People are constantly complaining about how hard it is to budget – and with rising inflation it can be tricky. However, there are 3 massive expenses for most people that they can easily cut back. Specifically, many people can cut a significant part of their budget by focusing on housing costs, transportation, and food.
If your rent or mortgage costs too much, downsize. If you’re spending too much on your car, just buy a reliable used car. Buying new cars or leasing is a fast way to hurt your financial security. Alternatively, if you eat out too much, try to reel that back in.
Housing
Home Ownership Or Renting
Generally, it seems to be a financially sound decision to buy if you plan on living in that house for 5-10 years. Depending on markets, it is possible for it to be less or more, but a good minimum is 5 years. This means that if you’re young and planning to relocate for your career or personal reasons, it may be best to postpone purchasing a house.
Before you buy, make sure you can cover all expenses associated with owning a home. Almost everyone I know has encountered unexpected issues after moving into a home they purchased. Some of these are minor and can be easily fixed, and others can destroy emergency savings! On top of that, there is usually a long list of furniture, decorations, blinds, landscaping equipment, and other things that need to be bought shortly after you move in.
Renting may be a great option if you don’t want to stay in the same place for a minimum of 5 years, or you aren’t financially ready for a mortgage, a large down payment, AND possible unexpected expenses, or if you don’t want to deal with the responsibilities that come with home ownership.
The Home Buying Process
Start Saving Ahead Of Time
Start saving as much as you can afford towards your down payment. It may require a tight, zero-based budget. However, the more you can start saving now, the better off you’ll be when it comes time to actually close on your home. Also, do not use your emergency fund towards your down payment. There are usually a lot of unexpected expenses that come with moving and settling in, so using your emergency fund as your down payment will only put you in a bad financial situation that you may not be able to afford.
Research Your Main Choices
These days, most people will probably go for a conventional loan. Depending on your current financial situation and eligibility, FHA and VA loans are other good possibilities to look into. USDA loans can also be a good choice, if it applies to you.
With that being said, most people will end up going with a conventional loan. Just make sure the loan you’re applying for is fixed (not variable). Variable loans destroyed a lot of families and their finances during the last housing crash, and they’re generally not worth the risk. A lot of people recommend getting a 15 year loan, but I prefer a 30 year loan. It gives you more breathing room and flexibility with your money. Besides, investing that money instead of making larger or additional payments will probably make you more in the long run.
Don’t Get Emotional
If you’ve been realistic, but find yourself just over budget, you’ll probably have to compromise somewhere. Maybe you’ll need to change neighborhoods, move to the next city over, get a slightly smaller house, or sacrifice certain amenities. When you’re over budget, you’ll have to find something your can compromise on to afford the house.
With that said, it’s important to not let your emotions control you. If you do, then you may find yourself in a financial situation you can’t handle!
Downsize With Minimalism
If you already own a home, then consider downsizing. You should get the amount of house you need, not the amount you want. If you focus on what you need instead of what you “dream” about, then you can find a more affordable house, and one that is more manageable to clean and maintain too!
Transportation
Buying A New Car
I hate to say it, but there is no way around it. As far as your finances go, buying a new car is pretty much always a bad decision. Now, the extent of how bad that decision is can vary, but you’re usually paying for way more than what you’re getting. Of course, personal finances are just that – personal. If you want a new car, then by all means go for it. Just know that you’re likely paying an exorbitant amount for some extra small conveniences or to have the newest and (subjectively) best looking model. I get the appeal, but try not to fall for it!
Buying Used
Buying used tends to save you a lot of money in the long run, and it’s what I have almost exclusively done throughout my life. I stand by it, but there is some extra headache you have to deal with.
It Pays To Be Friends With Your Mechanic
Obviously, you need to learn a little more about cars, or be close with someone who knows a lot about them (like your mechanic). Additionally, if you’re friends with your mechanic, then you know they’re being honest about prices and what needs to be repaired or replaced. Finding a good mechanic and sticking with them is key to saving money with a used car.
Food
No More Eating Out
Eating out is a huge expense for most people. Staying in and cooking can not only help your wallet but your health as well. For the average person, this is usually the first and easiest tip for them to tackle to see a significant financial benefit.
Meal Prep
These days it may seem hard to stay on a tight budget while trying to eat somewhat healthy, but there are actually tons of options available to us. Even if you’re a picky eater, or have dietary restrictions, you can always find a way to make do with even some of the most basic ingredients. The easiest way to achieve these is by experimenting at home with different dishes you can cook yourself, then doing meal preparation in advance. It can save you a lot of time and money, plus it makes it easier to eat healthy!
Shop In Bulk
Some of this goes without saying, but just in case you haven’t really bought items in bulk before I wanted to stress a few things. First, don’t buy something in bulk if you haven’t tried it before. It’s an unnecessary gamble, and it often has an unpleasant result. Second, make sure you have all the space you need at home to store your new purchases. If you haven’t prepared for it, buying in bulk can eat up a lot of your pantry space fast. Last, buying in bulk is the best time to use coupons and sales. This will help you save even more money, so make sure you pay attention to any discounts that are available.
So, if you want to buy in bulk, be sure you’re prepared and can use whatever it is you purchase before it goes bad. Don’t buy something just because there is an option to buy it in bulk either. Test it first and do the math to see if you’re actually saving money. While buying in bulk can help you cut costs, it does have a bit of a barrier for entry. If your budget is already maxed out, make sure you can afford the membership fees and the extra expenses in the short-term from buying in bulk.
Conclusion
There you have it, 3 massive expenses that are probably holding you back. Of course, these 3 are a good place to start if you need to cut down your expenses, but review your budget for any other problem areas.
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