How to Save on Your Two Major Expenses? - Expert Edition Episode 24 (Classic Episode)

Today we discuss the two major expenses you need control to save and invest or use to pay down debt to help in your overall personal finance. Below are the main expenses covered:

• Discussing the main misconception in controlling expenses and how it affects the sustainability of following this principle

• Controlling your housing costs and transportation costs

• Tips on how to offset part of these costs

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TRANSCRIPT:

[00:00:00] Naseema: All right, nurses on fire. We are back with our certified financial planner, Lisa Peterson. Hey Lisa. Hey, Naseema.

All right, so today we are going to talk about cutting expenses. And it's no secret that the key to building wealth, as they say, is decreasing your expenses and increasing your income, and whatever that gap in between is what you need to save and invest or use to pay down debt if you have massive debt.

But that gap, increasing that gap between your expenses and your income is where it's at. And a lot of times people think I've cut all the way down to the bare minimums. But there are two very important things that you can do to actually really increase how much money you're saving a month, and those two biggest things are cutting your housing costs and your transportation costs.

Now, I don't know about you, Lisa, but you know, initially when I entered the world of personal finance, I was taught that cutting expenses means. Like skipping out on lattes. Did you ever hear that?

[00:01:18] Leisa: I definitely heard that,

[00:01:22] Naseema: yes. Yeah. Yeah. So what, I mean, like what are your thoughts about the way a lot of traditional personal finances taught as far as expenses people can cut.

[00:01:36] Leisa: Right. And they're looking at everything and trying to just buckle your belt or, tighter and spend less. And I think that a lot of us, especially those of us who are able to make good money, We struggle with that because we're like, we're working really hard, and the idea that we can't go buy a cup of coffee when we want it, or some flowers or something that just brings us great joy.

Seems very restrictive.

[00:02:08] Naseema: Right? Yes. Yes. And when things are restrictive, the chances that people are going to stick to those prescriptive things in order to build wealth is less than likely. I know, like especially in the nursing community there's like this sense of entitlement. I mean, like once we've made it and we are earning good salaries, like thi not entitlement, but like the things that we deserve or we're supposed to have or keeping up with the Joneses or lifestyle inflation or whatever you wanna call it, is that, we get these jobs, we get these steady paychecks, and then we buy the house, we buy the car, and we buy all these things for our kids and then we're in a position where, When it comes to retirement, we're not in the place where we wanna be.

And I mean, that's why you see the. Average age of a nurse being really high is because a lot of nurses just either weren't taught, just don't know, or for whatever reason, did not plan for their own retirement. And so, I wanted to take this time to discuss some things that me and Lisa kind of do just naturally to decrease our expenses, but make a significant impact on Our overhead, and that's cutting our housing and transportation cost.

I do it two ways. With my housing, I always have a room to rent out. And I usually rent them out to my coworkers, my fellow nurses. So I have done some Airbnb and I also rent my car out. My car is out on a site called Toro. Which ways Do you cut your expenses, Lisa?

[00:03:47] Leisa: So the way that we've done it is by not having mortgages. So that helps a lot. But then you have a lot more money to go towards savings or other projects or buying other, houses or rentals or that sort of thing. But early on and all along still, We keep our cars for a really long time.

That's been one thing. So I drove my Honda Pilot that we bought in 2005 until my daughter went off to college. She took it off to college. It made it another four years, and so it, we just had it kind of blow up about a year ago and it had. 300,000 miles on it. So that is one way, and I'm driving a Subaru from 2013 that I negotiated heavily.

So we buy new cars and we do not get rid of them until they cannot go anywhere. Pretty much is pretty, is the way we do it. We keep those cars for a long time. We're really careful. We've also found that when we go on long road trips, it's far better for us to rent a car through Costco. Most of the time.

So if you're gonna put a couple thousand miles on a car, renting a car is far cheaper than putting those miles on the cars that we're keeping for a long time. So that's another way that we keep the cars lasting longer, and then we're not spending a lot of money on

[00:05:15] Naseema: our cars. That is actually really smart.

But you also Airbnb, your house is that don't have mortgages?

[00:05:23] Leisa: Yes. Yep. So we're Airbnb and we haven't done it in the house that we're living in right now. But because we've become so good at Airbnb, like if we were to go to Hawaii, let's say for a few weeks, it would be really easy for us to rent out the house that we're in right now for two weeks, and in many cases when you live in desirable places.

Yeah, there's some extra work because you're putting away valuables and things like that, but you could literally pay for a big portion of your vacation or offset your mortgage by renting it out even just for a couple weeks a year. And you don't have to pay tax. No, you don't have to pay taxes on it.

For the first two weeks, you rent out your private home. You could make several thousand dollars no matter how much you make, as long as you have not rented it for more than 14 days. That is tax-free

[00:06:18] Naseema: income. Wow. See, I'm learning so much. I didn't even know that. That's so cool. That's so cool. But Lisa, like you didn't start out like by never having a mortgage, right?

Like how did you get to a point where you never had a mortgage? I.

[00:06:34] Leisa: So I set it as a goal early on that we wouldn't have a mortgage. I, part of the reason I didn't like mortgages was my husband and I were building houses and we would have to go in and get construction loans and so, I made it a personal focus.

After we did two, I think we did two or three construction loans, and after that I was like, never again. This is the hardest loan to get. It costs a lot of money. I hate fees, so I. The goal was that we would always have enough money to be able to finance the next project and not have to get a mortgage. So it's funny how you just have these goals and then you realize, wow, hey, we paid it off.

So, there have been times when we've taken mortgages, but only when, we know that we can pay them off and they're just giving us. Additional flexibility. So it's not like a hard and fast. We won't do it if there's a project that means enough to us, we'll take maybe a small mortgage to make it possible, especially if we're just gonna stay, flipping a house.

The other way that we have been able to amass our wealth is because I knew tax codes so well, we would. My daughter, by the time she was, I don't know, I think graduating from high school, she had moved eight times because we had built houses and stayed in those houses for a minimum of two years, and there was only one time where we made more than 500,000.

Dollars in a house that we had lived in for two years, and when you exceed $500,000 for a married couple, you would have to pay income tax on that additional gain. But we literally made more than $500,000 in a couple years on one of the houses that we had built.

[00:08:18] Naseema: Wow. I mean, that's like awesome, like I'm like thinking of those numbers, but those are goals.

But the thing I wanted to emphasize is that you didn't just start there and you didn't just have this big pot of gold and then just buy, buy your first house cash and then just keep on buying first houses. Like you were selling houses and though that appreciation every time was enough that.

You were able to pay for the next house's cash and that's goals. Lisa.

[00:08:46] Leisa: That's, and we didn't really money didn't spend that money. Yeah, we were really careful that we knew, I mean, we've always lived way more conservatively like that rule with the cars and the rule with, just keeping our expenses, especially the big expenses under control.

We've always lived that way, and that allowed us to have that money to put into another project.

[00:09:10] Naseema: That is so awesome. And I know, my experience in dealing with lenders and if I never have to go through this process again, I never want to. So I commend you on being able to, Pay cash for your properties to be mortgage free.

That is totally a goal of mine, because I never ever wanna have to face the scrutiny. I mean, it's just like pure scrutiny and like it's agonizing to go through these processes. They don't make it easy. I mean, I guess it's for their protection, but it's horrible. So, oh, Lisa, your pure goals.

But yeah, I mean, The whole moral of the story is, if you can keep your expenses and your your transportation, your housing expenses as low as possible, it gives you the ability to be able to build wealth faster. So Lisa, thank you so much for sharing your experience. Again, I learned so much and I'm always ex super inspired.

Thank you. Love your story. Yes. Well thank you and we're go heading over to your Facebook group so we can talk about our side, our little, our ways that we generate extra revenue. So, yay, I hope you guys are in the Mindful Millionaire community, so you can check that out as well.

Hey there I’m Naseema

My dream is for everyone to know that financial independence is attainable with a little intentionality. Learn how I can help you finally break the cycle of living paycheck to paycheck.

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