“Beware of small expenses; a small leak will sink a great ship” — Benjamin Franklin

Despite the infinite wisdom of Benjamin Franklin, this is not going to be a post telling you to cut out your Starbucks habit.

What it is going to do is outline a way for you to isolate your largest expenses, and then work towards a much cheaper solution.

Remember, the less money you spend, the higher your Gap of Opportunity.

Notice there are no numbers on this bar graph. There doesn’t need to be.

No matter what your income is, there is a way to make your expenses less.

The goal is to create a surplus of income that can be applied toward investing.

This is the time tested best path for creating wealth.

But why can’t I just make more money? The chart will look the same.

Not a bad idea. There is just a few small issues with that.

Most people that do not have a lock on their expenses will spend more than they realize, often more than they can afford.

“Just because you can make the payments, doesn’t mean you can afford it.” — Dave Ramsey

Making more money won’t create a gap of opportunity if you immediately start spending more.

It is easier to start by reducing ridiculous expenses than it is to start with making more money. Some people may not have any control over how much they make, and might not be in a position to bargain for a raise.

But everyone has control over where their money is going. Now I agree, it does not make sense to only cut expenses. Remember from How To Lose Money As A Tool To Build Lasting Wealth there are four ways to build wealth. The first of those four is to build a lifestyle that requires as little money as is practical.

How do you intend to make more money when you already likely spend the entire day working already?

You won’t. The amount of time and effort required to build a business or viable stream of income on the side is substantial. In the meantime, building that lifestyle of conscious frugality will open up opportunities for you in the future.

Okay, so where would I start? I like my coffee.

Don’t worry, your caffeine vice is safe, for now.

In fact, purchases like that are likely such a small portion of your spending, that spending the mental effort to change habits would be a waste of your precious time.

In fact, according to the average American spends 80% of its money on just 5 categories.

• Housing Costs


• Transportation Costs


• Food


• Healthcare


• Insurance

So, if you can tackle a few of these areas, you can dramatically reduce your spending, allowing your Gap of Opportunity to grow, and opening up space to start saving and investing.

Housing — do you have a roommate?

It blows my mind how many twenty-somethings I know refuse to live with a roommate. When you do this you are spending at least double what you could be spending!

Let’s do the math. Let’s assume you live in an average priced apartment. $900 a month for a single bedroom. A two-bedroom apartment in the same complex probably runs $1200 or so a month.

Adjust the numbers down or up as would fit your area.

If you split the $1200 a month apartment, you spend $600 a month. That saves $300 a month! That is $3600 a year. From one change.

There is even more that could be done here, like moving to a lower-cost area, or even purchasing a starter home and renting out the rooms to friends, thereby dropping your living expenses to zero, as well as gaining equity each month.

At the very least, analyze how you can cut your living expenses. If you truly want to start building wealth and expanding that gap of opportunity, you can stand to live with someone else.

I’ve lived with roommates every year of my twenties (I’m currently 28), and have had tenants since I was 23. There have been times having a roommate was stressful, but the upside of being able to save enough money to pay off student loans was so worth it.

What kind of car do you drive?

I live in Texas, so I’ve been using a car as my primary means of transportation my entire life. Cars are expensive. New cars are extremely expensive.

When you own a car you pay the following ways:

• Car payment — Avg. of $300 a month


• Car insurance — Avg. of $100 a month


• Gas — An avg. of around $0.54 per mile, via the US Government


• The cost of lost time while driving

So let’s say you have a rather short commute to work of a 10-mile round trip. Your commute is likely farther.

This puts your transportation costs at:

$300 + $100 + $162 ($0.52 cents * 10 miles * 30 days)= $562

Well, holy crap. Even if you don’t have a car loan, that’s still $262 a month if you only drive to work 5-miles each way and nowhere else!

So what is the solution?

• Coupling with the section above, you could move close to your job, cutting down on your commute.


• Carpool with a coworker


• Ride a bike (woo exercise) — Also this isn’t as terrible as you might think. With the right clothes and preparation, you can do this in most weather, even the 105-degree heat of Austin, Tx in the summer.


• Does your city have public transportation?


• Downgrade your ride. Sell your car, and buy a used, reliable, car that gets better gas mileage

Stop eating out. Cook at home. Plan out your meals for the week

In my early twenties, right out of college, I got into the nasty habit of eating out with coworkers every day for lunch. In my head, I just thought, “What’s $12 a day for lunch?”

Sigh. $12 a day for lunch equals $360 a month. For only one-third of your meals! Often I’d find my fridge and pantry empty of food, since I never bothered to cook lunch, and I’d end up ordering take out. Tack on another $360 a month.

No single person should ever be spending more than $500 a month on food.

Take a few hours every weekend to grocery shop and meal plan for the week. The first time sucks. If you can figure out how to keep doing it you will save a killing in food costs each month. By eating at home, you save money that would otherwise be spent on tax and tip — and you usually save calories, too.

If you cut that expense you could save several hundreds of dollars more a month, extending your Gap of Opportunity and allowing you to put that money towards savings, debts, or investments.

These changes are doable by anyone

That’s the nice part. These three key changes are doable by anyone working a job full-time, part-time, or running their own business.

You don’t have any excuse not to take action on these changes.

If you are truly dedicated to building a lifestyle that will generate significant wealth, you will make these changes a priority.