How To Save Money On The Big 3 Expenses (Essential Tips)

The Big 3

Unfortunately, there are a lot of expenses in life. Reducing and optimizing these expenses are an essential step to becoming a master of your cash flow. There are tons of ways to reduce our spending habits such as drinking more water, taking lunch to work, driving less, shopping less, etc, the list can go on forever. However, there are 3 expenses in our lives that tend to be the largest across the board. The big 3 are housing, transportation, and food. These big-ticket items make up a majority of our spending and we might not even realize it.

1. Housing

Housing is most likely the largest expense in your budget. Whether you are renting or paying down a mortgage, you can do some quick math to see what the percentage of your budget spent on housing is. For example, a household with a take-home pay of $5,000 per month spending $2,000 per month on rent would be spending 40% of their take-home pay on rent. Try it out for yourself by taking your monthly payment and dividing it by your monthly take-home pay and then multiplying it by 100 to find your percentage spent on housing:

Monthly cost ÷ Monthly income x 100 = Percentage spent on housing

There are plenty of creative ways to reduce your housing expense. Downsizing could be one of the easiest ways to reduce housing costs. Moving into smaller housing may not only reduce your monthly payments, but the cost of utilities could go down as well. Splitting the cost with a roommate is another easy way to reduce housing expenses. Having a roommate could split the cost of housing nearly in half. House hacking by renting out rooms or sections of your house would essentially reduce your costs by offsetting them with additional income. Lastly, moving to a lower housing cost area is another option to reduce this large expense.

2. Transportation

Transportation can be a tricky expense to calculate because there are so many things that can factor into its overall cost. The cost of owning a vehicle is much more than the monthly payment of the vehicle itself. Some common costs include Interest paid on loan, depreciation, fuel, preventative maintenance, repairs, insurance, registration, taxes, fees, and cleaning. The same calculation for housing can be used to determine the cost of transportation but it is a little more tricky because of all of the different factors.

The easiest way to keep transportation expenses down is to buy a used make and model vehicle with a reliable record. Other ways include shopping around for the best interest rate when purchasing, purchasing a fuel-efficient vehicle, performing preventative maintenance according to the manufacturer’s schedule, prepaying insurance for a lower rate, purchasing only as much insurance as actually necessary for your situation, and obviously: driving less.

3. Food

Your food bill can be drastically altered to be very high or very low. While you should not sacrifice proper nutrition in order to save a few bucks, your food budget can be optimized to cost much less. The easiest and fastest way to cut your food bill is by eating more home-cooked meals as opposed to eating restaurant and fast food items.

It is easy to save on food at the grocery store as well. Big staple foods such as potatoes, rice, beans, oats, etc. are very low cost compared to how many calories you get out of them. Buying some fruits and vegetables frozen or canned can offer similar nutrients at a lower price, and they last much longer. Meats can be particularly expensive, but simply switching to leaner and lower cost cuts can go a long way. The possibilities are endless here too, the idea is to optimize your food bill, but still eat nutritiously and enjoy your meals.

  • The big 3 expenses are housing, transportation, and food.
  • Housing is usually the largest expense but can be optimized.
  • Transportation is a lot more than just the monthly payment of the vehicle.
  • Food expenses can be high or low, but you can still eat nutritiously at a low cost.

Zachary Smith

Zach is passionate about personal finance, especially when it comes to financial independence. He is a heavy index fund investor and budget connoisseur that also loves traveling, exercise, and the great outdoors. See his full bio here

Recent Posts