Some common financial advice you’ll hear is that small everyday expenses add up. By cutting out a daily $3 latte, you could save $1,000 a year! The match checks out.
However, I’d argue that you’d be better off focusing your efforts on your biggest 3 expenses, rather than on small, everyday purchases. I’m a big fan of the Pareto principle, which states that 80% of effects come from 20% of causes. Put another way, 20% of your effort leads to 80% of your outcomes.
Instead of focusing on the little stuff, like lattes, that make up 80% of your financial life but only get you 20% of the results, I suggest you flip it around. Focus on the 20% of things that get you 80% of the results.
So what are the 20% of expenses that make up 80% of your spending? There are three categories, which I’ll call the Big 3, that are the largest expenses for most people. The first is housing, the second is transportation, and the third is food. If you focus on decreasing your spending in the Big 3 categories, you’ll see the biggest results.
Here are 67 ways you can reduce your expenses in each of these categories.
Housing
Table of Contents
If you stopped spending on a daily $3 coffee, you’d save about $90 a month. And you’d have to exercise willpower and miss out on your coffee every day. However, you’d only have to make one or two changes to your living situation to lower your rent or mortgage by several hundred dollars a month. Then, you’d see these savings each month without having to do anything!
1. Get energy efficient appliances
As you do home improvements, install energy efficient appliances, new LED lightbulbs, and low-flow plumbing fixtures.
2. Turn down the thermostat
By switching to a programmable thermostat, you can keep your home a comfortable temperature when you’re there, and then save money on your bills while you’re away.
3. Insulate your home
Make sure to insulate areas of your home like the attic, where you could be losing heat in the winter. And by adding cheap weather stripping to your doors and windows you can save a lot on your heating and air conditioning usage. Put up thick curtains or even thermo reflective shades on your windows.
4. Use the sun to your advantage
Keep your shades closed during the day in the summer, and open during the day in the winter, to take advantage of the free heat from the sun.
5. Refinance your mortgage
Interest rates may be lower right now than they were when you purchased your home, or your credit score might be higher. If you plan to stay in your house for a while, you could refinance your mortgage and get a lower interest rate.
6. Rent out a room
Renting a room on Airbnb for several nights a month might actually pay your rent or mortgage for you! If you have an extra room that you don’t use, or an accessory apartment (sometimes called a mother-in-law suite), consider renting it out to offset your housing costs.
7. Get a roommate
You could consider getting a longer term roommate. Whether that is asking your partner to move in and split the housing costs, moving in with a friend, or finding someone online who needs a place to stay, this can save you money.
8. Negotiate when you re-sign a lease
If you’re a renter, it is a good time to negotiate when your lease is up for renewal. Having a good relationship with your landlord will make this easier.
9. Move to a lower cost of living area
Moving to a lower cost of living area is a frequently touted piece of advice to decrease expenses and increase quality of life. This isn’t realistic for everyone, sometimes you need to live in or near a high cost of living area for your job. However, with the world changing to embrace more remote work, moving could be an option for you.
10. Find a cheaper house or apartment in your area
You can even move within your local area. Finding an apartment that is cheaper, going one town over where the property taxes are thousands of dollars less per year, or downsizing to a slightly smaller place can save you thousands every year.
11. Sell by owner
If you decide to move, and you’re selling a home, selling it yourself instead of through a realtor can save you tens of thousands of dollars!
12. House hack
House hacking is when you buy a house with multiple units, live in one, and rent the others out to make income that will pay your mortgage. This is often done with duplexes, triplexes, or houses with accessory apartments. This is a great way to get your housing for a big discount or maybe even free!
13. Invest in real estate
House hacking is a type of real estate investing, and many people choose to keep their multi-unit houses once they move and rent out both units to generate additional income.
14. House Sitting
House sitting is where you stay in someone else’s home while they’re away to care for their pets, their garden, or their house in general. Sometimes you get paid for this work, and in other cases you house sit for free but this saves you money on housing.
15. Live in a tiny house
Usually smaller houses are cheaper, and tiny houses are no exception. You can buy a tiny house for less than six-figures, and you could build one yourself for even less!
16. Live aboard a sailboat
This idea will only work if you don’t get seasick, but living on a sailboat sounds pretty cool if you love the ocean and the island life. Plus, it can be a lot cheaper than housing on land.
17. Live in an RV
Plenty of people live full-time in Recreation Vehicles or RVs. Besides being cheaper than a regular house or apartment, your home is mobile so you can travel!
18. Live in a campervan
Living in a converted campervan might even be cheaper than living in an RV. Cargo vans that are converted into living spaces are more “stealthy” than RVs, and you can usually park places for free instead of paying for campgrounds.
Transportation
Some of the easiest changes you can make will help you save money on your current expenses. You can also make changes that will reduce the overhead costs of owning, operating, and maintaining a vehicle. Finally, by changing how you get places, you’ll be able to cut your transportation costs.
19. Get Gas Rewards
If you’re already spending money on gas for your commute and travel, save money by getting a gas rewards card to a specific brand of gas station you frequently go to. You can also get a gas rewards credit card that will give you cash back or points for spending at gas stations.
20. Pick a Smarter Route
Pick a smarter route that will help you avoid toll roads and traffic. This could save you cash every time you travel, and it will save you time as well as gas.
21. Drive slower
If you practice smart driving habits, you can increase your car’s gas mileage and stop wasting gas. One of the easiest, most impactful changes you can make is to slow down. Driving at or slightly below the speed limit is often the sweet spot for gas mileage in most cars. When you speed, accelerate quickly, and brake heavily, you are wasting gas and therefore money.
22. Increase gas mileage
You can increase gas mileage by minimizing your air conditioning usage, removing extra weight like cargo you haul around everywhere, and taking off roof racks that increase drag. The further you can get on a tank of gas, the less often you have to fill up and the more money you can save.
23. Don’t Warm Your Car Up
You also don’t need to warm up your car before driving it in the winter. This doesn’t do anything for the car’s engine, it just wastes gas. Yes, you might need to wear your coat and gloves for a few minutes while the heat gets going, but you’ll be wearing them anyway for the walk to the car, and saving money by keeping them on a little longer.
24. Get Commuter Benefits
Check with your HR department at work and see if they offer commuter benefits. Some companies offer discounted parking, reimbursements for public transportation, and other benefits specific to the type of commuting common in your area.
Owning and operating a car comes with overhead expenses, such as the cost of buying the car, maintaining insurance, and getting regular maintenance.
To save money on your car, you could rent or share a car, instead of owning. There are flex car programs like Zipcar where you only pay for a car when you need to use it, instead of all the time, even if it’s just sitting in your driveway.
26. Get a fuel efficient car
SUVs and big trucks are less fuel efficient than smaller sedans, so they’ll cost you more money on gas. Also consider that newer cars tend to get better gas mileage than older cars.
27. Purchase an electric or hybrid car
There are plenty of places to charge electric or plug-in hybrid electric cars for FREE! Even if you can’t find a free place to plug in, electricity is likely a cheaper way to operate your car than gas. Hybrids are also much more fuel efficient than regular gas cars.
28. Buy a domestic car brand
Domestic cars are cheaper to maintain and buy parts for because they don’t have to be shipped overseas. There are also often more options for where to get them serviced, so you can find a cheap mechanic to do the work instead of having to go to an expensive dealership.
29. Buy Used
Buying a used car could save you thousands in depreciation. Often buying a car that is 4 years old means that the previous owner has suffered the losses of depreciation instead of you. But even buying a lightly used car that is just a year old means you don’t have to suffer the depreciation that happens immediately after driving a new car off the lot.
30. Shop Around For New
If you’re still set on buying a new car, make sure you shop around. You can have multiple dealerships bid against each other in order to get you as a customer. Additionally, always negotiate. You can negotiate the price, the warranty and the value of your trade-in to get a better price on your new car.
31. Shop around for insurance
Insurance is a large overhead cost of owning a car. To save on insurance, be sure to shop around and get several quotes from different insurance companies.
32. Negotiate your insurance rates
You can also call and negotiate with your current insurance company, to see if they can reduce your rates.
33. Ask for insurance discounts
Be sure to ask about discounts, such as a safe driver discount. You can often get discounts for things like having an alarm system, being married, or taking a safe driver course.
34. Bundle car and home insurance
If you have home and car insurance, consider bundling them to save even more. Typically, insurance companies will give you a discount if you consolidate all of your insurance policies with one company.
35. Keep your tires inflated
By keeping your tires inflated, you can save wear and tear that will make them last longer so you don’t have to purchase new tires as often. There are free air pumps at most gas stations that you can use. Just check your tires to see how much they should be inflated.
36. Change your own oil
Changing your own oil is an easy task that will save you money. Be sure you’re using the right oil by reading your owner’s manual. Then learn how to change oil by watching a Youtube video. Once you see how easy it is, you won’t need to spend $40 at the auto shop for an oil change anymore.
37. Know what maintenance your car needs, and when
Not everyone is going to be able to do every type of maintenance their car requires. But as a money-savvy car owner, you’re going to need to know what types of maintenance your car needs, and when it needs it. This way, you can make sure that you bring your car into the shop to get the maintenance done on time, which will save you money from costly fixes later!
38. Telecommute/ Work From Home
One way to shorten your commute is to telecommute or work from home. A lot of people are already doing this right now during the pandemic! You can negotiate this full time work from home, or just do it a few days a week. Either way, you’ll cut down your commuting costs.
39. Move closer to work
You could move closer to work. If moving was something you considered to reduce your housing costs, think about moving closer to your office. You’ll want to consider whether you could see yourself staying in your job for the long-term before you make this kind of move.
40. Find a job closer to home
If you don’t see yourself staying at your job, perhaps find a different job. You could find a new job that will allow you to telecommute or one that is located closer to your current residence.
41. Avoid Traffic
Even if you keep your commute exactly the same, consider leaving your house and the office at different times to avoid traffic. This will not only save you money, it will save you time and frustration too!
42. Batch errands together
When you’re going out for errands, be sure to batch all your errands together on one day. That means going to the grocery store, dry cleaners, and post office in one trip. This way, you can take the most efficient route, and save money on gas. Plus, you’ll save time!
43. Bike or Walk
Have you considered getting where you need to go by biking or public transportation? Depending on where you live, walking may even be a good option to get places. Biking and walking are also great exercise!
44. Use public transportation
Some cities have robust public transportation, including trains, busses, and ferries. Oftentimes, public transportation will have commuter plans, which will save you money if you use it often. You’ll be saving money on fuel, parking and tolls by taking public transport instead.
45. Carpool
There are carpool services that you can pay for, or just get a group of friends or coworkers together and drive in the same car. You’ll be pitching in for gas and maybe maintenance, but it will save you money because everyone in the group is splitting those costs instead of you paying them yourself.
Food
There are several one-time changes you can make that will save you money over and over every time you shop for food! Additionally, by planning ahead, changing how you shop, and eating at home more instead of eating out, you can save a lot of money!
46. Shop at a discount grocer
If you’re used to shopping at a high-end grocery store, you’ll be shocked by how much money you can save by shopping at an Aldi or Walmart instead. You don’t have to buy all of your food from the discount grocer, but even just shopping there for staples like bread, rice, pasta and canned foods will save you money. If you’re not ready to give up your regular grocery store, just shop there for produce, meats and specific items you can’t find at your discount grocer. This is the single biggest change that reduced our grocery budget to just $250 to $300 per month for two people.
47. Get a loyalty card
Get a loyalty card for your grocery store. Some grocery stores’ loyalty programs give you access to exclusive sales, coupons, and discounts, and they’re free to sign up for! Others provide gas rewards every time you buy your food.
48. Get a grocery cash back credit card
You can also get a rewards credit card that pays you cash back or points for grocery purchases. You can see what credit cards I recommend on this page.
49. Watch your items being scanned
I also recommend watching as your items are being scanned at the checkout counter. Sometimes a sale that you saw on the shelves won’t register, and if you’re not paying attention you might end up paying full price.
50. Check your receipt
At the end, scan your receipt before you leave to make sure everything was rung up at the price you saw on the shelves when you were shopping. And you can check and make sure that nothing was scanned twice.
51. Meal Plan Ahead
Meal planning can save you a lot of money on your groceries. By planning recipes that use the same kinds of ingredients, you can make sure nothing gets wasted.
52. Substitute for one-time-use ingredients
If a recipe needs an obscure ingredient you’re pretty sure you’ll only use once, google a substitute that is more common.
53. Use up leftovers
Also plan to use up leftovers from meals by repurposing them into new meals or eating them for lunch the next day. If you go out to eat, take any leftovers home and eat them later. This will help you cut back on food waste and save money.
54. Inventory your staples
Inventory your staples, such as pantry items and frozen foods, so you know what you have. This will keep you from over-buying, and will prevent food waste.
55. Don’t follow expiration dates (within reason)
You also don’t have to follow expiration dates to the minute. Often, expiration dates are very conservative, and the food is still good for a little while after it expires. Use your judgement before throwing something out like frozen broccoli that is a day past it’s expiration date.
56. Make a grocery list
Once you plan your meals and see what you already have on hand, you can come up with a detailed grocery list. Going to the store with a grocery list will help you stop impulse purchases and buy only what you need.
57. Shop less often
By knowing what you have and what you need, you can also go on fewer shopping trips each month. I’ve found that shopping once a week ends up being much more expensive than shopping once a month. This is because the more you shop, the more opportunities you have to be tempted by the candy in the checkout lane, or junk food you don’t need, or an item you see that you want to try on a whim. If once a month is too extreme for you, try going to the grocery store every two weeks.
58. Pay attention to prices
Make sure you pay attention to the prices when you’re shopping. This way, you’ll know when you’re getting a good deal. When you know that, you can stock up on items when they are on sale or at a particularly good price. It can help if you keep a price list, which is a list of what the cheapest prices for common items are, and what stores they are generally the lowest price at.
59. Shop Alone
Don’t bring the kids, or your partner, unless they are an accountability partner. If your partner will remind you that you don’t want junk food, or they’ll help you stick to the grocery list and grocery budget, then they’re a great person to bring along. When you don’t have multiple people adding unnecessary stuff to the cart, it makes it easier to only shop for what you really need.
60. Don’t shop hungry
Have you noticed that you come home with a bunch of snacks that weren’t on the grocery list whenever you walk into the grocery store hungry? Take a minute to eat a small snack like a granola bar, or try to go shopping right after you eat a meal, before you head to the grocery store.
61. Cook Easy Meals at Home
One obvious way to save money on food is to eat at home more. I’m not saying you need to completely cut out restaurants, but by limiting restaurant meals to special meals that you can’t make at home, you’ll get much more bang for your buck.
Breakfast and brunch are often much more expensive at restaurants than at home. Eggs and toast cost less than a dollar, and pancakes are cheap and easy to make at home.
62. Pack your lunch
Instead of spending $10 for lunch at a restaurant, you could pack a salad or sandwich for $2. And packing snacks will keep you from dropping several dollars a day into the vending machine, which probably doesn’t have anything healthy to eat anyway.
63. Make dinners with cheap basics
Even for dinner, it’s easy to structure meals around cheap basics, like pasta, rice, potatoes or beans. Find a few easy recipes to make at home that your family loves, and then when you go out you can spend money to get meals that aren’t simple to make at home. By cooking easy meals at home, you can cut down your restaurant visits and takeout orders to once or twice a week.
64. Shop in Season
Have you noticed that it’s really expensive to buy strawberries in the winter? They’re also not as great quality as they are in the summer. That’s because they’re out of season in the United States, and so they have to be shipped really far from South America for us to have them in the winter. This means more fuel is spent getting them to our grocery stores, and the prices are higher. You can save money by buying produce when it’s in season and locally abundant, like watermelon in the summer, peaches in the fall, and squash in the winter.
65. Buy store brands
By buying store brands of the same items you usually get, you can save money without sacrificing quality. Did you know that the store brand and the name brand items are usually made in the same factory – and are therefore the same EXACT thing? At the Domino sugar factory, they put the Domino bags on the assembly line and fill them up, and right after that they put the store brand bags on the line and fill those. There is no difference in quality for many staple store brand foods.
66. Avoid pre-prepared foods
You’ll also save money by avoiding pre-cut and pre-prepared foods. Chopping peppers and onions yourself can save you 50% on the pre-cut stuff. Additionally, purchasing pre-cooked foods from the hot bar is going to be more expensive, because the store has to pay someone to prepare it. Instead, get frozen food that can easily be thrown in the oven or microwave to make a quick meal.
67. Cut out junk food
Not only are junk foods unhealthy, they’re just not cost effective. You can buy more quality calories in the forms of fruit and vegetables than you can that $3 bag of chips or bottle of soda.
The one thing I don’t recommend
The one thing I don’t recommend is spending excessive time looking for coupons. If you think about it, companies offer coupons to incentivize you to buy something you wouldn’t normally buy. Whether they’re trying to get you to try a new product or switch to their brand, coupons are marketing products.
This means that you are likely to spend more money when you use coupons instead of less, because you’ll be buying things you don’t need. Plus, the amount of time you spend finding several 50 cent coupons compared to the couple of dollars you save will not be worth it.
Conclusion
You’ll see the biggest impact on your spending by focusing on the big 3 categories. That means focusing on cutting your housing, transportation and food expenses.
To get started, pick just one of the ideas in this podcast to implement.
To save money on housing, you could look into refinancing your mortgage, do something to improve the energy efficiency of your house, rent a room, or research moving somewhere cheaper.
To save money on transportation, maybe you’ll decide to change your driving habits to increase your gas mileage, work from home, bundle your house and car insurance, learn how to do an oil change, or batch all your driving errands together.
To save money on food, you could find a discount grocery store in your area, sign up for a loyalty card or grocery cash back credit card, start meal planning, cook some easy meals at home, or start buying store brands.
Whatever you decide to do, just get started. Even implementing one or two of these money-saving suggestions could save you as much money as cutting out a daily latte for a whole year.
Your Turn
How do you tackle your 3 biggest expenses? Comment below!
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