Have you ever felt like the harder you try to get something the harder it is to actually get? Like when you spent the first 3 years of high school trying to be your sexiest self to reel in someone you found attractive. Then your senior year you decided to just give up and have fun and be your natural sweatpants-wearing self and then, BAM, you meet the love of your life? (Well, at least the love of your senior year.) Of course, this is an example, but I’m hoping you know what I mean. Well, that’s kind of how this worked for my family and me. For years we wanted more money. We stressed over lack of money. Then, one day we decided to put our focus on other things that were more important to us and one day we woke up and realized we had generated $20,000 … on accident. If you like the idea of doing this on purpose…listen up.
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Ahem…where was this $20K hiding?
Yeah, so before we dive into how you can start to lower your cost of living, let’s go over how in the wide world we actually started freeing up over $20,000 per year!
I’m an open book…here’s the breakdown:
- Downsized the house (and mortgage): $8,400 per year
- New location with cheaper taxes: $1,000 per year
- Paid off our car loan: $5,040 per year
- Downgraded our gym memberships: $840 per year
- Paid off student loans: $2,400 per year
- Got out of credit card debt: $3,600 per year
And here are the 2 biggest complaints I get from people when they see these numbers:
- I can’t downsize. It wouldn’t save me money.
- You were super irresponsible! If you didn’t have so much debt you wouldn’t have struggled so much!
Yes, you might not be able to downsize as quickly and as easily as we did. There are however unique ideas on how to lower your mortgage cost like renting a room, house hacking, or even selling your home and renting instead to avoid the high costs of homeownership.
And um..yes, I know. I was insanely irresponsible with money. We were in debt and we spent constantly! I could dive into the mentality behind why we stayed so broke for so long, but I’ll get to that later.
The sad reality is, where we were is where most Americans are hanging out. Juggling debt, living paycheck to paycheck with little to nothing saved in the bank. Don’t even get me started on the lack of funding in retirement accounts!
Step 1: Know what you want
A lot of us just kind of follow society’s lead that tells us we need to go to college, get married, have a family, and then buy the big, beautiful house (that must be well furnished and spotless at all times).
The thing is, none of this might actually be what you want. While I’m probably catching you a little too late (if you’ve got student loans, they’re kind of stuck with you — like your kids).
But before you go giving up all hope, remember, there is still so much you are in control of. You don’t have to keep following the same beaten path that everyone followed before you.
Here are a few questions to get you started with:
- If you had an additional $1,000 per month (and all debt was paid) what would you do with it?
- What is one thing that’s been hanging out on your Bucket List since…like…forever?
- Can you name the biggest factor that causes you stress on a daily basis?
Taking the time to answer these 3 questions can help you gain some insight into how you want to spend your time, money and how you sure as hell know you don’t want to be spending your time and money.
This can instantly give you some insight into what you might want to look at eliminating for your life.
Step 2: Eliminate the big stuff
Paying massive amounts of money in bills every month can easily keep us stuck in jobs we don’t love. If that’s the case, I totally get why you’d want to ditch your job ASAP…but if that means you need to also compensate for the loss of pay, then it’s time to start hacking away at the big things that don’t mean as much to you as a little bit of financial freedom.
For us, this meant eliminating the house.
- We knew we had gained equity in the house in just a few years
- The mortgage cost was ridiculous
- Instead of cleaning and maintaining the house, we wanted more freedom
- And maybe we weren’t such big fans of our jobs either and wanted to create some wiggle room
For you big things to eliminate might be a cabin, an RV, student loans, or a car payment.
Think about the thing whose payment stresses you out the most — bonus points if this is a thing you don’t even like looking at or maintaining.
Now, take a moment to calculate how much additional $$ you could have in your pocket each month should you knock out this expense from your life.
Step 2.5: Don’t forget Phantom Costs
While I think the term Phantom Costs is fun in theory — in reality, it’s something to be taken very seriously. You see a lot of times we make purchases without pausing to think about the additional expenses this purchase will cause us.
I’m going to stick with my example of a house. Not only because this was our biggest setback but also because houses tend to be the thing people underestimate cost for the most.
Phantom Costs for houses:
- Property taxes
- Maintenance like lawn care, association fees, snow removal
- Long term expenses like new pipes, fixing the roof, and general upkeep
- Updates like flooring, counters, other minor costmetics
- Utility costs (especially if you are in a larger home)
Step 3: Slash recurring expenses
A lot of time people think that they just need more money, a rise or to win the lottery or something in order to get ahead. The reality is that if you can slash your monthly recurring expenses, you can drastically increase the amount of money you have.
The first step is to do a Spending Inventory so you know exactly how much money you are spending on things every month. This is particularly important for things like gas, groceries, entertainment, and out-to-eat expenses since those are things we don’t often account for.
Once you have an idea of how much you are spending on these things each month, you can start to make plans for where you will cut costs. Here are some ideas on how to ditch recurring expenses.
Reduce your grocery bill – Make sure you are shopping your pantry before you head to the store. Another good way might be to get pre-planned meal plans to help you stay on budget.
Ditch some of the subscriptions – If you have multiple streaming services, consider rotating between them. Even if it’s an additional $20 per month, that ends up being another $240 per year! Plus, if you have goals to get out more, exercise, or spend more time on your hobbies, less time in front of the TV would also be aligned with the things you want for yourself
Step 4: Knock out any debt!
Debt is like the kid who pees in the pool causing everyone and their moms to have to get out and stand wet and dripping on the sidelines until they have officially decontaminated the water. Is that a thing, I’m not sure, but it’s pretty fitting for debt.
For years I denied that I was able to pay off debt. I had heard over and over again about people using the Debt Snowball method to pay off debt. This required an additional $200 per month and I refused to believe that I had that kind of cash lying around.
The truth is, I had that in spades, I was just spending it on a lot of poorly thought out things.
If you believe in yourself enough to find $200 in your budget or are willing to work a side hustle to help generate that income, be sure to use my Debt Snowball printout and see how we paid off $6,000 in 6 months!
Step 5: Invest in what matters
Were we able to just start saving an additional $20,000 per year? I mean, we probably could have, but instead, once we were done paying off our debt, we started investing in things that were designed to help us get to the places we wanted to get to in our lives.
Here are some of the areas we chose to put our money:
- Increasing retirement contributions
- Automatic transfers to savings (The Savings Builder is a great one for beginners)
- More automatic transfers for travel funds
- Investing in starting an online business (How to start a blog)
- More training to help us manage our money (My Unstoppable Purpose program is perfect for simplifying life and money)
At the end of the day, it is so important to put your money where your priorities are.
Once you have freed up additional income, please don’t make the mistake of just pissing it all away again. Unfortunately, this is what a lot of people tend to do. That’s why it is so important to also work on your money mind blocks.
Your Money Mindset
Thankfully, there are so many tools out there that you can access to help you get clear about your money mind blocks and therefore enhance your money mindset.
It might sound corny, but the way we think about money spills over into how much (or how little of it) we actually have.
Here are my top book recommendations to help you gain clarity on how to heal your limiting beliefs around money and create abundance in your life.