3 Most Common Mistakes to Getting Rich

While there's a million positive things you can do to reach your retirement or semi-retirement goals faster, it's also important to not stuff it up!

So what are the most common mistakes to getting rich and retiring early?

They say that the three biggest expenses in people's budgets are:

• Where you live
• Transportation
• Food!

  There's obviously many other ways that people throw their money away, for example, going to the pub and catching an expensive taxi home (hopefully Uber will help in this area), but for people who have already refined their savings a bit, these are usually the three that are left.

Where You Live
The biggest expense for most people is their home.Whether you're renting or have a mortgage, especially in Australia, you're likely paying somewhere between $300 and $600 per week for your shelter (Australia has some of the most overpriced homes in the world, with a shitbox in my area costing $350,000, 45 minutes from the big city!). So how can you pay less?

The first option is of course to buy a home that's not overly expensive and dominate it! Anyone who follows the principles that I lay down should be able to pay off their mortgage within 8 years from start to finish. At the end of this process, you can focus on building wealth with a much higher savings rate, or perhaps you are putting more emphasis on building wealth because you expect a higher return than the current home loan rate is Australia of roughly 4.5%, why not! Either way, eventually you'll have your own home and significantly reduce your shelter expenses.

Another option which makes a lot of sense is simply paying less! You can either move to a cheaper area (with cheap access to your work), live with family or friends or share a house, or even rent out one of your rooms with Air BnB or some other room sharing app/website.

Get these costs down and see your savings rate soar!

Transportation
You'll see many finance/frugal/early retirement blogs talk about living close to work. Many people underestimate just how much it is costing them to drive to work everyday. I used to spend $80/week just getting to work, more than what I spend on food!

Some ways to reduce costs here include driving a cheaper, more fuel efficient car and obviously not making the stupid decision to get a new car on finance. You're much better off buying a car for less than $8,000 second hand, with cash, that's 4 cylinder and uses little fuel for many reasons.

Firstly, the depreciation you will save.If you buy a new car for $40,000, you're going to be losing about $4,000/year in depreciation, that's $80/week! Whereas an $8,000 car will depreciate roughly $800, saving you $3,200 per year or $65/week! Enough to buy your groceries!

The second is paying cash and not financing for obvious reasons, not paying interest! If you have a car on finance, sell it and buy a cheaper second hand 4 cylinder car that you can actually afford to get out of the debt cycle. Many people are paying huge amounts of interest and it's killing them!

The third is to drive a 4 cylinder car. I used to drive a 6 cylinder car, I did pay cash for it, but I quickly came to resent the fuel economy. Even using hypermiling techniques, it was still guzzling 9 Litres per 100km (31 MPG). I'd hop in my partner's car and smash it around town for 7 L/100Km (40MPG) and could easily get it down to 5 (56MPG). If you drive 250Km (155 Miles) per week, this could save you $13/week with today's fuel prices, or $676/year or $9,400 every 10 years! - if invested at 7%.

Food!
Last but not least, one of the largest parts of people's budgets is their groceries and food. It's easy to eat beautiful food for $70/week, yet most people seem to spend over $150/week conservatively!

Taking lunch to work is an easy way to save $40/week. I like a simple Chicken and rice dish, which is cheap and can pack as much flavour or sauce as you like.

To be honest I'm not sure how people spend so much money as it's just never been something that I do, but one thing to watch out for is picking up little items for $2, $3 or $4 each, just 10 little things like this adds $40 to your bill, which compounds out to thousands per year, and you probably don't even appreciate these little things. I made the mistake of making a Mexican Bake and spending $4 on jalapenos just last week, so we've all been there.

Summary
Once you cut out all of the outright wasteful spending, like taxis, eating out all the time (not saying never) and buying alcohol at clubs etcs, the last few very expensive things to remain are usually Housing, Transportation and Food. Cut these down as much as possible and see your savings rate soar to 80-90%, giving you financial independence within 5 years!

Don't forget to share this post with the link down the bottom and follow me on Twitter @EarlyRetireAus . You can email me at earlyretirementaus@gmail.com and please leave a comment!

Peace.
E.