Where We
Spend the Most Money
What if
you spend more like $1oo bi-weekly on alcohol
The
graphic above breaks down how the average US household spends their paycheck,
according to the US Department of Labor. As you can see, housing,
transportation, and food are the biggest costs. Because they take so much out
of our paychecks, it makes sense to concentrate on reducing spending in these
areas.
Housing
Where
you choose to live will make a huge difference in how much you’ll pay not just
for housing but also the other cost of living items. Sometimes even moving just
a town or a few blocks away can be much less expensive. If you have the
flexibility of moving, Sperling’s Cost of Living
Calculator can help you evaluate different cities. (And if you're
moving to a new country, check out Expatistan’s Cost of Living
Index, which compares typical costs across 1,560 cities, according
to user-entered data.)
This
Sperling's calculator doesn't seem to be accurate. Just told me, "A salary
of $50,000 in Boston, Massachusetts could decrease to $42,776 in New York, New
York," but then in the text below it said, "New York is 14% cheaper
than Boston."
Another
option is to get a roommate to share the housing costs or, if you’re a
homeowner, refinance to a better rate.
Utilities
take up 7% percent of the total expenses. Even if you’re renting, you can still
save on your energy bill with small but smart measures like using insulating
curtains and using your appliances more efficiently. You can do an energy audit yourself to find the energy leaks in your
home, and some utility companies offer free assessments as well.
Transportation
We all
know that driving to and from work every day is costly, but exactly how much of
a toll does each mile of commuting take on your finances? This … Read…
Transportation
is the second biggest expense. Gas and motor oil account for 4.8%, while
vehicle purchases (i.e., car payments) account for 6.5%. Again, if selecting
where you move is an option, choose a location as close your workplace as
possible. It could save you not just time, but potentially as much as
$125,000 in ten years. Even better: convince your boss to let you
work from home.
Also,
the average household has roughly two cars. Do you really need the second car?
If you can swing it, you can save thousands by getting rid it.
Food
Finally,
food is the last of the three biggest expenses. We’ve shared tons of tips over
the years for how to save
money on groceries, including:
It
takes a bit of time to learn to make good, inexpensive food and shop smarter,
but the payoff can be huge.
Eating
out is one of the many pleasures of life and a great convenience when you're
too tired or swamped to cook, but it's also one of the… Read…
The
other part of the big food budget is eating out—something many of us enjoy or
do when we’re too tired to cook. Changing your dining out habits could save the
average American hundreds if not thousands a year, and it doesn’t have to be a
big sacrifice either. Besides eating out less, you can save money when
dining out by timing when you go out and ordering wisely.
Where We
Waste the Most Money
Over
the years, I’ve received many, many emails from readers. A lot of those readers
tell me that they’re in a serious financial bind and that… Read…
Besides
looking at the major expenses above, you’ll also want to make sure you’re not
throwing money away or overpaying for anything. With that in mind, here are the
budget items you should pay close attention to, in addition to other financial
blind spots.
Any Kind
of Loan
If you
don't understand your credit score and how it's calculated then you're in the
dark regarding one of the most important aspects… Read…
If you
can reduce or eliminate the interest on any kind of debt—whether it’s a car
loan, mortgage, or credit cards—do it. Carrying credit card debt, especially if
you only make the minimum payments, is a particularly terrible move that can
cost you thousands in addition to lowering your credit score. If you’re
carrying that kind of debt, make a debt
reduction plan to dig yourself out as soon as possible. Also, boosting your
credit score can improve your spending power and save tons on big
purchases like a home.
Taxes
If you
itemize your tax return, claim every last deduction you can. Not doing so is
just handing that money over to the IRS. See the IRS’s guide to
itemized deductions and Kiplinger’s list of the most overlooked tax
deductions so you can plan accordingly.
Insurance
Your
current auto insurer (and perhaps other service providers) may be holding out
on you. If you're eligible for a lower rate, you probably… Read…
Life
and other personal insurance account for only 0.6% of the average budget, but
getting a lower rate is so easy to do there’s no reason not to. You can save on
car insurance by taking an online driving course. Combine insurance policies to
get a discount. And simply call and
comparison shop each year to make sure you’re getting the best
rates.
Entertainment
Cable
TV is insanely expensive, and with all the cheap video services out there, it's
easy to cut the cord without losing your favorite shows.… Read…
Finally,
the average household spends about $2,700 a year on entertainment. The first
thing people think to do is ditch cable
television because the cost is pretty outrageous when there are free
or much less expensive options. There are also tons of ways to have fun without
spending a cent. See The Simple Dollar’s list of 100 such ideas.
Figure
Out Where You Can Cut Back
Conventional
wisdom tells us that everything gets more expensive over time and there's
nothing we can do about it. That's not the case. If… Read…
The
list above should help you find more room in your budget, since they're the
seven biggest expenses or money wasters. For even more savings and advice,
check out our guide to saving
money on all your monthly bills.
Of
course, your own spending habits might differ from the average person, so
you’ll also want to track your budget (e.g., with Mint) and see where you money really goes so you can
start saving more of it.
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