“Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.” – Will Smith

The fastest way to create the excess cash needed to achieve your financial goals is to take a machete to your monthly expenses.

About four years ago, My wife and I cut nearly three-thousand dollars from our monthly budget once we got serious about creating excess cash.

That three-thousand dollar reduction meant we cut our monthly cash outflow by forty percent almost overnight. That’s the sort of excess cash creation that can bring you financial independence relatively quickly.

When you make major cuts to your budget, you are literally buying back your freedom.

You’ll find that once you start cutting it becomes quite fun, and somewhat addicting. If you search Google you can find tons of money-saving options for each category of spending in your budget. Every single category of your budget that you’ve determined does not further your vision must be analyzed for reduction or elimination.

Also, since you’ve likely just received your bankruptcy discharge, then you’ve got a massive head start!

There are way too many possibilities for budget cutting to discuss in our time together. I think the best way for me to help you get started is by simply explaining what my wife and I have done to reduce our monthly expenditures. We found several incredible opportunities online that led to our tremendous success cutting our own budget.

Remember, it is not about cutting out everything you enjoy in life. This phase in our journey is about prioritizing, or choosing to reduce your overall monthly cash outflows by reconfiguring your expenses to spend on the things in life you truly enjoy.

You do not get real pleasure from your cell phone, or from prepackaged microwave meals, or from having a thousand channels on your cable package. Yet we spend premium amounts for these things.

You probably do get real pleasure from your hobbies, from spending time with your family, and from taking vacations. If you realign your expenses to match the things you enjoy in life, you will find your monthly needs will be significantly reduced.

Cell Phones

Cell phones and cell phone contracts have gotten out of hand in recent years.

When I was in college at Arizona State University in 1998 almost nobody had a cell phone. I thought the few kids who did have phones took themselves way too seriously.

What made them so important that they always had to be connected to a telephone? That thinking seems funny now, but somehow we made it through life without the use of cell phones.

These days our lives revolve around these devices, and almost never for the purpose of placing telephone calls. I am no different. When my wife and I addressed this budget category in our own money map journey I went two full days without a cell phone.

Those two days felt like I was being kept in solitary confinement. I immediately became aware that my life was conducted largely through that phone. I realized I conducted my banking, my communicating, my calendar, and even most socializing on the back of Apple’s smartphone innovations.

We are not going back to 1998, and our reliance on cell devices will likely not be reduced. We simply need to minimize the cost of our reliance, and luckily there are many outstanding options for doing just that.

Prior to our own budget cutting efforts we were paying $180 per month for our family plan with AT&T, and that came with just 1 GB of data (which is nothing). Our AT&T bill was usually around $240 every month, or approximately $2,800 every year. That’s a lot of money that we must go out and earn just to have a smart phone.

We found a company called Straight Talk (www.StraightTalk.com). Straight Talk offers an unlimited talk, text and data plan for just $45 per month. The “unlimited data” is really 3GB of data at 4G speed, and if you go beyond the 3GB the speed slows dramatically. Even still, that is a huge savings. The best part is that Straight Talk allows us to use the AT&T network.

My wife and I began using our same iphones on the same AT&T network for just $90 per month, instead of the $240 per month we were paying for using the AT&T network with only 1GB of available data. That $150 of savings per month yields a savings of $1,800 per year. That’s $1,800 a year we can invest or save, or $1,800 for which we do not have to trade our invaluable time to generate.

Cable or Satellite Television

The average American watches five hours of television every day, for an average of 35 hours each week or 76 full days each year. Don’t believe me? Google it. That is a full-time job. How much could you accomplish if you eliminated television, or at least reduced it significantly?

I must admit, this is a hard thing for me. We have reduced our television consumption a little recently, but still spend way too much time numbing ourselves with television. My family had the premium subscription with Direct TV including both the NFL Ticket and the NBA package. This overdose of television came in at a hefty price of nearly $250 per month. What a waste of time and money!

We are not where we should be at this point, but we did cut out all sports package upgrades and reduced our subscription plan to a lesser plan, reducing our monthly cost to $110 per month. (annual savings $1,680).

There are many outstanding options for getting rid of television altogether without completely abandoning your favorite shows. For example, Hulu Plus allows you to have access to hundreds of current television programming for just $7.99 per month.  Many of the most popular shows on television are available, you just have to wait a day or two later than when the episode first airs.

Although we have not fully engaged the “no television life” ourselves, I believe tremendous benefits will flow from eliminated television. Thirty-five hours a week of television viewing equates to 76 days per year. We spend an average of 76 days per year watching television. I want to get the two and a half months of time back and saving money while doing so.

Groceries

Chances are you have significant room for savings when it comes to your grocery spending. In fact, two-thirds of the products we buy at the grocery store we had no intention of buying when we entered the store. Think about that for a minute. More than half of our grocery store purchases were unintended, impulse buys.

Below you will find 16 tricks you can use to save money on groceries. A little savings each week can have a big impact. If you cut your weekly grocery bill by $25, you will save $1,300 every year. That is a lot of money; a lot of freedom you can buy back.

  1. Use your iphone to save money at the grocery store. The Flippapp (Flipp.com) allows you to find the best deals contained in local grocery store flyers in your area.
  2. There is no randomness in the way grocery stores are setup. Notice the staples like milk and eggs are always found at the rear of the store. To get your milk you must walk by a thousand items you did not intend to buy. Inexpensive items are always found on the higher and lower shelves, and the higher priced brands are always found on eye level. Know this going in, and you can save some cash.
  3. My wife and I used to do all of our shopping for groceries at Publix. That was before Trader Joe’s came to town. Now we save an average of $20 each week just by choosing Trader Joe’s over Plublix, and because Trader Joe’s does not really offer non-food items like cleaning products, bath, soap, etc…we are forced to visit big box stores like Target. These stores offer these non-food items at cheaper prices than Publix, saving us even more money.
  4. When items you regularly buy go on sale, but them in bulk. By doing so you will reduce the average price per purchase you make of that particular item.
  5. Stick to buying only food items at the grocery store. Leave the non-food items like cleaning products, bath products, hygiene, etc…for big box stores like Walmart and Target.
  6. This is a big one for our family. We currently make an average of four trips per week to grocery stores. Commit to making one stop each week at the grocery store, and the amount you spend on groceries will fall.
  7. This does not always apply, but most of the time store brands are less expensive than national brands while containing the same ingredients.
  8. Compare ingredients between a lower cost and higher cost version for an item such as body wash. I bet they are nearly identical, so why buy the more expensive version?
  9. Do not pay extra for an item simply because it comes in an individual sized portion. For example, instead of buying the prepackaged individual sized salad just buy a head of lettuce and some veggies to make your own salad. Doing so will keep your money in your wallet.
  10. Buy your lunchmeat and cheese slices at the deli counter, and not in the aisle. Again, when you purchase these prepackaged meats and cheeses you are simply paying for the packaging. You do not eat the packaging, so why pay for it?
  11. The number of impulse items calling out at you near the registers is staggering. Do not give into the temptation, and avoid spending your dollars on these non-essential impulse items.
  12. Most of the time endcaps contain higher cost products the store is promoting. Endcaps can be tricky because they do sometimes contain great deals, but you must approach endcap purchases with hesitation.
  13. If you do not have a grocery list before you step food in that store your budget is in trouble. You are going to battle, and you do not want do battle without a strategy for winning. Have a list of what you need for your weekly meals, and stick to that list at all costs.
  14. Anybody can grow a small garden. Produce is really expensive, and growing a few staple product items at home can lead to big savings in the long run. Remember, you shop for groceries each week, so a small savings can add up quickly over just a few weeks.
  15. Impulse items are items that are not contained on your list. Impulse items are also budget killers…avoid them.
  16. Near the counter you will always find single-serving items…pop, water, candy bars. Single-serve items will come at a premium cost and add not extra value whatsoever.

Almost everyone can create extra savings by focusing on grocery spending. Little changes in your shopping behavior can have a huge impact on the amount of money you are able to save annually. Use these tricks to add a boost to cost cutting efforts.

Auto Insurance

As a former bankruptcy attorney I spent a lot of time reviewing peoples’ budgets, and I’ve come to the conclusion that almost everyone is over-insured when it comes to auto insurance. Over-insurance is a huge obstacle for achieving financial independence, and you need to reevaluate your current spending on all forms of insurance, not only auto insurance.

Insurance is simply the shifting of the risk of financial loss to an insurance company. The more risk you shift, the higher the cost of your policy.

For example, if you choose an auto policy with a collision deductible of $1,000 your premiums will be lower than if you were to select a $250 deductible. With the larger deductible, you are accepting more risk yourself, or shifting less risk to the insurer, and the lower risk to the insurance company provides a lower policy cost.

Let’s consider a worst case scenario for someone with minimal auto insurance coverage. Assume I rear-ended someone this morning on my way to the office, and the accident was one-hundred percent my fault.

My auto policy with ABC insurance carries $10,000 in collision coverage to cover the other party’s auto repairs, and $10,000 in bodily injury coverage to compensate the other party for any medical bills. Finally, assume the damages to the other vehicle came to $15,000 and the medical bills for the injured other driver total $25,000.

ABC insurance cuts a check to the other driver for $10,000 for the auto repair, and pays $10,000 toward the other driver’s medical bills. At this point the loss is shifted to me, personally. The uncompensated loss to the other driver is $5,000 in property damage and $15,000 in medical bills.

The other driver hires attorney Jackie Black from the Law Firm of Rich Ambulance Chasers, PA. Mr. Black receives the copy of my auto insurance benefits page and learns my coverage has already been exhausted. Mr. Black, keenly aware his contingency fee hangs in the balance, will do one of three things.

First, he may tell the injured driver he will not take the case due to lack of insurance coverage. Second, he may send me a demand letter seeking a settlement of the injured party’s claim. Third, he may sue me.

I’ve been in Mr. Black’s shoes, working for a large personal injury law firm. In my ambulance chasing days we refused cases in nearly every case with exhausted insurance coverage.

The likelihood of any recovery in a case where we were left with pursuing an at-fault party personally was extremely low. As a result, as a business practice, we most often refused to accept these cases.

In cases where we knew the at-fault driver owned “reachable assets” sufficient to compensate our client, we would either send them a demand letter seeking settlement or file a lawsuit. By “reachable assets” I mean assets that can be levied upon by creditors.

Every state has its own laws regarding what property is, and is not, exposed to creditor reach. For example, in Florida the equity you have in your home where you live is one-hundred percent protected from creditor reach, up to 160 acres.

Regardless of whether you are sued for a billion dollars, that judgment creditor cannot touch your home in Florida. Other exemptions are provided for motor vehicles, retirement accounts, personal property, government benefits, and many others.

This is why consulting with a savvy asset protection lawyer while implementing your plan for achieving financial independence is highly recommended. An asset protection lawyer can setup your assets in such a way that maximizes available property exemptions, and makes you a less attractive target for a greedy personal injury lawyer.

However, be warned. The time to meet with an asset protection lawyer, and conduct asset protection planning, is before you have to protect yourself.

If you have an accident or are sued, it’s too late to then start implementing asset protection strategies. There is a fine line between proper asset protection and the fraudulent conversion of assets.

For our purposes, consider shifting less risk to the auto insurance company and lowering your premiums. It sounds like an over-simplification, but how many accidents are you going to cause if you do not speed, do not text while driving, don’t drive intoxicated, and pay attention all of the time while you are driving a vehicle? Not many.

In an upcoming post we will transition from focusing on our monthly living expenses to a focus on consumer debt. Even though you likely have no more consumer debt, it is important to gain an understanding with respect to consumer debt so that bankruptcy is a one time deal for you.

Before we do though, I want you to commit to reviewing your monthly spending at least once per quarter, or preferably once per month.

If your spending becomes out of alignment with your vision, bring it back into alignment. All spending should support your vision, thereby ensuring continual progress toward financial independence.

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