Do you know the first rule of the Game of Wealth?
No, it isn’t ‘spend less than you earn’. It is what comes before that, which is:
Minimise your waste to maximise your wealth!
At least this is what I figured out when I first started transforming our finances and introduced sound money management.
In our case, one obvious area where we were shamefully wasteful was food; recently, looking through bank statements from the mid-1990s we noticed that our monthly spend on food was over £600 ($980). At the time we were grown-ups and two children.
I also remember standing in the kitchen, just back from shopping, and wondering what shall we have for lunch.
At the time, our fridge was over flowing straight into the rubbish bin; our cupboards were empty but our bins were full to the brim.
Now I feel ashamed! I also tell people that if they notice their bank account is empty they should check how full their rubbish bin is; they think it’s a joke. Were people to take this seriously, their bank accounts may look healthy again.
Thinking about it, it seems to me that there are three main areas where cutting waste is relatively fast and very effective. These areas are also where the family outgoing are highest.
The three areas where, I believe, people ought to tackle waste so that their wealth grows are: food, transportation and housing.
Minimise waste on food
Did you know that about a third of the food for human consumption is wasted globally? This is 1.3 billion tons per year according to FAO.
Food is wasted at the same level in developing and developed countries: 40% of food waste in developing countries happens at the post harvest and processing stage; 40% of food waste in developed countries is at retail and consumer level.
In other words we are very, very wasteful of food. This is when pictures of starving people are far too frequent on our flat-screens; when we know that roughly 20% of the population of the planet is under-nourished to a degree where their activity levels are affected.
Wasting food is immoral (inequality), bad for the environment (waste goes in landfills and produces methane, a potent greenhouse gas) and bad for your wallet (we used to send about £300/$490 straight to landfills to kill the planet).
Here are some ways to minimise waste on food:
- Learn to cook;
- Plan your meals for the week;
- Buy for what you cook; generally match meal plans and shopping plans;
- Batch cook and freeze what is left;
- Serve smaller portions – it is better to have seconds than to over-eat or throw away what you can’t finish;
- Use your leftovers: take them for lunch or use them as a basis for another meal;
- Use all ingredients; if you need only egg yolks for a meal think of something to do with the egg whites (egg white omelette is all the rage in dieting);
- Compost any waste.
Have to say that since we started applying these rules, our bins are much less full.
Minimise waste on transport
We all know that keeping a car is expensive. Regretfully, it is more and more the case that this is very difficult to avoid – having a car and using it is a necessity.
I heroically went to work on the bus for close to three years. This wasn’t a saving – getting to work and back on the cheap bus cost me £3.60 ($5.88). Going to the office four times a week, for the month this amounts to over £60 ($98). And a lot of noise, crowds and the smell of diesel!
So it is not only that there are places not accessible by public transport; it is also that using public transport is not that much cheaper, really.
Of course, one can ride a bike everywhere but this is not a realistic alternative for most of us. It may work if one lives in a small place, doesn’t need to dress up for work and is very good on a bike.
I have come to believe that the way to minimise waste on transport is not by not keeping and/or using your car but by taking a look at what you drive. Generally, driving large, thirsty cars, fun as this is, is obviously wasteful.
Driving very old cars is wasteful as well in three different ways:
- Old cars need regular repairs;
- Old cars need maintenance and new parts;
- Old cars are not very economical on fuel; they are less economical than when new and less economical than the newer models.
Here are some ways to minimise waste on transport:
- Drive smaller, economical cars;
- Service your cars regularly;
- Drive, when and if possible, new(er) cars;
- If you drive your cars to the ground sell them for parts or scrap metal; there are companies, Sell The Car is only one of these, that provide this service;
- When possible leave your car at home; this way you’ll be saving on gym and fuel.
You’ll know whether it’s time to change your car for a newer model by comparing the running costs of your present car with the costs of getting and running a newer one. As a general rule, when your maintenance costs exceed the costs of getting a new car it is time for change. You don’t have to buy new cars either; at The Money Principle we believe there is a lot to be said about leasing the right car.
Minimise your housing bills
Housing is the major expenditure on any budget. There are two kinds of expenses involved: the direct costs of housing (rent or mortgage) and utility bills.
I’ll assume that my readers have mastered the art of minimising their housing bills by deciding what the optimal size of dwelling is, where they need and want to live and what proportion of their income they can spend on that (it’s a bad idea if this exceeds 35% of your after tax income).
I believe that the way to minimise housing bills is to minimise your utility bills.
This can be done by:
- Insulating your roof;
- Putting cavity insulation;
- Getting your house double glassed properly;
- Under-floor insulation (though this is still relatively rare);
- Servicing your gas boiler regularly.
We did all those recently and the saving on energy bills is about 20%.
Minimising what you waste on food, transport and housing bills requires some initial investment but can ultimately save you, sustainably, thousands of pounds. Even more importantly, life is so much more pleasant with nice food, cars that work and worm house.
Have you looked recently at any of these? How much are you wasting on food, transport and housing?