“Bad! Very, very bad spender!” you say to the mirror before trying to hide the tempting plastic from yourself. If only shaming yourself the way you shame your dog worked. The plastic always magically reappears in your wallet, too.
Hey, big spender. You know you need to cut back on your renegade purchases and save for the big stuff of life — like retirement and starting that dream business of yours. If you’re like most people, three things are probably responsible for holding you back.
What Three Needs Separate You From Saving?
It's not clothes, entertainment, travel or even gas. It's related to your basic living needs, unsurprisingly.
According to the Bureau of Labor Statistics (BLS), most people blow 70 percent of their money on housing, transportation and food — that doesn’t include social security or your income taxes. So, what are you supposed to do — be an urban nomad that hordes stray cats?
Standard financial advice shames you for spending on the extras, but most folks can’t afford any extras, in reality. The cost of living continues to rise — and at an exorbitant rate in big cities like New York and San Francisco. Feeling defeated yet? There’s still a way to make this thing called life work, keep a roof over your head, thrive instead of survive, and save. You just need to learn some hacks for when it comes to the three aforementioned basic needs.
Don’t be one of the third overpaying for housing in America. Instead, look for a home that meets your standard of affordability and comfort. The general rule of third has always been to keep costs at 30 percent or less of your annual pretax income — but a quarter or less is even better.
This means you’ll have to get strategic and creative with your thinking. Before the effects of the housing crisis, many people possessed a combined total loan-to-value ration of 100 percent with their home equity line of credits. A home equity line (HELOC) works similarly to a credit card with a maximum limit of borrowing based on the equity you’ve got in your home. Some use this line to pay off old debts while others may use it to improve upon their existing home and lessen their financial burden in the process.
Transportation takes second place as the next-largest household expense according to the BLS. And, according to the Federal Reserve, people borrowed more to pay for their vehicls than college last year. It looks like household debt is still taking the brunt of the Recession around a decade later.
While you need a reliable vehicle, you don’t need to commit financial suicide to get or maintain one. Get wise in mechanics — or bring a friend — and don’t be afraid to purchase an older model. Shop around for reasonable rates and terms you can pay off in four years instead of six, and be sure to put as much money up front as possible on the car.
According to BLS, households spend an average of $7,023 every year on food and 43 percent of all annual food expenses are for eating out. Meal planning is essential to everyday family planning. How much food waste do you have compared to the food you typically go through? Are you meeting your nutritional needs?
You can still have convenience and save money by making a few different choices in ways that aren’t typical to the “no Starbucks for you” advice. Coffee saves lives. “Make your lunch cheeseburger and morning coffee in advance,” they say.
Everyone's heard it, but it's time to balance the food budget like you should your checkbook. The significant part of what hurts your wallet is miscellaneous spending on groceries, such as snacks and premade meals. Choose your convenience costs wisely. Make your list and check it twice.
You may also want to skip the supplements, too, unless you have a specific dietary restriction or condition you need to accommodate. Get your nutrition from whole food and make it a self-care ritual.
It’s down to your choices, and what those “experts” say you should cut back on isn’t always accurate. Modern folks live in a society of burning the midnight oil to keep up with everything new and shiny, but in reality, most people burn that oil and put their noses to grindstone just to survive.
You can thrive, save your hard-earned cash and probably retire at a reasonable age by cutting back on your housing, transportation and food costs. Put it in your pocket and never look back.