How to Control your Money

Financial independence through controlling your money

No Pants Money Man can’t actually throw a lasso in real life 🙁

How to control your money is important shit to understand if you’re gonna become financially independent. Your spending habits determine everything. E v e r y t h i n g! What you spend on the cost of living each year accounts for, like maybe 85% of the variance (just made that up, but it’s probably pretty accurate) of when you’ll reach financial independence. Hence, taking control of your cash and managing your spending will let you reach financial independence very quickly. This is because, you will create smaller nut, and increase the ways you can reach financial independence.  However, to control you cash you need a big internal locus of control[1].

Locus of control is fancy psychology talk for referring to the phenomenon of  perceptions of casual behavior. That is, the degree that you expect your behavior to cause a desired result, based on your perceptions of control.  There two types of control loci:

  • the internal locus of control and,
  • the external locus of control.

People with an internal locus of control (Internalists) believe they have tremendous control over their lives. Internalist’s believe their decisions and behaviors will cause the results they want. For example, an Internalist’s believes their lifestyle choices will result in them being able to save over 50% of their income and retire by 35 years old.

People with an external locus of control (Externalists) believe uncontrollable things are the causes their life events, such as the economy, other people, or a flying spaghetti monster. Externalists believe that external events determine when they retire, like winning lotto or a good economy. They also believe that the cost of living is largely uncontrollable.

However, people are not a 100% Internalist or a 100% Externalist. They exist somewhere along the locus of control spectrum, being more of an Internalist or more of an Externalist. See the Colourful Illustration Box below.

Colourful Illustration Box

Financial Independence by Controlling your Cash

Locus of Control Spectrum

If you were a 100% Internalist, you’d be bat shit crazy, or a super powerful omnipotent being. If you were a 100% Externalist, you’d be bat shit crazy, or very fucking stupid. This is because, there are somethings you just can’t control, while other things you can control. See Colorful Locus of Control Bubbles below. [2]

Colorful Locus of Control Bubbles

Financial Independence by Controlling your Cash

Locus of Control Types

How much do you control? Achieve Financial Independence by Controlling your Cash

If you can’t control something, it will ultimately be reflected in your behavior and spending habits. How many times have you said “fuck it” when shit got too hard and you just went full throttle reckless? You figure you couldn’t actually control the outcome of whatever you were doing; so you just went wild. Yeah, lets avoid that. If you think you can’t control something, you’ll never challenge it.

Take gravity as an example. Any half-sane person realizes that the Earth’s mass creates a gravitational force that pulls objects towards it at a rate of 9.8 m/s2. Therefore, if you jump off a cliff without a parachute, you’re gonna fall at a rate of 9.8 m/s2 until you splat on the ground. (Yes, you may reach terminal velocity before you go splat, stop splitting hairs.) No matter what you do, this gravitational force will always exist, and jumping off the cliff will always cause the same result – you going splat.  Hence, your behavior is going to reflect this fact. You’re never gonna jump off that cliff. But, what if Earth’s gravitational force was controllable?

If Earth’s gravitational force was controllable, it would mean we have all been missing out on a lot of consequence free cliff jumping.  We could of been changing the gravitational force as we saw fit, jumping off cliffs and pretending we are NBA all-stars.  It would mean that your behavior of not to jump off cliffs only existed because you incorrectly believed that Earth’s gravitational force was uncontrollable. It would mean that your none cliff jumping behavior would significantly change if you believed that Earth’s gravitational force was controllable (it’s not actually controllable so please don’t go jumping off cliffs). Now, apply this same concept to spending money.

If you mistakenly believe that spending X amount of money is uncontrollable because of Y reason,  you’re never gonna change your behavior. If you believe that the amount of money you spend on stuff so you can live – the cost of living – is uncontrollable, you’re gonna have a hard time reaching financial independence. Hence, if you control your cost of living, you can significantly speed up the time you’ll reach financial independence. Lets take a  look at a few of the examples listed below:

  • fuel,
  • interest rates,
  • utilities,
  • food,
  • insurance and,
  • mobile phones.

Cost of fuel

Here in Australia, the cost of fuel can reach over $1.50AU / L ($4.36USD a gallon). If the price goes up, you spend more on fuel, if the price goes down, you spend less on fuel. For example, if Bruce travels 10,000km (16,000miles) a year at 8L/100km (35 MPG),  he will consume 800L (211 gallon) of fuel a year. At $1.50/L this is $1,200AU or $920USD spent on fuel a year. At $1.00/L this is $800AU or $616USD spent on fuel a year. The cost difference between $1.50/L and $1.00/L is $400AU and $304USD, respectively. You can see that fuel cost has a considerable impact on your savings, and the cost of fuel is completely out of your control[3]. But, how much fuel you consume is completely within your control.

You don’t need to travel 10,000km a year in your car, you choose to travel 10,000km in your car. If you used an alternative mode of transport, like a bicycle or an e-bike, you would use your car less and burn less fuel. If the majority of your travel is commuting to work, running to the grocery store for food and visiting friends and family, swap your car for a bike (with a trailer to get groceries) and you will cut down how many units of fuel you use per year and save a shit load of cash.

Let assume by using a bicycle instead of the car you can reduce your car mileage to 5,000km (8,000miles) a year. At $1.50/L ($4.36USD a gallon) that is $600AU or $460USD in fuel, compared to $1200AU and $920USD at 10,000km (16,000miles) a year. That’s a saving of $600AU or $460USD a year. If that yearly saving was invested at 8% per annum for 10 years it would be worth $9,387AU ($7,197USD)! That’s money in in your pocket towards financial independence.

Interest Rates

Most people are currently experiencing low interest rates, but interest rates were at 6% to 8%+ not too long ago. The majority of people out there have a mortgage, which will incur interest charges every month. Some people have other debt as well, like credit cards or car loans, which they also have to pay interest on. In either case, you can’t control the interest rate you have to pay, but you can control the amount of interest you have to pay.

If you have credit card or a car loan debt, you can eliminate that interest bill pronto by paying off your credit card in full, and selling the car. You can buy a smaller more fuel efficient car with cash instead of debt. If you have a big mortgage you can reduce the interest bill by getting a smaller mortgage.

A big mortgage is normally accompanied with a big house. Lets take the suburb where I live as an example. The suburb is 10km from where I work, perfect for cycling. It also has houses worth over a million dollars and houses worth under $350,000[4]. A million dollar house is ridiculously big. It is 400m2+ (4300sq. ft), 4+ bedrooms, 2+ bathrooms, 2+ garage spaces sitting on 600m2+ (6500sq. ft) of land. With a 20% deposit, the million dollar house will have a mortgage of $800,000. At 5% interest that is a $40,000 per year interest bill. $40,000 is more than my entire yearly expenditure!

Now think for a moment. Why do you need a 400m2+ (4300sq. ft) house? You live 10km from work so you don’t need 2+ garage spaces to house multiple cars. Sell a car and use the bicycle more. You only have 1 child (or none), so you only need 2 bedrooms at most. Even if you had more children, they can use a bunk bed. If you run 2 showers at once, the water flow disappears and the water becomes lukewarm, so you never run 2 showers at once. So why do you need 2 bathrooms again? 10% or so of your block is occupied by water wasting grass, and unless you grow your own food in your backyard, or make shit in your shed, the rest of your backyard is arguably wasted space too[5]. So you could easily have a smaller block as well.

Conversely, a $350,000 house will be 80 – 120m2 (860sq. ft – 1300 sq. ft) in size, have 2-3 bedrooms, 1 bathroom, 1-2 carport spaces, and sit on 300 – 400m2 (3200sq. ft – 4300 sq. ft) of land. Just what you need. The small house also has a small mortgage. With a 20% deposit, the $350,000 house will have a mortgage of $280,000. At % interest that is a $14, 000 per year interest bill. That is a $26,000 a year less than the million dollar house! If that yearly saving was invested at 8% per annum for 10 years it would be worth $406,783! That is HUGE!! This is how you achieve financial independence by controlling your cash!

Cost of Utilities

You can’t control the unit price of a kilowatt hour (kWh) of electricity or the unit price for a megajoule (MJ) of gas, but you can control the amount you use. If you have a smaller house, you have a smaller utility bill (and less time spent cleaning!). Smaller house = less space to heat and cool = less units of energy used = less cost = most cash in your pocket.

You can also do simple things such as using energy efficient light bulbs like LEDs or halogen globes (both use significant less watt hours (wH) of electricity compared to incandescent bulbs), and line dry your clothes instead of using a dryer. Or, you can take it a step further and install energy efficient systems, such as a solar hot water heater, photo-voltaic solar panels, or increase the actual energy efficiency of your home by installing R4+ insulation (R23 in the US) in your walls, roof and floor void which will further reduce your utility costs[6].

The yearly electricity bill for our small house is $600 a year. Contrarily, a big million dollar house can have power bills of $8,000 a year. That is a potential saving of $7,400 per year. If you invested the $7,400 savings a year at 8% per annum compounding growth for 10 years it would be worth $115,777. Even more money generating passive income and an even smaller nut to cover.

Cost of Food

The average person’s grocery bill is $1,000 a month. Mrs No Pant and I’s grocery bill is $400 a month, and we eat delicious healthy food every day. The difference between our grocery bill and the average person’s is $600 a month or $7,200 a year. Not only does our grocery bill give us awesome looking bodies, it equals $112,648 when the $7,200 saving is invested at 8% per annum for 10 years. Follow these simple guides to control your own grocery bill:

  • Buy in bulk
  • Buy at your local markets or bulk seller for cheaper prices
  • Do not buy processed food and cook more
  • Eat less red meat
  • Buy substitute goods
Buy in bulk

The price per unit is always cheaper when you buy more units. A 500g block of brand name cheddar cheese costs $17.18/kg at Woolworths. A 1kg block of the same brand name cheddar cheese costs $13.00/kg at Woolworths. The 500g block of cheese is 32% more expensive, simply because you are buying less of it. If you have room, buy in bulk. The only exception is for perishable items that will turn before you can eat them. Buy them in smaller quantities.

Buy at your local markets or bulk seller

If you are buying in bulk and you have a bulk seller within cycling distance, then shop at the bulk seller and save some cash. If you don’t have a bulk seller in your area, check out your local markets to save some coin. The local markets will sell fruit, vegetables, legumes, spices, meat, fish and usually diary too. The food is normally fresher and is cheaper than a supermarket. At our local markets we can consistently buy chicken breast for $8/kg while at a supermarket it will cost $10 – $12/kg.

Do not buy processed food and cook more

This is where you can save some serious cash and improve your health at the same time. When you buy processed food you are paying for someone else’s labour and profit to cook for you. The food will also be loaded with high levels of sodium and preservatives. If you cook all your own food, you will save heaps of cash[7]. As an example, a typical microwave dinner costs $1.91/100g or $10.52 per 600 calories (size of a moderate meal). Conversely, a delicious healthy home cooked meal will cost about $2.25 per 600 calories[8]. That processed microwave dinner is 489% more expensive than a tasty home cooked meal! If you cooked all your meals and never buy processed food again you will slash your grocery bill and save a fortune.

Eat less red meat

Red meat is comparatively expensive compared to carbohydrates, fats, legumes, dairy and chicken. Although it’s rather tasty, Mrs No Pants and I only eat red meat 2-3 times a week. And when we do eat red meat, it will be low fat mince. You only really need to consume meat for protein and iron requirements, which depending on your level of exercise is around 30 – 35% of your calorie intake. However, there are plenty of other good sources of protein rich food, such as legumes[9], whey powder[10] and chicken. These sources of protein are leaner, healthier[11] and cheaper than red meat. Check out the table for a comparison.

Food Type Cost / Kg Cost / 600 Calories Protein per 100grams Cost per 30g Protein Serve Comparison to Steak per 600 calories
Black Beans $5.50/kg 97c 21g 79c 85% cheaper.
Whey Powder $15/kg[12] $2.25 77g 59c 66% cheaper
Chicken Breast $8/kg $2.90 31g 77c 56% cheaper
Porterhouse Steak $27/kg $6.53 24g $3.39 0%

Furthermore, there is a strong positive correlation between increased consumption of red meat and a country’s wealth. The richer a country grows, the more red meat they eat. But nutritionally, there is no need to consume the amount of red meat western society eats. And according to the Cancer Council of Australia, eating excessive red meat increases your risk of cancer. Therefore, you should reduce your red meat intake and save some cash (and your health).

Buy substitute goods

The cost of food is a bit different compared to other cost of living expenses, because you have some control over the unit cost of food, as well as the total quantity you consume. What I mean by this is you can choose a substitute good, that has a lower per unit cost, and you can also choose to consume less of it. A substitute good is a product that is slightly different, but essentially the same thing and is cheaper. For example, you could buy Joe Blogg’s Peanut Butter instead of Bridget Jone’s Peanut Butter. Both are the same, but Joe Blogg’s Peanut Butter is cheaper.

Cost of insurance

There is insurance for almost everything now. Income insurance, pet insurance, house insurance, car insurance, health insurance, mobile phone insurance, travel insurance, contents insurance, funeral insurance and so on. The only insurance you really need is health insurance, house (building) insurance and depending on your personal circumstances, car insurance.

Mrs No Pants and I only have health and house insurance. In Australia, we have an great public health system, where all required health treatments and services and provided free of charge. The only reason we have health insurance is because the tax benefits are greater than the cost of basic hospital cover. House insurance is mandatory if you have a mortgage, but due to the catastrophic consequence if our house was to burn down, it also makes sense financially to have it. We don’t have comprehensive car insurance, because we seldom use the car and we self-insure against the risk of an at fault crash. To decide whether insurance makes sense you need to do a risk assessment. Here is how.

Below is a risk assessment matrix. To use the matrix you make an informed judgement on the likelihood of a risk event occurring, say a car crash, against the consequence if it occurred (e.g., minor dent to death). Let use my decision not to take out comprehensive car insurance as an example. Based on my driving frequency (once a week at most), my general maximum travelling speed (60km/hr – 38mph), my driving behavior (defensive driving), and my driving history (zero at fault crashes in 12 years of driving), I believe the likelihood of a crash is unlikely and the consequence would be moderate (a few bent up car panels). This provides a score of 6 out of a maximum score of 25, which is a medium level of risk. For myself, I deem this as an acceptable level of risk not to have comprehensive car insurance.

Financial Independence by Controlling your Cash

Risk Assessment Rating Tool

Risk Assessment Matrix

Let’s do the same exercise for funeral insurance. The likelihood you couldn’t pay for your own funeral is unlikely (unless you’re a junkie). The consequence if you couldn’t pay for your own funeral is slight (your relatives or friend would likely pay or your government is likely to provide assistance). This gives you a score of 2 out of a maximum score of 25, which is a low risk. Therefore, if you have funeral insurance you are bat shit crazy or very fucking stupid, because you achieve financial independence by controlling your cash!

You should do your own analysis of your current insurance coverage using the same risk assessment tool. If you are over insured, you can save some cash by reducing your coverage.

Cost of phones

Mobile phone plans can be ridiculously priced. However, there is one key point to remember to save you some cash:

  • Do not sign up for “free phone” mobile phone contracts.

These plans usually cost $40 – 80 a month and lock you into the one provide for 12 – 24 months. If you shop around you can find some pretty sweet bring your own mobile plans. Vaya is one company with some awesome deals. For $16/month with no lock-in contract you have access to the Optus network and have the same inclusions as a $60 a month lock-in contract. Just grab an android mobile phone online for under $100 and you can be saving $400 a year. $400 savings per year compounding over 10 years at 8% interest is $6,258 in savings.

If we add up all the savings we have managed to achieve by controlling the cost of living units consumed it equals $650,852 over 10 years. This is an insane amount of savings generated just by a few small behavioral changes. Imagine how much more money you can save if you apply the same internal locus of control principles to your other areas of expenditure. The $650,852 could easily balloon to a million dollars or more! This will achieve financial independence by controlling your cash.

So next time that Externalist within you starts on their negative triad about your lack of control over your spending, stop and think. How can you achieve financial independence by controlling your cash? What would the Internalist do? You can control a shit load more than you think, and your level of control is the difference between reaching financial independence within 10 years and pursuing more fulfilling pursuits or wasting your life in a job you don’t enjoy.

Peace Out,

No Pants Money Man.


  1. Psychologist Julian B Rotter wrote the founding article on Locus of Control in 1966. The article is called Generalized Expectancies for Internal versus External Control of Reinforcement. Since 1966, countless research articles have been published on the locus of control. ↑
  2. With continuing technological improvements, some of the uncontrollable things like genetics and maybe the weather will  eventually become controllable. ↑
  3. Unless you have an electric car, or a diesel car and you process your own fuel. ↑
  4. I forgot to mention, real estate in Australia is ridiculously expensive. Oh, and we have the $350,000 house. ↑
  5. Do not get me started on backyard swimming pools. These are an absolute waste of money. If you have one, drain it and fill in the hole immediately! ↑
  6. You should compare the lifecycle cost of these options to see if they are financially logical. I will be exploring energy efficiency in a lot more detail in a future blog post ↑
  7. If you are time poor, cook in bulk batches and freeze in meal sized separate containers. Then you can just grab one out for lunch or dinner and reheat it. This is what Mrs No Pants and I do, cooking about only 3 times a week. ↑
  8. 110 grams of chicken breast, 325 grams of brown rice, green vegetables, a drizzle of olive oil and some tasty seasoning. ↑
  9. Legumes are not a complete protein and need to be eaten with a grain, such as brown rice to be useful for protein synthesis. ↑
  10. Whey powder is a nutritional supplement not a meal, unless you enjoy having smoothies with your food! ↑
  11. Chicken isn’t necessarily any healthier ↑
  12. Remember, buy in bulk! You can purchase 20kg bulk bags from dairy processing plants or select online resellers such as (no affiliate relationship). Mrs No Pants and I consume 20kg of whey powder a year. ↑
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