Modifying your FIRE Engine Pt 2 – Reducing Drag

If you haven’t seen my earlier post, modifying the FIRE engine part 1, I’d recommend trying there first. In the first post, I talked the importance of increasing the amount of money coming in each month, giving your FIRE engine more power. The more money in, the more you have to save and invest, and the faster you’ll become financially independent.


The second key aspect of overhauling your FIRE engine for maximum efficiency? Reducing drag.

Reducing Drag


Having more power in your engine is a good start, but it’s not everything. Many people with even average incomes could become financially independent soon if they tried. But if they spend all of their money by the end of the month, that’s never going to happen. Your income is the fuel in your engine driving you forwards, but your spending is the drag force that determines how fast you can actually go. I’m going to talk about some of the most straightforward and effective ways I’ve found to reduce spending, therefore freeing up more money to save and invest!


Here we go!




Regardless of whether you’re renting or buying, keep housing simple and appropriate to what you need it for. And it’s not just about the amount you sign up to pay each month. Bigger homes have more space to fill, cost more to run, and if interest rates or rents go up, it might soon become unaffordable and a millstone around your neck. It’s also worth looking for places near to your work and any amenities you might use, to reduce your transport costs (more below).




In the UK, there are countless utilities suppliers. For things like gas an electricity, there can be vast differences in how much you pay each year, but at the end of the day it’s still the same gas and electricity coming into your house. At least once a year you should be doing an online comparison to see if you can save money, and the answer is normally a resounding yes! Same goes for your internet supply, your mobile phone contract, insurance and anything else you pay on a regular basis. For the UK audience, I can’t recommend Martin Lewis’ site enough for this purpose.


Once you’ve cut down on the overall unit price of your utilities, see if cutting back on your usage makes a significant difference. In the UK all homes are to be offered a smart gas and electricity meter by 2020, and I recently had mine installed. It’s a little display that sits in my kitchen and shows my how much gas and electricity I use each day/week/month, and offers a live monitor for electricity use, which means I can identify the most energy-hungry parts of my home. When the guy came to install my monitor it showed my house at that moment was only using 1 pence an hour of electricity. He thought it was an error, I had to tell him that sounded about right (it was daytime, the only thing turned on was the fridge!).


Ways to cut your utility usage include switching to LED bulbs (prices have come down sharply, so new bulbs will pay for themselves much faster these days), ensuring your house is well insulated from heat loss and turning off appliances at the wall when not in use.


As I wrote the first draft of this article, someone from the water company was outside installing a water meter onto my supply. In the UK you can either pay a fixed monthly amount based on the “rateable value” of your home (a weird valuation that was last carried out on homes between 1973 & 1990), or have a water meter where you pay for the water you actually use. Generally, if you have a family or large number of people in the home, or it has a low rateable value, it’s cheaper to pay the fixed monthly price. But if you’re a smaller household, have low water usage or the rateable value is high (and the value isn’t just based on number of bedrooms) then you will likely benefit from a water meter. My house, a three bed with two people living in it, has a higher rateable value than my last home, a six bedroom house share with five living there. The water company’s initial estimation of my bill with a water meter installed is almost 50% less than I was paying before, and the meter was free to have fitted. Update: two months later, they’ve sent me a letter to say they’re reducing my bill by another 15% based on my usage!




After housing and bills, one of the largest expenditures for households is on groceries. I’ll be honest, if you’re going into the supermarket without a list or concrete idea of what you’re going in for, you’re preparing to fail. These companies have spend lots of money working out how best to convince you to buy things you don’t need, and they’re phenomenally good at it! I will admit I often get things that aren’t on my list, but it makes up a fraction of my bill and far less than the times I’ve gone without a list.


Depending on your situation, shopping only once a week (or two weeks if you can stretch it) is ideal, because the less often you walk through those supermarket doors, the fewer times you’re being bombarded with adverts to buy more stuff you don’t need. When I visit my parents, they do small shopping trips at least five times a week between them, and as a result buy loads of rubbish they don’t actually need.


As for what food you buy, cook and eat? I’m a strong proponent of batch cooking, and as a single guy I can cook 8-16 portions of many meals at a time, which set me up for weeks at a time. Of course, many people don’t like eating the same thing over and over, so I switch between multiple pre-prepared meals regularly to keep things interesting. It also means when you’ve had a long and stressful day earning money to fuel your FIRE Engine, and you come home with low willpower, it’s easier to throw a healthy home-cooked prepped meal on the table than to order a takeaway.




When it comes to transport, take the time to work out what is the cheapest feasible mode of transport for your purposes. The ideal for me would be to live in walking or cycling distance of work and a supermarket, with local public transport links for anything further afield. Bikes are cheap to buy and cheap to maintain, and give you fresh air and free exercise by using them, both big bonuses!


If you “have” to have a car, please be reasonable with what you shell out for. It doesn’t just depend on the sticker price, either. The other major costs associated with a car are the insurance, the vehicle tax, fuel costs and maintenance costs. These costs can vary wildly between vehicles, so it’s worth doing your homework. Look for low insurance classes, low (or even zero) vehicle tax, and small engines with high efficiency and lower breakdown rates.


I would at this point advise to buy used, but in recent years it’s almost becoming a rarity for people to actually buy their cars. Financing for cars has rocketed recently, particularly because of the use of Personal Contract Purchase deals, which give you lower monthly payments but require a “balloon payment” at the end of the contract to buy the car outright, or more commonly get people switched onto a new deal with another new car, and begin the cycle again without ever actually owning a car! So I’m going to say it anyway, buy used! The Bank of England is already getting concerned that last year a record £31.6 billion was borrowed to finance cars, and rightly so.


Any repeating expenses


After all your household bills, we’re left with all those other repeating expenses. I’m talking about those subscriptions to magazines, streaming services, gyms, and anyone else you’ve given permission to take money out of your account every single month.


Look hard at every single one of them, and ask yourself whether or not it is providing that much value to you every month. A gym membership you use the hell out of regularly, great! One where you haven’t been in a couple of months, but you swear you’re gonna go back soon? Cut it. Just as you’re building your FIRE engine to run automatically, paying every month for something you don’t need is just funding someone else’s retirement!


For some of them, look to see whether you could replace a monthly subscription with a one off purchase. For example, instead of a satellite tv subscription you could buy an Amazon Fire TV Stick and get free catch up services, or even add on a cheaper Netflix subscription. Or replace exercise/yoga classes with a mat, a small set of weights and some YouTube videos!


Driving home the message


Yes, it is important to work on increasing your income on the road to financial independence. But you need to maximise the difference between your income and expenses to speed up progress to FIRE. Setting aside compounding for a moment, if can you save 25% of your income, three years’ work equals one year of retirement. 50% saved means one year working gives a year of retirement. Get that up to 66%, and every year you work pays for two years of retirement. You get the picture.


So what’s the biggest drag factor in your financial life right now?



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