|September by Eric Joyner|
It's like weight loss, changing your fixed expenses is like having surgery. The changes to your finances are immediate and permanent if you move to a smaller house or closer to work, or even if you sell a car. But changing your discretionary spending is like losing a pound a week, it takes time and hard work, but with practice and discipline you will get there.
PracticeDepending on your personality the practice part can be easy or hard, but the overall goal of practice is to spend less and save more. This doesn't mean spending less on coffee by making it at home and redirecting the money you saved towards other purchases that month, it means actually saving it or paying down debt. The more you practice by making appropriate budgetary decisions the better you will get at it. For example if you make $40,000 per year and you decide to contribute just 3% more to your 401(k) that will translate to about $18 less take home money per week. For some people I know that could be difficult, but I think that most people would be able to find simple ways to save that much discretionary spending every week. Going out to dinner less, saving on coffee, bringing lunch to work, finding sales at the grocery store, or many other things. That 3% savings would equal $1,200 each year and compounded over 30 years at an 7.5% rate, that would equal about $128k all because you decided to cut back $18 per week. Just think what would happen if you saved 10 or 15% more than you are now.
DisciplineI think that this is the harder part for me personally. Practice to me is just spending less than I make, and the overflow goes into my savings/investments. But discipline means continuing to live that lifestyle month after month, or year after year. It also means not touching that money month after month, or year after year. If your car breaks down and you have $30k saved up, don't spend it all on a new car, use discipline to determine how much car you really need and purchase appropriately. Most people can get by on used cars. Many times people save up large amounts of money but then decide that they should upgrade their house since they have enough money to put a large down payment on a larger, more expensive house. Then there goes most or all of their savings because they wanted lifestyle inflation. Decades of work can be wiped out by a lack of discipline when someone takes out a loan against their 401(k), have discipline and don't let that be you.
I think that the older you get the more you realize that $10,000 is a lot of debt but not a lot of money. I know that during college I would have thought that having $25k saved was a lot of money, but now I know that's not even half of a down payment on a house where I live. Small amounts of money over time will start to add up so start practicing as soon as you can and learn to let it grow.