There is great importance in reducing so-called “fixed” expenses and not just discretionary ones like that morning coffee at Starbucks. The important thing is to reduce these expenses before they become fixed. Here are some of the key decision points in which you can make that happen:
1) Which state should you live in? If you’re fortunate to have job prospects in more than one state, you may be able to choose which one to call home. There are lots of factors in that decision like friends and family, the jobs available, climate, culture, and how much you like the general area but you don’t want to forget state income taxes, which can vary considerably from state to state.
For example, I estimated that I pay about an extra $600 a month or over $7k a year in “sunshine taxes” for living in CA as I would in states without a state income tax like Texas, Florida, Nevada, Washington, and New Hampshire. As much as I like living here, is it really worth the price of a nice car payment or an upgrade in my housing? I have other compelling reasons to stay put for now but I can easily see others making a different choice.
2) Which home should you buy or rent? After you’ve chosen your location, the same thinking should apply to your home. Ask yourself if you really need that extra space. After all, more space not only means a bigger rent or mortgage payment but also bigger utility payments and even the need to buy more stuff to fill it with.
One of the most common things I see is people having extra bedrooms for guests. But when you add up much extra those bedrooms will cost you, you may actually find it cheaper to just pay for your guests to stay at a nice hotel. It will seem even more generous than simply letting them stay with you (despite actually being cheaper for you in the long run) and you won’t have to clean up after them.
3) Which wheels should you drive? Another financial decision I’m very happy with was buying a used car that I could pay for in cash. That brand new car smell will last only a little longer than the car’s value as you drive it off the lot. Pretty soon, your new car will feel as old as the payments on it.
Remember to be aware of all the financial aspects when making key decisions to your fixed costs. The lower these expenses are, the more freedom you’ll have to spend your money as you wish…even if it is on that cup of Starbucks coffee.
This post was derived from the Financial Finesse Blog, click here to read the original, full, post and to learn about other decisions that unbelievably, also affect your fixed expenses.