I lost control of my spending in Summer 2023 and regularly overspent my budget. At some point, I even stopped tracking my expenses because I didn’t want to face the reality of my overspending. It took a lot of effort but I clawed my way out, got my spending under control and currently no longer use a credit card.
Since I got my spending back under control, I realised the benefit of my expense reduction keeps compounding. And since I’m doing the Uber frugal month challenge this month, it’s a reminder on why expense reduction is great. I know there’s a lot of focus on increasing income which I do as well but doubling up with reducing expenses at the same time is a game changer.
The 3 key benefits of expense reduction are:
- It frees up money for me to invest for the future.
- The reduced spend carries forward to the future so the impact compounds going forward as it’s permanently out of my budget.
- If the reduction is permanent, it reduces how much I need to save/invest for the future as my FIRE number drops.
Exemplified, if I reduce my monthly expense by €100, this frees up an additional €1,200 for me to invest annually. My FIRE number reduces by €30,000 and the €100 invested monthly becomes €68,730 in 20yrs at 10% annual return
I already streamlined my budget so there’s not a lot to cut out with the frugal month challenge. What I am getting better at is not spending money on random things I don’t need. I have zero urge to spend and I’ve only spent €24.24 on groceries top up at Lidl month to date.
What I am doing instead of mindless shopping is improving my sourdough bread making skills, spending at least 2hours on walks/outside play time daily and reading a ton. I’m looking forward to see how I end the month.