Cutting Expenses Where You Can

by Redeeming Riches on March 19, 2013

A lot of people seem to be obsessed with money savings. This is actually understandable since people usually live within the limits of their financial means and do spend what they’ve got. Therefore, at the end of the year it is likely that the person earning $40,000 does not necessarily have more money left in his or her pockets than the one earning $20,000. No matter how much you earn, then, you are probably wondering how it is possible to save big bucks in order to go on a family trip or start planning your retirement. To figure that out, we first have to look into the areas where Americans spend their money.

American Household Expenses Breakdown

According to the February 2013 publication of the U.S Bureau of Labor Statistics, housing is unsurprisingly the greatest source of yearly spending both for rural ($12,000) and urban ($17,000) American families. Transportation comes second ($8,000), and personal insurance and pensions ($4,000-$6000) comes third. Food at home, health care, entertainment and food away from home follow with similar levels of spending ($2,000-$3,000 a year). Apparel and services then close the march. Unidentified expenses that are not included in the aforementioned categories, however, represent more than $4,000 per year.

Areas of Potential Savings

When we look at the data, it looks very unlikely that people can save money in every single area of spending. Indeed, saving on housing is hardly feasible considering that it would probably involve moving to a cheaper place (although it is true that one could save on maintenance, energy bills, furniture, etc.) Saving on transportation is more realistic but once again, it could involve buying a new car in the first place, especially for rural families that do not have access to public transit. The payoff would then only materialize in the long run. One therefore has to pick his or her battles!

Saving on food is highly possible and should not be looked down on. Going for what’s on sale, stocking up, cooking bigger meals and freezing them, running errands at a few different places in your town instead of buying everything at the same supermarket are easy ways to cut down on food expenses at home. But food away from home also is quite costly and sometimes not worth the price. The idea is not to stop going to the restaurant as it is a very pleasant activity! However, you should be more selective and not go to the restaurant by default.

For instance, you ought to think of preparing your own sandwiches and salads at home for your daily lunches instead of going for the closest fast-food chain restaurant, which usually does not produce a great, satisfying experience anyway. Going to the restaurant should be part of your entertainment budget rather than part of your daily routine! Saving on insurance also is possible: protecting all of your goods with the same company and requesting a higher deductible for your car insurance (especially if you do not drive much in accident-prone areas) are potential ways to save money on insurance every year.

Why Do You Save?

Of course, you could also save on entertainment simply by going out less. But this probably not something you want. In effect, saving money should not come at the expense of your happiness. If going to the movie theater  to the museum, to the coffee shop or to a music festival are essential ingredients in your life, do not neglect them… unless you want to save in order to achieve something that is even more important to you! The thing is that if you know the reason why you are saving, you will better be able to figure out in which spending areas you are willing to compromise.

About the author: Alexandre Duval is a freelance blogger writing about money, travel and other topics of interest. He is also currently completing his master’s degree in political science at the University of Quebec in Montreal.

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