In the last wealth post we talked about the two keys to unlocking wealth: 1. Decreasing Expenses, and 2. Increasing Passive Income.

This time, we’ll take a look at the Expenses side of things. Decreasing expenses is a surefire way to get closer to wealth and set yourself up for safely building passive income. I think this step is super important, and it is the whole reason Debt Freeks exists. Reducing expenses and defeating debt is an extremely powerful mechanism for wealth-building and financial success, freedom, and independence.

You’ve probably read all about the difference between needs and wants, and heard that you can be a millionaire if you just quit drinking expensive coffee. Well, forget all that psycho-babble and sensationalism. This is real life. I’m not going to go into fine detail about how to save money on XYZ, or pitch a radical lifestyle change. There are plenty of other blogs for that kind of thing. Besides, saving money is not the same thing as decreasing expenses (I hear a future post). I am going to provide an overview of two things that keep you from building equity in yourself, and show you how I started thinking differently about money in the process.


Debt is the biggest obstacle to growing your money. End of story. It is the antithesis of passive income – it is literally a passive expense!

Rule number one for wealth building: consumer debt is the enemy and must be eradicated from your financial life as soon as possible!

I’m talking about the huge availability of money that you can borrow to buy things you don’t have the cash to pay for right now.

Don’t do it!

The Two Faces of Debt

There are two aspects of debt that work together to stifle your ability to save and invest in real assets – a psychological aspect and an economical aspect.

The economical aspect is pretty obvious – when a percentage of your income is always dedicated to debt payments, it cannot be used for other things like saving or investing. You’ve already spent the money, and you can’t use it twice.

The psychological aspect is more subtle, but more dangerous. It is the part of your mind that has been trained to think “I can always put that on the credit card,” or worse, “If I refinance my house I can take a vacation and buy a car!” Retraining your mind takes work, but being aware of how your thinking is linked to your borrowing is a huge step in the right direction.

You have to be mindful of that little voice urging you to borrow and take it out with the trash, because borrowing does not make for healthy, independent finances. Debt tends to produce more debt, and that is a mindset thing. Ask any wealthy person and I am certain that they will never suggest living beyond your means on credit. The risk of failure is astronomical. It is super rare for a person who never borrows money to declare bankruptcy.

When you liberate your income from the shackles of debt, it is free to start working for you by being turned into income-producing assets.

Defeating Your Debts

Defeating debt fast and liberating your income is a straightforward process, often referred to as the “debt snowball”:

  1. List your debts, smallest amount to largest amount (your tiny gas card balance all the way up to your bloated student loans)
  2. Identify the minimum payment on each, and make those payments to stay current
  3. Scrape together as much extra money as you possibly can (sell something, work overtime, etc) and apply it toward the smallest debt
  4. When it’s gone, mark it off the list and celebrate a little
  5. Take what you were paying on that debt, and add it to the payment of your next largest debt
  6. Repeat steps 3 through 5 until your debts are six feet under for good

There are tons of analyses on how this process works, why it works, and why more people don’t do it. Suffice to say, it is effective, simple, and satisfying.

“Must-have” Debts

Debt is essentially risk. when applying for a loan, your other loans are taken into consideration, and borrowers with many other loans are typically treated higher risk than borrowers with few other loans.

It’s kind of like the opposite of insurance. Many people look at major purchases and think they’ll never be able to make that purchase without the “help” of a loan or credit card – well they certainly won’t with that attitude!

It’s a lot like lifting weights – you look at a heavy weight and think “I’ll never to able to lift that!” but give it some time, effort, and determination, and sure enough, there will come a time when you nail that PR to the wall then exceed it with ease. Saving money is a lot like that.

Think you’ll never be able to pay for college without a loan? Sure you can, I’ve done it.

Think you need a note to get a good car? Nope, I’ve bought four cars with cash that run like a dream.

Think you’ll never be able to buy a freaking house without a mortgage? Sorry, even that is possible (two more years of saving, and I’ll tell you how it goes).

Think you need to borrow money to start a business? Think again, people bootstrap their own businesses all the time!

All these things have one thing in common – they are inherently less risky. When your education, car, home, and business are YOURS, you are in control, not someone else. When your business only serves the purpose of repaying your startup costs, what good is it?

Less risk means less stress.

No one who’s bought a car with cash has ever had it repossessed – Think about it.


The things you own can hold you back from saving and investing. Things that need constant upkeep, repair, costly consumables, fees, etc can really put a drain on your bank account. I think of these things as money pits – don’t get money pits.

Making informed purchasing decisions can help you identify money pits, avoid them if possible, and fill them in a little if they’re unavoidable.

The most popular money pit is the car. Cars are constantly doing expensive things like using gas and oil, breaking down, and needing dumb things like tires. And what do they give you for all that? Do they put money in your pocket? Usually not.

But choosing a car that is in good shape, is economical on gas and repairs, and having good insurance can make this one a little more bearable.

Transcend the catch-22 of your job only seeming to pay enough for your car, which you need in order to get to your job.

Smart spending involves smart planning. Thrift is a term that means – spending a little more now, so you don’t have to spend more later. Think about shoes – one of my ultimate pet peeves. You can get an inexpensive pair made with dodgy materials glued together by Malaysian slave children that may last a season or two, or you can spend a few more dollars on a quality pair that will last for several years.


Areas that are ripe for big win saving after your debts are dead and your purchases are planned are lifestyle things like utilities (sometimes), food (usually), insurance, and vacations. These are areas that small changes can often add up to huge savings.

After beating debt and making sure your car is running smoothly, the next thing you can do is evaluate your housing situation. Obviously if you’ve paid off your mortgage, you’re in amazing shape, but if not, take a look at your other options – could you maintain the same quality of life in a different home? Would it make practical sense to refinance, move, or sell and rent. It is up to you, and you know your situation, but housing is one of the biggest expenses for most people.

I like to advise people to never spend more than 30% of their income on housing (including utilities, phone and internet) if they can possibly help it. Food can be a big expense too, if most of your meals are purchased or if a lot of food spoils in your fridge.

I’ve found that we cut our food budget by about half when we made weekly meal plans, weekly grocery runs, and pre-made some of our meals in advance. Plus we never wondered “what’s for dinner?” sapping our focus on important things in the process.

Insurance can be another area where the flood of information can be so great that people don’t even know they’re overpaying for service they could get for less. Check it out.

Finally, we often spend a lot of money on food, experiences, and souvenirs on trips. Look into ways of making vacations more cost-effective by renting a room with a kitchen and cooking a few meals in the room, or taking more pictures and printing the good ones to go on a wall instead of getting a knick-knack to set on a shelf. Look into trips where you can share costs with family or friends, attend free events, concerts, and workshops in the place you’re visiting, staying with family, trips with a volunteer component where the sponsoring organization provides you with food, lodging, or other “compensation”. You may find that you can take more trips per year or save on the ones you already take.

Notice I’m not saying: Never eat out. Never travel. Never buy a home. What I am saying is be smart about where you put the money you have, so you get the most value on things you already do. I’m not a big fan of self-denial, but I am a big fan of self-discipline – making the most informed choices that set you up for long-term growth and happiness.


When you gain skill at reducing your expenses and liberating your income, it becomes yours to work with. One of the best benefits of having low expenses is the freedom to take calculated risks.

Your threshold for attaining wealth (when you’re producing enough passive income to cover your living expenses) is also a lot closer.

It’s relatively simple to generate a thousand dollars per month in passive income, but much more difficult to generate ten thousand dollars per month. Think of those pro-blogger types that always talk about living like a king on only the revenue from their websites (you know who you are).

They can do that because their expenses are super low to start with. They can live in Thailand or somewhere for only a few bucks a day, and invest the rest of their earnings into other income-producing areas or luxury goods.

If you think about financial success as a fraction with income in the numerator and expenses in the denominator, you can get bigger numbers by increasing the numerator, or decreasing the denominator.

It’s up to you. You can double your income or halve your expenses and get the same result. Doing both would make you a hero.

So, the three biggest ways to reduce your expenses are defeat debt, adjust your purchases for quality to avoid money pits, and take big wins by changing your big expenses. Now that you’ve freed up a big portion of your income, you can start  looking for ways to turn that saved money into more money coming in, and are that much closer to wealth.

Just one more key to go.

Until next time,
Do Brave Deeds and Endure!
– Ben at Debt Freeks