The Power of Reducing Expenses
Thanks to my dad’s advice, I’ve had the best 6 months of my life.
My dad has been a truck driver most of his life. He worked away from home two or three days at a time when I was a kid; he had to pay the bills, but he regretted not being with us.
Last year, when my wife was pregnant, he told me to spend less, work less, and be with my soon-to-be-born son more. It’s surprising how little you can live on, he said.
So we listened and cut our expenses. My wife and I are six months into a year of parental leave, and it has been the best 6 months of our lives.
By reducing expenses, you increase flexibility.
My dad’s point was that spending less means less pressure — less pressure to work long hours or pick up extra shifts.
Less pressure means more flexibility. You could take a lower-paid position that gives you more free time; you could consider a career change or finally follow your passion. You could even take a year of parental leave.
I gained the flexibility to spend seventy more hours per week (compared to if I was working) with my son. Now I’m considering quitting my full-time job and becoming self-employed. Reducing expenses has made this possible.
By needing to work less, you can improve your lifestyle.
This increased flexibility doesn’t have to hurt your bank balance.
Although our household income has decreased by 30%, our saving rate hasn’t changed. Because we reduced expenses by 30% too (this was by accident — no way could I have worked that out so neatly).
In other words, our retirement plan is still on track. And our net worth has increased by over $20,000 USD this year, even though we haven’t worked for six months because we reduced our expenses. We didn’t work too much, get advanced qualifications, or aim for a promotion. We simply live within our means.
Increasing income is great (of course) but it comes with baggage. Your new position might have more responsibilities. Or more stress.
Spending less can reduce responsibilities and stress while not reducing your net worth.
My wife and I aren’t high earners; if we can do it, you can too.
Last year, our combined income was under $80,000 USD. Luckily, we live in a country with a generous parental leave system, and we had room to reduce spending.
But reducing expenses can help people in any number of situations (not just new parents).
Struggling with debt? Reduce spending and pay off loans.
Struggling to save or invest? Spend less and free up more money for your future.
Struggling to cover bills? Analyze your spending habits and get rid of anything you don’t need.
There are many ways you can cut costs:
- We canceled subscriptions we no longer felt were a good value (bye, Netflix).
- We stopped eating out (not easy here in Japan).
- We haven’t upgraded any devices (our 9-year-old MacBook Air and 4-year-old smartphones are still going strong).
- We changed cell phone plans.
- We started shopping in bulk (again, not easy in Japan — fridges are tiny here).
Of course, reducing expenses and increasing income is the quickest way to financial independence. And I’m not suggesting taking a year off work and spending less will get us to our retirement target any quicker. But, spending less has given us the flexibility to enjoy life more.
And I’ve been there for all my son’s ‘firsts.’