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Dramatically Cut Costs and Increase Investments with the Lasso Method

on 3/26/18 by Miguel A. Suro
14 Comments

You know how cowboys and cowgirls lasso those bulls at rodeos? What a skill! I’m always amazed at how they manage to maneuver and throw that rope, and quickly tighten it (but not too much) and take fast control of that stud. In fact, and as this news crew found out, those skills can even be used to protect the public from loose llamas:

Anyways, I’ve come up with an idea for dramatically cutting your expenses and increasing your investments that I’m going to call the lasso method (as far as I know, I’m the first to propose this). Here it goes:

The Lasso Method – A Six-Step Plan to Reduce Your Monthly Expenses and Increase Your Investments

Step One – Create A Fund

First, take around $100-$300 and set it aside. I suggest you use an online savings account, but you can really park it anywhere, so long as it’s safe and earmarked for this endeavor. I’m going to call it the “Lasso Fund”.

Step Two – Come Up With An Investment Plan

Create any reasonable investment plan. I recommend you open an account with a robo-advisor like Betterment, since all you have to do is deposit money and they do everything else for you, from choosing what securities to buy to re-balancing to tax-loss harvesting. Easy-peasy, lemon squeezee.

Ideally, use a tax-advantaged retirement account like a traditional or Roth IRA. If not, just use a taxable account.

get ready to reduce those home expenses and monthly expenses

Step Three – Set Up An Automatic Monthly Investment Deposit

Configure your investment account to automatically draw money from your main checking or savings account once per month, on a day you get paid. Choose an amount you’re comfortable with and can easily afford, but don’t use the money in your Lasso Fund.

Step Four – Gradually Increase the Automatic Monthly Investment

Here’s the kicker. Set a monthly reminder and, on that day, increase the amount of the automatic monthly investment you set up in step three. For example, if you originally ordered up a draw of $100, increase it to $125 the second month. Then, increase it to $150 the third month, $175 the fourth month, and so on.

Step Five – Lasso Your Monthly Expenses

As the months go by and you keep increasing your investment auto-deposits, the slack in your budget (if any) will decrease. Soon enough, you’ll be forced to either make more money or lasso your expenses, and to gradually tighten that lasso. Since every passing month you’ll need more and more money to meet your auto-investment commitment, you will be forced to cut your living expenses with increased fury.

lasso those living expenses or operating expenses, for your investment plan

Getting ready to lasso those expenses!

Step Six – Keep Lassoing Your Operating Expenses Until You Can Cut No More

Keep cutting those expenses (or increasing your income), until you can cut no more. How do you know when you’ve reached that point? You’ll know when you’re forced to withdraw from your Lasso Fund in order to pay living expenses. At that point, go back to your prior auto-deposit amount so that you’re not operating at a deficit.

For example, if you stepped up your auto-deposits to $500 but had to dip into the Lasso Fund at that point, revert the auto-deposit to $475 until you either make more money or are able to further cut your expenses.

And that’s pretty much it! By using the lasso method, you’ll force yourself to become increasingly more efficient with your money, and become richer in the process. Your investments will increase, while your monthly expenses will decrease, until you cut them to the bone.

The degree of cost-cutting you do is up to you. It’s not necessary to take it to the point where you’re eating Ramen noodles and canned beans every night. You can continue until further cuts would make you miserable, or you can stop well before that. It’s your choice, but no matter how far you take it, you’ll have no options but to improve your money management a little more each month.

A Note About Debt

This method doesn’t address debt. If you’ve got debt whose interest rate exceeds the returns you could reasonably expect from your investment plan, it’s probably best to pay off that debt before starting to invest. You could adopt this method (steadily increasing the payments you make on the debt), or any other method that works for you.

Summing It Up

That’s all I’ve got today, dear readers. To summarize:

  1. Create your Lasso Fund.
  2. Come up with a reasonable investment plan (I suggest a robo-adviser).
  3. Set up an automatic monthly deposit to the investment account.
  4. Increase the auto-deposit amount every month.
  5. Cut your monthly expenses to meet the demands of the ever-increasing auto-deposit.
  6. Stop when you’re forced to withdraw money from the Lasso Fund to pay your household expenses.

Here’re to more saving and less spending!


What do you think about using the lasso method to cut your operating expenses and enhance your investment plan?

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Finances, Investing, Personal Finance

About Miguel A. Suro

I'm Miguel A. Suro, a Miami dad, attorney, journalist, and entrepreneur devoted to helping you live well for less. I've been seen on the NY Times, CNBC, NBC News, and more. Get to know us on:

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Comments

  1. Tom @ Dividends Diversify says

    March 26, 2018 at 7:14 am

    That’s an excellent strategy and plan Miguel. A person can build a lot of wealth over time using a method just as you suggest. Discipline and automation are two key components.
    Tom

    Reply
    • The Rich Miser says

      March 26, 2018 at 11:03 pm

      Thanks Tom!

      I agree, by making a plan like this and executing it, wealth should increase and expenses decrease steadily.

      Cheers,
      Miguel

  2. SMM says

    March 26, 2018 at 3:37 pm

    I love it; a deliberate strategy to increase savings and decrease expenses. A great formula. I was slowly increasing the savings in my account last year but had to kind of revert back as you said towards the end of the year. Now I have to start tightening that lasso again. πŸ™‚

    Reply
    • The Rich Miser says

      March 26, 2018 at 11:05 pm

      Hey SMM,

      Thanks! I think it works, but like you say, sometimes it’s necessary to make adjustments.

      But yeah, tightening that lasso is a good thing! πŸ™‚

      Cheers,
      Miguel

  3. Mrs. Defined Sight says

    March 27, 2018 at 6:51 am

    oh my gosh….this whole post has me seriously cracking up! It pretty much starts with the lasso – and goes from there!

    I’m going to be using the lasso concept on all my work activities today in efforts to also increase my efficiency….this should be fun!

    Great post Miguel!

    Reply
    • The Rich Miser says

      March 27, 2018 at 4:50 pm

      Hey Mrs. DS!

      LOL, looking for the video and images was fun πŸ™‚

      Good luck with your lassoing!

      Cheers,
      Miguel

  4. Cubert says

    March 27, 2018 at 7:39 am

    Who do you think you are, The Mad Fientist?!? πŸ˜‰

    Seriously, this is a great concept, Miguel! I think the amount of “freelance spending” we’ve been doing lately, I could use a little more discipline. If nothing else, this gets me inspired to batten down the hatches a bit.

    Reply
    • The Rich Miser says

      March 27, 2018 at 4:53 pm

      Thanks Cubert!

      I’ve had lassoing issues myself, where I sometimes loosen instead of tighten πŸ™‚

      Here’s to tightening the lasso!

      Cheers,
      Miguel

  5. Dave says

    March 27, 2018 at 12:59 pm

    I love the concept. It is a win-win approach. Increasing savings and reducing debt in one automated plan. I have a feeling this one is going to take off.

    Reply
    • The Rich Miser says

      March 27, 2018 at 4:55 pm

      Thanks Dave!

      I think it’s a good way to get oneself to spend less. As the lasso tightens, so does spending πŸ™‚

      Cheers,
      Miguel

  6. Heidi says

    March 28, 2018 at 10:32 am

    Great post, Miguel!

    This is a great reminder that all we need is a little discipline in order to be able to start investing, and more importantly, to do it consistently.

    Heidi

    Reply
    • The Rich Miser says

      March 28, 2018 at 10:56 am

      Thanks Heidi!

      Yes, I see investing as a way to gain financial freedom, since your money will grow over time, especially with time-tested investments like stock index funds.

      Thanks for stopping by!

      Cheers,
      Miguel

  7. Enoch@Savvy New Canadians says

    March 29, 2018 at 5:32 pm

    Great analogy, Miguel – and now I have a name for the strategy I have been using for the last decade or so! πŸ˜‰

    Will keep lassoing away!

    Reply
    • The Rich Miser says

      March 29, 2018 at 10:59 pm

      Hey Enoch!

      Good to hear you’ve been lassoing expenses since ’08! πŸ˜‰

      Here’s to using that lasso!

      Cheers,
      Miguel

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