This is a question I hear all the time, and the answer may surprise you. The percent of after-tax expenses within your control are 100%. I know you’re probably saying that’s impossible since expenses like my mortgage, auto loan payments, property taxes, etc., are fixed cost that don’t change from month to month. And because these payments are fixed, there’s no way I can control how much I spend by reducing what I pay each month. That’s how most people look at it, but let’s take a closer look before passing judgment.
Who made the decision to take out a mortgage and buy that house? You did. Who made the decision to buy that high-end automobile? You did. See where am I’m going with this? No one told you to take on these obligations. You were the one who decided this was what you needed to live the life you wanted. And what goes along with a big house? Big property taxes, big insurance premiums, and big utility bills. The same goes for that nice car you drive that requires loan or lease payments, premium gasoline, expensive insurance, and high-priced maintenance.
Ask yourself if you really need the best of everything or brand-name products 100% of the time. Also, don’t be fooled into thinking that a generic product is low quality. It may surprise you to find out that most generics are made by big-name companies that manufacture and sell similar products to companies under a different label for a lower price since they don’t have to worry about the cost of advertising. And because these products aren’t marketed with print ads or expensive commercials, the savings are passed on to the consumer. As for clothes, avoid buying what’s hot for the season and stick to something practical that won’t go out of style.
If you’re looking for simple adjustments that will translate into big savings, I outline solutions in Chapter 5 of my book that can save tens of thousands of dollars each year. Just remember, it’s these little adjustments or sacrifices you make each day that will help finance your retirement.