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Cutting Expenses is Great But...In an effort to help in cutting expenses, I just changed our cell phone provider.  Here in the part of Ohio where I live, Verizon is the logical choice for a phone provider as they are the most prominent and basically lack any dead spots.

I’ve been with them since the beginning – from GTE Wireless, to the transition to Alltel, to the transition to Verizon.  It just made sense.  However, although the pricing is Ok, it’s not great.

Last week, I just moved us to Total Wireless.  We’re still using the Verizon backbone and their Bring Your Own Phone program meant that, in a nutshell, nothing changed for us.  The exception is we went from sharing 3 GB of data to sharing 8 GB.

Isn’t this a good thing, Jim?

Absolutely.  Not only are we getting more than twice as much data and the exact same coverage, but our bill also dropped a little more than $20 a month.

So by doing very little (just swapping out the SIM cards in the phones and activating), we now magically have another $20 a month that I can put to better use elsewhere.

 

Our wins from cutting expenses

The new phone plan is just the latest in my mission of cutting back on or eliminating unnecessary expenses.

Let’s start with the good – here are a couple examples of savings we’ve made happen…

 

Cutting the cord

Cutting Expenses is Great But... - Cutting the cordWe were one of the forerunners in the mission to cut the cord.  We’ve been using a Home Theater PC (HTPC) for almost a decade now.

In other words, we have a computer that acts as the hub for everything in our living room (similar to a cable box, but insanely better!).  The incoming coax from the cable company connects to our computer and then the TV acts as a computer monitor.  The HTPC software we use is the interface designed to fill the screen and give a fantastic experience.

We have access to all our digital movies, music, and more.  And, of course, we can watch TV complete with a guide and the ability to schedule and record our favorite shows.

The only reason we kept our basic cable service was because the cost of Internet by itself was actually around the same price of combining the two.

However, Time Warner’s recent merger with Spectrum ended up being a thorn in my side.  I’ll skip the drama, but I had seven separate calls to them recently to decide how to adjust my service as the price went up.

I ended up getting pretty ticked off and decided to cancel everything but the Internet with them.

I kept everything the way we had it with the only difference being that we now have an antenna in place connecting to the HTPC instead.  Works awesome.

These changes have eliminated some heartache and saved us around 25 bucks a month.  Not too shabby.

As a side note, if you’re considering cutting the cord, check out Untangle.TV.  It’s a free site with no registration required that helps you figure out what you need to do to cut the cord, save some money, and still get the important shows or channels that are important to you.  Great idea, nicely implemented, and it only takes maybe 5 minutes or so to run through.

 

Utilities

Cutting Expenses is Great But... - Utilities
Aha! Ok, I don’t really have an idea, but I think you’re just supposed to say that when you see a light bulb.

I don’t believe all states offer this, but here in Ohio, we have the ability to use a different utility company… sort of.  The main companies are still responsible for providing the gas or electric to us, but you can choose a different company to be your supplier.

I don’t really get or care why they do it this way, but if you dig into it, you can actually save a great deal of money by choosing a different supplier.  And hey, we’re all about cutting expenses, right?

The HR manager at my office and I go back and forth a couple times a year discussing the latest offers and figuring out the best deal.  Though most people just stick with what they have, we’ve saved a bundle by using other supplies.

Currently, the two utilities we seem to be doing very well with our natural gas and electric.  It varies, but I would venture to guess that I save about 25% off my utility bills by keeping an eye on this.

 

So cutting expenses seems like a great idea, right?  You can save some good money doing this!

 

True, but here’s the problem…

Cutting Expenses is Great But... - But here's the real problem...
I thought a stop sign would be appropriate for this block of text, but then I came across this photo and thought it was a million times cooler!

The biggest problem with cutting expenses is that you can only go so far with it.  In other words, it’s a finite mission.

You can cut out big expenses like cars or even better, you can downsize your house.  This is definitely going to help get your further ahead financially.  In fact, it should also make a dramatic difference expediting the path to financial independence.

But eventually, you’re going to run into a limit.  You can only cut out so much… and then what?

I enjoy the idea of cutting expenses – it makes me feel like I got a little win on something.  However, it’s not going to get me to where I need to be because it’s limited.

 

So then, what’s the other side of the coin?

 

For the win…

Cutting Expenses is Great But... - For the win...The good news is that making more money doesn’t have a cap.

And the even better news is that it can exponentially help your finances grow.  So, I could spend a few hours a month cutting expenses trying to find ways to save $20, $30, or even $50 a month.

Or, I can spend a few hours a month trying to find a new rental property that will help me net $500 a month.  And in the process, I gain an asset that I get to keep along with a number of other great benefits.

Hmmm, this doesn’t seem like a hard decision… I’ll take the rental property any day!!

The good news is that my sole focus isn’t on cutting expenses.  In fact, with the exception of possibly downsizing the house, I’m spending most of my free time building up other income streams.

And the best income streams are the ones that can be a little more passive or fun.  Here are some of the ideas I’ve got cooking up…

 

A few ideas…

Real estate

Cutting Expenses is Great But... - Real estateI’m building up a cash flow stream through buy-and-hold rental properties.  If you haven’t done anything with real estate before, it can seem a little scary, but so far, I haven’t found anything too difficult with it.

We have three units (a single-family and a duplex) and I’m currently trying to pick up another one.

It’s very important to do some learning beforehand to get a better foundation and then you just do it.  You’ll make mistakes, but the key is to learn from them.  BiggerPockets is an excellent resource to get a good real estate education with most of their content being both free and easy to understand.

And just because I like rental properties, that doesn’t mean it’s the only option out there.  There are so many things you can do with real estate, it’s crazy – buy-and-hold, flipping, wholesaling, commercial or residential, tax liens, REITs, and tons more.  It’s really a matter of learning about the different options and going down the path of the ones that are the best fit for you.

Although I personally think real estate is a great focus to have when building wealth, it’s not the only avenue out there.  There are so many side hustles that can be done with just a handful of extra hours a week.

 

Blogging

Cutting Expenses is Great But... - Blogging
If I’m going to discuss blogging, I might as well use a picture promoting the Route to Retire site! 🙂

This blog is a great example of another side hustle.  I spend probably around 10-15 hours a week on this site (sometimes more, sometimes less).

This is going to be a long road, but over time and as my audience continues to build, the income should also continue to grow.  A few years from now when I quit my job, I hope this site will provide some nice supplemental income.

It’s very unlikely that you build a blog and it just takes off.  It takes a loooonnnng time to gain a following, cultivate relationships with other bloggers, and refine your writing to be what your readers want.

As I write this, I’m just shy of two years in and I’m finally starting to feel like I’ve found a good place in the personal finance web space.  Regardless, the low cost-of-entry makes this something worth considering.

If you’ve thought about writing a blog, check out my Blogging for Money and Fun post to get a better idea of what to expect.

 

Royalties

Crown
Royalty – get it?! I should have been a comedian.

Have you ever considered writing a book?  I did and I’ve written and published a couple of technical books.  The first book is now out of print, but the second book continues to generate royalties for me every month.  It’s not anything I’m going to retire from, but it’s nice to get that deposit every month with no further effort put forth.

In fact, I recently decided to start writing a third book in the personal financial area.  I just got started and have some great ideas, but I’m going to take my time with it since I have so many other side hustles going on right now.  But once it’s done, the royalties should flow in every month like they have for my other books.

Once retired, I also plan to write a children’s book at some point, which I think will be really fun to do.

The great thing is that the simplicity just from when I published my first book compared to publishing my second book is tremendous.  It has become so easy for anyone to publish a book.  Check out CreateSpace for one great avenue to make this happen.  They’re a subsidiary of Amazon and make it very simple to publish both print-on-demand (POD) and Kindle books.

 

Licensing

Cutting Expenses is Great But... - Licensing
I actually invented the wheel, but I was still young and didn’t think to get a patent on the idea.

This isn’t an area where I’ve done a lot, but it can be a great side hustle to earn some passive income.

Come up with a great idea or invention, take it a little further, and then license it out to another company or companies, and let them pay you to use your idea.  Many people have realized just how possible this is through the Shark Tank show on TV.

You need to be careful to protect your ideas or inventions through different types of patents, copyrights, or trademarks.  You also want to make sure that you keep your ideas to yourself, document them carefully, and require that anyone that’s going to learn of your idea sign a Non-Disclosure Agreement (NDA).

There are tons of books out there that can get you on the right track for this.

I have a couple ideas of my own for inventions, but I haven’t done anything with them yet.  We’ll see if I can make anything happen with ’em at some point.

 

Cell Phone Apps

Cutting Expenses is Great But... - Cell Phone Apps
If you still run this kind of cell phone, maybe developing cell phone apps is not the right side hustle for you…

This is another idea that is possible to make a little money from.  If you have a great idea for an app, you can either build it yourself or you can hire a developer to do it for you.

I don’t know enough about this area to know the best strategy to use with your apps to earn money (freemium version or free with ads?).

Like the others side hustles I’ve mentioned, I have one idea for an app and briefly talked with a developer, but I have yet to make it happen.

I’m also curious to find out just how long it will take to recoup the money I put in with a developer if the app has an average performance in the market.  That will help determine if it’s even really worth pursuing.

 

These ideas are only the tip of the iceberg, but the point is that building up other income streams can be a better payoff than cutting expenses.  If it takes about the same amount of time to make more money than you could possibly save cutting expenses, isn’t it worth it?

 

Do you agree with putting your focus on making more income than cutting expenses?

 

Thanks for reading!!

— Jim

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Cutting Expenses is Great, But Here’s the Problem…
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22 thoughts on “Cutting Expenses is Great, But Here’s the Problem…

  • April 25, 2017 at 9:20 am
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    Sounds like a classic offense/defense dilemma to me. You need to work hard to increase your income, but can’t forget about expenses. Your advice is excellent and I myself have a list of monthly expenses I often peruse and wonder if it’s necessary.

    My job is very stable and everything is laid out in writing, so I also know my major salary events for the next 15 years. This leaves my biggest consideration being where does my excess time go? Focus on the blog, pull some overtime, be with my family? It’s a delicate balance but I think you truly do have to pay attention to both sides of the wealth gap.

    Reply
    • April 25, 2017 at 1:35 pm
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      That’s cool that you basically know your pay scale for the next 15 years… I would guess that makes planning much easier!

      Balance is truly important when it comes to your time. When it comes to the money side of the equation, I’m trying to weigh my time against the tasks that will bring the biggest reward. In most cases, that’s going to be making money over finding ways to cut back on spending.

      — Jim

      Reply
  • April 25, 2017 at 11:24 am
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    Thanks for the reminder on the power and energy provider. We have a similar setup and I keep meaning to do something.

    My current job doesn’t allow a lot of time to side hustle personally. But my wife is working that angle now that she is a stay at home mom. Beyond that I continue to push for the next pay horizon in my job.

    Reply
    • April 25, 2017 at 1:37 pm
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      We’ve definitely saved a good sum of money by choosing different energy providers. The trick I found is to then add it to your calendar to start shopping around again toward the end of the contract, so they don’t just move you onto a variable rate.

      — Jim

      Reply
  • April 25, 2017 at 5:48 pm
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    Great post Jim! I agree – you can only cut so far. We are using Project FI and Republic Wireless for phones. We cut cable. We hardly ever eat out (we prefer to eat at home). We drive older used cars. We are working on padding our FI numbers by increasing income through side gigs and rental properties. The flexibility meets our goals and the ability to say no to gigs is great too! I’ll be really interested in whether you like Total Wireless after a few months. I’d prefer a Verizon MNVO.

    Reply
    • April 25, 2017 at 9:07 pm
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      Hi Vicki! You’ve nailed both sides of the equation… nice job on that one for sure!!

      Although it’s only been a handful of days, I’m not sure how I wouldn’t still like Total Wireless down the line. The reason being is that nothing changed as far as I can tell. Same coverage, and the texting and data seems to be the same as well. Fingers crossed because the price is right! 🙂

      — Jim

      Reply
      • April 25, 2017 at 9:20 pm
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        My son and daughter use Straight Talk on the Verizon towers for $46 with tax for unlimited talk, text, data (tethered at 3GB I think) but they love it. I’d like a plan where I can use my phone as a hot spot and you can’t do that with Straight Talk… I can with Project FI right now.

        Reply
        • April 25, 2017 at 9:37 pm
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          Our plan with Total Wireless will run us about $60 for the Mrs. R2R and I for unlimited talk, text and 8GB at 4G, which is plenty for us. I found a couple websites that seem to say that tethering isn’t officially supported on TW, but they also didn’t have any problems getting it to work. That’s something I rarely care to do, so that wasn’t a checkmark for us when I was investigating the different plans. I may have to try it out at some point just to see if it works.

          As a side note, thanks so much for the Panama lead a couple months ago – that’s been a wealth of great info!!

          — Jim

          Reply
          • April 25, 2017 at 9:43 pm
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            That sounds like a great plan! (Much better than ours in terms of data). Tethering is nice if I want to use the computer on the road. I turn the phone on to be the hotspot for the laptop. But that plan may be one we seriously look at for traveling out west. Glad the Panama information was helpful! I’ll tell my brother. He sent it my way and thought you might get a lot out of it.

          • April 26, 2017 at 7:42 am
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            I’m excited about getting into these pre-paid plans since we can jump around a little as needed (like you’re talking about for traveling out west). It gives you a little more flexibility to go with what makes sense at the time.

            — Jim

  • April 25, 2017 at 11:52 pm
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    Like this post, and you’re absolutely right that cutting expenses has a limit. For me personally the best way of doing it is cutting expenses and making extra money doing what I like. But at the same time I always remind myself that there’re no money in the whole world that can buy time with my family

    Reply
    • April 26, 2017 at 7:45 am
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      You got that right, Friendly Russian! It’s definitely a balance that needs to happen between money and time with family. I ran into that with this blog, where I was posting more initially, but it started to impede to much on time with my wife and daughter. That’s why I generally post only once a week now.

      — Jim

      Reply
  • April 27, 2017 at 11:53 am
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    I agree that cutting expenses has a cap. However, it is still essential. Increasing income without watching the expense is not a good recipe either. You need to be good at both side of the equation. For most people, cutting expenses is the best place to start because that’s been neglected. IMO.

    Reply
    • April 27, 2017 at 12:12 pm
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      I was just listening to an Afford Anything podcast yesterday and they hit on this topic, which was a pretty interesting discussion. Paula nailed it when she said (similar to you) that cutting expenses is definitely the place to start since that’s the low-hanging fruit.

      But she also said that the goal is to widen the gap between what you spend and what you earn. To accomplish that, you can either cut expenses more or make more money. However, you can only cut expenses so far, but earning more is limitless. Great discussion, but the point was that once you’re in control of your expenses, it’s time to start exploring making more money.

      — Jim

      Reply
  • April 28, 2017 at 10:50 am
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    I am going to have to dissent on the expenses part of this article. I think Jacob from Early Retirement Extreme proves you can live a very happy life for only $7k per person. I have a family of 4, and I inisist that kids cost next to nothing when you add in tax credits and deductions. So they should cost about half as much as adults. Being conservative, i will pretend they cost AS MUCH as adults. 4 X $7,000= $28,000 per year for our family of 4. We did our ER budget recently (after all I just turned 41 and this work stuff IS for the young), and we came in at $60,000 per year, and this was a very generous and fluff filled budget with lots of travel money.

    Anyway, the problem with side hustles is that taxes can kill you. You need exponentially more effort to make up the net amount of savings, due to taxes, than you would if you simpy: 1. Moved 2. Added roommates 3. Sold your car and bought a bicycle instead 4. Stopped eating out

    It does seem like you got rid of the low lying fruit and my hats off to you for doing so. There is nothing that says you can’t tackle the fixed expense fruit either. That’s where the big savings come from.

    Reply
    • April 28, 2017 at 11:35 am
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      Didn’t realize we’re the same age and yup, we gotta get done with this work stuff! 🙂

      I agree with the big amount of savings you can come up with by making some changes, but eventually, you’re out of stuff you can do without a tremendous lifestyle change. And similar to you, our familiy of three is planning on living what some would call lean once retired ($35-40k including healthcare).

      On the flip side, yeah, taxes can be a pain with some side hustles, but not all of them. Rental properties are a perfect example – the government wants people to be landlords and rewards them with some great tax advantages. I have a nice cash flow coming in for my properties, but every year, I legally show a paper loss on my properties and am basically rewarded for doing that.

      On another note, if the Trumpster’s tax reform plan goes through, that could be a boon for self-employed and small business owners. I don’t want to bring in politics, pros/cons, and possible repercussions into the discussion, but bringing the corporate taxes and owners of pass-through companies (such as LLCs) down to 15% is a really big deal for side-hustlers.

      Cheers!

      — Jim

      Reply
      • April 28, 2017 at 3:00 pm
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        I agree that tax law changes could change things, but realistically, you have to plan under current law.

        I have never had a problem with real estate investing, but it does SEEM that it requires a lot more effort than low cost index fund investing, which is truly passive. Also, I recall that there is a certain recapture provision in the tax code if you sell a property for a gain. Is that correct? A higher tax rate than if I sold my stocks for a gain, in which case my taxes are 0% currently in the bracket we are in.

        Thanks Jim (I’m Dan)

        Reply
        • April 28, 2017 at 4:06 pm
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          Thanks, Dan – I would say that the passivity (is that a real word?!) of rental properties totally depends. In my case, I do put a little bit of work up front in regards to finding, closing, and any repairs that I want to do myself. From there, I hand things over to my property management company and they handle everything from there – I just collect the checks every month. However, some people want to be more active and will manage the places themselves. But on the other end of the spectrum are those that are completely hands off and just buy turnkey properties – they sign some paperwork and they’re done.

          There is a depreciation recapture later when selling. However, that assumes that you plan on selling (which I don’t). But if I did decide to sell, I would probably look at doing a 1031 exchange to buy another property which would help defer any depreciation recapture taxes as well as capital gains.

          I’m sure we could debate the pros and cons of each of these, but it really just comes down to a matter of comfort. Some people are comfortable with the market and some are comfortable with real estate. I still feel like I’m learning real estate, but I distrust the market. Even though I have most of my net worth in it, I like having the rental properties as a hedge against the market. And with the advantages it provides (including the leverage), I’m coming out much further ahead. You’re definitely right though – it’s not as passive as index funds, so it depends what your needs and comfort level are.

          — Jim

          Reply
  • April 29, 2017 at 3:58 pm
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    I just got a second phone to separate life from business. Recently it’s been getting quite annoying to have work-related calls come in at 10pm. So now I keep my work phone on silent at night and leave my life-phone on.

    Reply
    • April 30, 2017 at 9:12 pm
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      That sounds wonderful! I just ended up getting a work call at 10:30 last night… that sucked.

      — Jim

      Reply
  • May 1, 2017 at 12:51 pm
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    Yes, cutting expenses does have limits that you begin to reach …. but those are the easy expenses to cut.

    There are other places to save — there’s always little wins that seem to pop up, or some amazing temporary deal that if you change your behavior just slightly, you can take advantage of to save money.

    I’m always on the hunt for those kinds of deals, and inevitably they do happen quite frequently. Those kinds of savings are ongoing, but do take more effort to realize.

    Reply
    • May 1, 2017 at 3:53 pm
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      Hi Mr. Tako! Definitely agree and I’m similar to you on that front – just can’t let go of the great feeling of finding those easy-pickins deals out there. But I try to keep in the back of my mind that there is only so much headway that can made by doing that. For those that are still in the wealth-building years of their lives, the opportunities to make more money have some bigger potential (although usually these involve a little more effort).

      — Jim

      Reply

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