fast track your way to financial independence. What is house hacking? I also thought you would never ask. At a high level, house hacking is renting out portions of your home (single family or multi family) while living there. To read a complete breakdown of different ways to house hack, checkout this article I wrote a few months back. Want to get a full breakdown of how to house hack from beginning to end? I have teamed up with @househackingsuccess to help get the word out about the incredible course they have put together to walk a beginner through how to house hack. If you are interested in this course, click the link here.
How To Eliminate Transportation Or Food Costs
The next biggest expense on a monthly basis for individuals are either transportation or food costs.
Why transportation? People love lifestyle creep. The second someone gets a raise at their day job, they have already figured out a way to spend it. A lot of times this comes in purchasing a brand new car and taking on a massive monthly car payment. I have heard and talked to people my age who took on a $600 a month car payment because they felt like they had earned driving that nice new car. I usually don’t give them my two cents because I don’t want them to feel like they didn’t deserve the car. Do you really need that nice new car? You will be taking on a huge car payment and also a higher insurance bill. Don’t forget, there are many more costs to owning a car than simply the price tag.
How do I attack my transportation costs? Don’t purchase that brand new car. Drive used cars that you can pay for in cash. When you get a raise at work, invest the excess cash. Trust me, you don’t need that new car. It can wait till later down the road.
Why food? People are lazy by nature. People want to always get out and about. This typically means going out to eat more often than we should. I mean, who wants to sit at home and cook every day. Interestingly, this pandemic has made things very interesting for many individuals who would previously go out to eat all the time. I feel pretty confident hundreds of thousands of people are going to be shocked at how much money they have saved during the pandemic by not going out to eat all the time. It’s a balancing act though.
How do I attack my food costs? As humans we enjoy paying for convenience. For the purposes of food that means eating out versus cooking at home. The problem becomes the costs to eat out every meal add up quick while eating at home is much cheaper. This isn’t to say never go out and enjoy a happy hour or going out to eat with your friends every once in a while. That is not the intent of attacking food costs. The intent is to think a bit more about how much you want to go out to eat versus eating in. Simple concept but much easier said than done.
Key Takeaways:
- Want to become financially independent at a young age? Figure out how to attack your two largest expenses.
- Take time now to figure out what your two largest monthly expenses are each month. Was I right that they are more than likely housing and transportation or food?
- Don’t buy that new car just because you received a raise at work. Don’t go out to eat for every meal. Keep things simple.
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@TheYoungRetireeBy33
Always remember @TheYoungRetireeBy33 3 Core Principles:
1 – Your money should make money for you
2 – Start early to realize the power of compound interest
3 – Eliminate your largest expense by house hacking
