Get Rid of Passive Expenses

Most people don’t know it, but they are victims of passive expenses. Passive expenses are things that a person regularly spends their money on but do not get a good or relevant value out of it. This can be best described as a useless expense, as it is almost worthless and does not help in keeping a practical budget.

Some examples of passive expenses are monthly premiums on insurance policies that are not necessary, service fees where quality is not important, interests on loans with high interest rates when there are options with lower rates available, membership fees for organizations, clubs, loyalty programs, or gyms that rarely or not at all consumed, and losing potential income in situations such as earning a lower interest rate on cash savings when the money can be invested elsewhere with a higher interest rate.

Most people are not aware that they have passive expenses because they are too busy with other things or simply lazy enough to cancel or consider better options that the ones that are readily available to them. There are those who are aware of these passive expenses but dismiss them as petty or insignificant enough that the amount of time spent to get fix them might cost them more than actual savings from getting rid of them. This outlook should be changed, because passive expenses are still expenses, and any practical person would not want to spend on unnecessary things especially if there are other worthy options available.

To get rid of passive expenses, examine first which ones they are. They can be as big as the examples mentioned previously or trivial ones such as buying expensive coffee everyday when there are cheaper but equally good alternatives available. While individually, these expenses might appear insignificant, calculate how much it will cost to sustain this expense for a year. Carefully assess the impact of cutting this expense from your lifestyle—will drinking a non-branded coffee affect the way you work?

There are also those who hold on to their passive expenses because they see it as more of a convenience. For example, health club memberships that aren’t used are not cancelled, in case the member might think of going back to the club “one day”. Give it thought: is the monthly membership fee worth the convenience you think you will get if one day you decide to work out? Maybe paying a daily fee when you feel like working out is a better option.

Next, set a day to sit down and go through all passive expenses. Nobody can be busy every moment of their lives, so set time aside to fix financial problems. Talk to friends who have invested in better options and don’t be afraid to ask for their help—maybe they do it for you if you’re too busy or save you time from learning about it by explaining it to you over the phone. Remember, an afternoon worth of work might be able to get you out of debt by the end of the year, so do take time to sort your expenses out.

Once you’ve gotten rid of your passive expenses, you’ won’t even notice how the loss has impacted you until you receive rewards for better investments and bigger savings.


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