Thursday 29 March 2018

Reducing Life's Big Three Expenses

When you are trying to become more financially free and independent, you first need to take a closer look at your existing expenses and the ways in which you can reduce these. And a good place to start is with life’s most costly items, which we will talk about as the ‘big three’. These are housing, transportation and food. In the average household budget, these things have been shown to take up 60% or more of your monthly outgoings. So, we will look to tackle these expenses one-by-one with a few different suggestions of exactly what you can do about each of them.

The Roof Over Your Head

Housing costs depend very much on where you choose to make your home. If you live in the heart of a major city and you are finding that your housing expenses are simply too much to bear, you should consider moving out to the suburbs. With ever-improving transportation links, you may not even find that you are as far away as you initially thought. The decision to rent or buy is also a challenging one. While some people will say it is just throwing money away, many of us are choosing not to settle in a single area for our entire lives and renting gives you that flexibility to move at the drop of a hat. However, when you become settled in an area, buying a place is likely to be the better choice.

When you are searching for a place to buy, focus on what you need rather than what the bank says you can afford. You should be looking for a place that is safe, functional, and modest. If you are a single person with a four-bedroom house, this is a lot of space that is simply going to waste. If you are looking for a good rule of thumb to follow, the ⅓ one usually stands up well. Essentially, this states that you should be spending no more than a third of your post-tax income on your housing expenditures.

Your Pride and Joy (Car)

While many people dream about driving an expensive car around, don’t be fooled into shelling out more than you can afford. Remember, if you can’t afford to buy the car with cash, you can’t afford to buy that car at all. When you do buy a car, instead of upgrading every couple of years to the latest hot model, you should look to maintain your vehicle in a good condition for the longest possible time. Learn some basic techniques and follow your manual if you are not sure. And, as you are probably already well-aware, buying a new car is one of the biggest wastes of money out there. Instead, you should look to the used market to snag yourself a great deal.

Ask yourself whether or not your household really needs two cars. Remember, every additional vehicle is going to cost you more in tax, insurance, maintenance etc. Speaking of insurance, you should always look to find the cheapest car insurance every year. Thankfully, comparison websites have made this easier than ever to do.

Filling Your Plate
The quickest way to spend your food budget is by eating out for dinner. While there is nothing wrong with treating yourself from time to time, you can often end up spending the equivalent of a week’s worth of groceries when you eat at a restaurant. You need to make a household food budget and factor this in. Even turning a single one of your take-out nights into a cooking night can make all the difference.

Cooking night

One of the key reasons why people don’t prepare their own meals on a regular basis is that they don’t have the time and energy to do so. However, with some simple meal prep on a Sunday night, you can save yourself a lot of time during the course of the week. When you are cooking, why not up the number of ingredients? This way, you can freeze some for future lunches, dinner etc.

If you really want to reduce your household budget, the best way of doing so is going to be focusing on the three categories that we have discussed. Even the small savings all add up to make a noticeable difference over time. Essentially, it all comes back to limiting housing to what you need (not what you want), buying and maintaining a modest car, limiting eating out and preparing your own food.

* Collaborative post *

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