According to the Bureau of Labor Statistics, the average American’s top three household expenses are housing, transportation, and food. If you focus on reducing these top three expenses, not only will you be able to boost your savings, but you’ll be able to reduce the total amount of money that you’ll need to reach financial independence/early retirement (FIRE). Recall that to arrive at the total amount of money that you’ll need for retirement, you multiply your monthly expenses by 300 (e.g. if your total monthly expenses are $4,000, you need roughly $1.2 million to retire). However, if you can reduce your monthly expenses by just $100, that’s $30,000 less overall that you would have to save up. Here are some tips on how to save on these top three household expenses.


In general, housing accounts for the largest expense for the average American. The rule of thumb is to spend no more than 30% of your gross income on housing–anything beyond that and you’re really stretching yourself thin. In high cost of living (HCOL) areas, it can be difficult to keep this cost low. Here are some suggestions on how you can lower your housing expense.

1.  House hack. This is accomplished by buying a multifamily unit (duplex, triplex, or fourplex), living in one of the unit while renting out the other unit(s), and essentially living rent-free. If you own a house with a basement or detached garage, you might even be able to convert those into rentable spaces to reduce your mortgage. Imagine being able to cut housing expense out of your budget completely. People who are able to take advantage of this will be able to quickly boost their savings and achieve financial independence.

2.  Rent or buy a smaller place. Homes today average 2,687 square feet, more than 1,000 square feet larger than they were in 1973. Larger homes not only cost more to rent or buy, but they are much more expensive to maintain and to heat and cool. Think about how often you use a space and whether it’s worth the additional cost. For example, a formal living room and dining room are two of the most underused spaces in a home. Unless you entertain every week, consider whether you really need them. The same goes for guest bedrooms. Prior to buying our condo in Virginia, I had rented a basement apartment for $875 a month, which included all utilities (the average for a studio was about $1,200 a month), and it was in a great location. I briefly debated getting a one bedroom–you know, just in case we had guests. But then I thought about how I often we had people visit, and if they did, for the amount of money I was saving per month, I could actually put them in a hotel where they would be more comfortable.

3.  Get a roommate/housemate or host via Airbnb. Sharing a home is a common way to keep costs down. It might be difficult for people who have a family with children, but it’s not impossible. My aunt, who is married with kids and own enough properties to retire, still rents out the rooms in her home, so don’t think it can’t be done just because you have a family. Is it sacrificing your privacy? A little bit. But what if that means that you could be home with your kids full-time?

4.  Move to an area with a low cost of living. Traditional retirees sometime do this to stretch their fixed income, but if you live in an area where housing is not affordable, moving to another city is an option worth considering. The Earth Awaits is a great website that will help you determine the cost of living in different parts of the world.


5.  Use public transportation. If your employer offers a subsidy for public transportation, definitely take advantage of it. You can use this Fuel Savings Calculator to see how much you’d saving riding public transportation compared to driving a car.

6.  Bike. It’s a great way to get exercise in and keep your transportation costs down. There are now more than 119 cities in the United States with bike share systems, so if you don’t want to bother with maintaining your bike or worry about it getting stolen, you can get a bike share membership. Some employers now cover the cost of bike share memberships. If biking to and from work is not feasible, try biking just once a week, or biking to your neighborhood store when you have to run out and grab an item in the evening.

7.  If you need a car, buy used and save up enough money so you can pay for it in cash. Also consider the total cost of ownership, including maintenance, fuel costs, insurance, etc. In some states, such as Virginia, there is even a property tax based on the value of your car that you have to pay annually. There are calculators like Edmund’s True Cost to Own that will give you an estimate of what the average cost is for owning a car for the first five years. For example, for a 2011 Toyota RAV4 that is financed, this amounts to $35,405 based on 15,000 miles being driven annually. The bulk of this cost is in fuel.


8.  In the 1950s, most meals were eaten at home. Today, Americans spend roughly half of their food expense on dining out. The easiest way to reduce this expense is to cook at home. It’s healthier and will also save you a lot of money. Budget Bytes has delicious and free budget-friendly recipes. If you’re looking to eat healthier and want to try out batch cooking, check out this free Whole30 slow cooker 30 day meal plan (for those of you who love your InstantPot, there’s even a way to convert these slow cooker recipe into pressure cooker recipes). The meal-kits are great, but they can get expensive. An alternative is to use a weekly meal planning service like Cook Smarts, which costs $6-$8 a month, but will save you time and the hassle of coming up with different meal ideas (they usually offer a Black Friday discount, so if you want to wait until then, you’ll be able to save a little more).

9.  Shop at ethnic stores. The produce at Indian, Chinese, Mexican, etc. grocery stores tend to be better priced than national chain supermarkets because they don’t have the large overhead (prime real estate location, employee training costs, high-end equipment, etc.) that the national chain supermarkets do. Another reason is because the produce may have been downgraded for not being uniform in size or are over-riped. If organic is your thing, the price for organic produce tend to be cheaper at Costco and Trader Joe than the national chain supermarkets. If you want to eat healthier but can’t afford to eat all organic, stick to buying just the items on the Dirty Dozen as organic.

Do you have any savings tips to share that are not listed here?
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9 Ways To Reduce Your Top 3 Expenses