The brand new car smell! So many people love it. Many people live for it. Purchasing a new car every 7 years or less. I get it! Its exciting and after all, its new! But its also a huge detriment to anyone pursuing financial stability and freedom. Why? It is a liability (not an asset) that depreciates terribly the instant you purchase it. You don’t even have to drive it off the lot before the depreciation kicks in, making your new car worth significantly less than it was worth ten minutes before you financed it! The reason I call it a liability is because it will cost you money to own that car, whether it be interest paid, repairs, or routine maintenance. Assets on the other hand should make you money, or at worst, don’t cost you anything to hold onto. So what should one do? Its simple. Take advantage of others bad choices of course! I know this sounds bad, but hear me out!

In typical fashion of the consumer mindset, the second most people realize they are making enough money to finance a new car or they realize that the raise they’re about to get will allow them to finance the car of their dreams, they run out to the nearest dealership. They sign on the dotted line and drive that depreciating liability off the lot. They hold onto it for awhile and then realize that the car of their dreams has now been replaced by a NEWER car that is now the car of their dreams. Their current car becomes the nagging ex they just can seem to get rid of. So they are willing to do whatever it takes to get rid of it so that they can go get that NEWER more expensive car to impress everyone around them that is also of the consumer mindset, even if it means selling the car for a loss!

The benefit of this all too common situation is that you can now purchase a newer car with low miles and often times a transferrable warranty for anywhere between 1/2 to 3/4 the price they paid. And if you’ve put yourself in a great financial position this far, you will have saved up enough to make this purchase outright with all cash (which I would advise). However, even if you must finance, you can often get a very low interest loan for a short term. These terms will far surpass those offered by a car dealership more often than not. And your “new” car will be paid off in no time. So essentially, you are taking advantage of the poor decision of others to purchase a nearly brand new car. Not to mention, these cars are often being sold by a private party. Which means we get to use our ability to negotiate to make for an even more affordable purchase on our part!

Most Americans, including many that I know will spend anywhere from $600-1,000 per month on depreciating liabilities we call vehicles! And while it is important to have a reliable vehicle that you can depend on, it is wise to obtain one that is also affordable. If we look at the numbers mentioned above on an annual basis, that adds up to anywhere for $7,200-$12,000 dollars per years. Now imagine saving that money and investing it is an appreciating asset that provides you with cash flow of a couple hundred per month. In 2 years times, you could have saved an amount that could provide you with a down payment on a cash flowing rental property or a sizable investment into a mutual stock fund that is returning you money on an annual basis!

So the next time you see someone roll by in the car of your dreams, just keep in mind the end goal. Financial stability and freedom. I don’t know about you, but a new car is not worth time with my family and friends that is obtained through financial freedom. And if were being honest, no one cares what car you’re driving around anyway! So make the smart choice and save yourself thousands that you can invest to make you money!

So you’ve decided to start down the path to financial freedom. You have taken the first step of tracking your expenses. But in the mean time, you might be thinking, what other actionable steps can I take to improve my finances and work toward my paying my debts? There are several areas one can make changes to and start saving money almost immediately. I advise that when you look at what you are currently spending and make the change to decrease the spending in that area, take the difference and apply it toward paying down any high interest debt you might have. Once you have paid off a high interest debt, roll over what you were spending monthly on that debt, plus the amounts you have saved by making changes to your monthly expenses, and move on to the next debt. Essentially, you are snowballing your monthly savings into debts which will ultimately amount to larger and larger savings over time that can eventually be deployed into investments once you have eliminated all bad debts. Let’s take a look at a few common areas people can evaluate to save money.

#1: TV/Cable- Many people pay large monthly amounts for television every month. And for some this might be considered important and something that you might not want to sacrifice. But results that are meaningful always come with sacrifice. Remember, the definition of insanity is doing the same thing over and over again and expecting a different result. I look at personal finances the same way. You cant do the same things and live the same way as the majority of people but expect to be in a better financial situation as the majority of people. No in fact, you’ll end up just the same as most people, buried in debt and living paycheck to paycheck. I think about it this way, all the time that you spend watching TV is wasted time that could be spent doing something more productive such as pursuing a side hustle or educating yourself in personal finance, real estate, or some other form of investment. And there is no better investment to start with than investing in yourself with knowledge. But back to the point, many people I know spend around $150 per month on cable TV with DVR’s in every room, sports packages, premium movie packages, and on and on. And like I said, maybe this is very important to you. But is it more important to you than your financial future? Today, there are plenty of alternative options to the traditional TV package. So much so, that I find it hard to believe that they still exist. Some options include Netflix at $10 per month or if you prefer live television, there is Sling TV with rates as low as $25 per month or Direct TV Now at $40 per month.  Not to mention the services offered for free by amazon if you are a prime member. There are an endless amount of affordable options if TV is a must have for you. A TV package at $150 per month runs you about $1,800 annually compared to Sling TV at $300 per month. That is $1,500 in annual savings that can be applied towards bad debt or saved and rolled into an investment. Look into the many options available and I am sure that you will be able to identify a more affordable option to satisfy your television needs.

#2. Transportation/Gas- Let’s be honest. No one cares what car you are driving. We tend to think everyone cares about our appearance and that is what fuels us to keep up with Jones’s. Ultimately, it leads us to make poor financial decisions. Monthly Gasoline expenses coupled with the monthly payment of a vehicle that was purchased brand new can be a huge monthly expense. Again, we have to look at the importance of a vehicle vs our future. My advice would be to only purchase pre-owned vehicles all cash. This way you can take advantage of someone else’s poor financial decision. Purchase a vehicle that is fuel efficient and reliable of course. If possible, try to work as close to home as you can. This will minimize what you are spending monthly on gas by reducing mileage. Often times, people are surprised when they realize that although a job near home might pay less, they end taking home more monthly net income because of the high costs associated with working far from their home. Of course, this is not always the case and needs to be evaluated on an individual basis. If you are tied down to a high monthly payment on a car/truck, get out from underneath it if possible. Save up an amount to purchase a reliable pre-owned car and then sell your vehicle with the high monthly payment for at least what you owe to avoid taking a loss. Or if you can make do with one vehicle (this applies to families with more than one car), sell the vehicle with a high monthly expense, save up, and purchase an affordable,reliable used car if needed. Some car payments can be as high as $500-800/ month. That means you could save $6,000-$9,600 annually, which should allow you to quickly save up enough to purchase a vehicle all cash.

#3. Utilities- Now that you are tracking your expenses, you will be able to notice trends in expenses. Often times, we pay little to no attention to utility costs. And while we may be aware that these expenses are high, we make little to no effort to make a change in these numbers and just assume that these costs are essentially fixed. Take a month and be mindful of leaving lights on, leaving the TV on, or setting the AC to 68 degrees. Instead, shut anything off it’s not being used. Don’t set your AC below 76 degrees. Pay attention to how often you leave water faucets or showers running. These little things add up and you may notice a significant change in your monthly utility expenses. A bunch of little savings add up to big savings over time.

#4. Cell Phones- They are everywhere. They have allowed us to have a personal computer that we carry around with us everywhere and allow us to accomplish a lot throughout one day. In today’s society, they are a necessity. With that, however, we also have WiFi everywhere, because people are always on the internet. There is of course a benefit to this, we can log onto these WiFi Systems where ever they are present, almost always for free, and use their data instead of own. Most cell phone companies don’t want you to do this because they want you to opt for their most expensive plans, which of course are most often the unlimited data plans.  Now for some, depending on your line of work and location, these plans might be optimal because if you don’t have the ability to utilize WiFi and consistently use a large amount of data, you would spend more in overage charges rather than save money. However, for others, it may be beneficial to look into a cell phone plan with a lower amount of data per month. In fact, with most carriers, you are able to login to your account and view your data usage for each month. Review your monthly data and see what your average use is. Compare that with the plan you currently have vs. a plan that would allow for sufficient monthly data based on your past usage. Often times, you can put a few extra dollars in your pocket every month by switching to a plan that better suits you rather than paying for an unlimited amount, which is overkill based on your usage history.

#5-Eliminate Subscriptions and Shop for services-Now that you are tracking your expenses, be sure to eliminate all subscriptions that you have acquired over the years that aren’t necessary. These can add up quickly. Also, be sure to shop around for services. Internet, insurance, cell phones, etc. All of these services have multiple providers with different options and pricing. Don’t cheat yourself. There are plenty of good deals out there. You just need to find them.

#6-Eating out-Last but certainly not least, eating out. You will find that this is perhaps one of the largest, most wasteful expenses people will find when tracking their monthly finances. An energy drink here or there, fast food a couple times a month, and a nice dinner out can quickly add up. Now, I won’t tell you to stop eating out altogether, although it would it would extremely beneficial in terms of finances and health for that matter. But I suggest that you start by setting a budget that you are comfortable with. If you are disciplined, you can do this by setting an amount and not exceeding that amount. Or if necessary, and this goes for anything, you can pull the budgeted amount out in cash and place it an envelope labeled eating out, this way, when that envelope is empty, you know you have reached your budgeted amount for the month. This method will help you better manage these budgeted amounts for the month. As I mentioned, this method can be applied to any category of expenses.

Of course, there are several other ways to cut costs and we could go much further into detail on each of the subjects discussed above but my hope is that this gives you an idea of where to start. If you have any questions, comments,would like more detail on one particular area, or would simply like to see information on a different subject, please feel free to comment below.