The 30-Day Expense Elimination Challenge
This is fairly obvious from a business perspective – it’s one of the first places most businesses look as they attempt to improve their bottom line. It amazes me how people can be so meticulous with expense control for business operations, and simultaneously act with such neglect for their own personal finances.
I’m going to start by taking my monthly budget, which lists the general things I spend money on each month, and remove all “fixed” expenses. This primarily includes:
- Utilities (assume fixed for purposes of this challenge)
- Gym membership
- Cell phone usage
- Student loan repayment
What does this leave me with? The big remaining expenses include:
- Restaurant/”eating out” expenses
- “Going out” expenses (i.e. alcohol)
- Gas (for my car)
- Parking expenses
- Other misc. purchases
Looking at the my actual vs. budget results for the past three months (I will explain how I do my budget in a later post), the average monthly cost of the above non-fixed items has been approximately $1,400.
This feeling is a familiar one. You feel like your daily expenses are normal and reasonable. You’re not dropping $500 at bars on a nightly basis (sure, some of you are – but you probably aren’t reading this blog). You’re not buying a new computer or 50″ plasma tv each week. Yet every month, you read your credit card statement and wonder, “Where did all of this money go?” It’s an easy question to answer, because the credit card companies provide the details, but you feel better filing the statement away without reading it.
This brings us to: The 30-Day Expense Elimination Challenge. Ideally, we shouldn’t have to care about this. True lifestyle design doesn’t mean cutting out things you enjoy. You want to be adding to your enjoyment. However, if you haven’t yet begun finding a way to automate your cash flow (as I haven’t) and you want to increase the cash available for whatever you do enjoy, you probably need to trim expenses somewhere.
In some ways, this is very much a “throw everything against the wall and see what sticks” exercise. The goal isn’t to end the 30 days living in a cardboard box on the street living off garbage scraps. This scenario would leave you saving most of your income, but also would likely make you suicidal in the process. My goal is to cut back on everything possible in order to find a couple things that I can realistically cut back on beyond the 30-day period.
Example: I love to eat grilled sandwiches from Panera for lunch. A sandwich and a drink from here might set me back $7 or $8. During these 30 days, I will attempt to make my own sandwiches the night before on my George Foreman grill and will reheat them at work. The bread, cheese, and meat might set me back $10, but will probably amount to five or more sandwiches. That’s easily $25 you’re saving in one work week (and $100/month for those who don’t like math). Of course, that assumes you eat out everyday.
I know none of this is revolutionary to you. Everyone knows that packing a lunch is cheaper than going out for lunch. The challenging part is having the discipline to stick to it. We tend to do things out of habit, whether we enjoy them or not. Going out to eat for lunch is more enjoyable than packing a lunch, but if packing a lunch became a habit for you, would you really feel like you’re “missing” enjoyment?
Perhaps after 30 days, I won’t cut eating out for lunch completely, but I may trim it down from 4 days a week to 1 or 2 days a week. Food is only one example, and maybe the largest, but I think this exercise will shed light on other things you typically spend money on without really thinking.
The Challenge: As of tomorrow, 1/26/2010 through 2/25/2010, my goal is to spend no more than $500 on all variable expenses (so, everything excluding the fixed expenses I’ve listed above).
- Things like gift cards don’t count against the $500 limit. I have a few restaurant gift cards from the holidays that I may or may not use during these 30 days.
- I’m not starting with a clean slate – my refridgerator has some food in it, my car has some gas in it. I didn’t load up on anything before today, but this is just what I have right now, and it can be used without taking into account how much it was originally purchased for.
- Freebies are freebies. If lunch or dinner is provided for me at work and I don’t have to spend money to eat, it’s allowed.
It’s a cash flow challenge, so we are only concerned with cash that is actually spent during these 30 days. Obviously there are flaws with this, but I’m trying to keep this challenge as simple as possible. I haven’t decided if I will do daily updates or simply update whenever I feel the need to, but feel free to play along. The more valuable piece will probably be at the end, to see if I’ve learned anything from all of this.