I hope you have a (perpetual) goal to spend wisely so you can save and invest more. Do you know where to start? If you want to save serious money, you can’t just trim around the edges. Getting a new cellular plan and buying fewer shoes isn’t going to cut it. To make real progress on lowering your costs and saving money, you need to focus on the large expenses in your monthly budget.

To map out some serious savings, I dug into average income and expense numbers from the 2017 US Bureau of Labor Statistic’s Consumer Expenditures Survey. (If you want, you can grab the same spreadsheet I used and follow along. Or, see the table of numbers at the bottom of this post.)

For this article, I’m using overall averages and after-tax income. The average household income in the survey after taxes is $63,606.

Three Monthly Budget Items That You Should Reduce

According to the Consumer Expenditures Survey, three large budgets categories are transportation, food, and housing. Together, they account for 34-38 percent of average household spending. Notably, these are fixed costs, not variable.

These costs do vary, though, depending on where you live. You can nerd out on regional and metropolitan differences in these costs; the survey offers those numbers. I’m sticking with the averages.


Transportation in the survey accounted for 15.1 percent of expenditures. I was surprised to find it the biggest of the three categories I studied. With the average household in the survey, transportation costs come to $9,576 a year.

  • If you’re planning on buying a car, buy less car. Buy a good used car, rather than new. Vehicle payments account for 42 percent of transportation costs. Buy for reliability and efficiency. Fuel and repairs make up another good chunk of transportation expenses. None of this is sexy, and your friends might rib you about your ride, but you can laugh at their net worth numbers.
  • When interest rates are low as they are right now, borrowing isn’t bad for a car, and it helps you hold onto your cash. My credit union is currently advertising car loans starting at 3.29 percent. Remember, you’re aiming to earn seven percent a year on your investments. If you can borrow for significantly less than seven percent and afford the payments, it’s worth considering.
  • Buying less car will usually mean paying less for car insurance, as well.

For your consideration: My current car is a Toyota Camry hybrid that I bought used. It was a year old with 15,000 miles and two years left on the transferable warranty. I paid about $8,000 less than a new Camry. My 48-month car loan charged 1.99 percent interest. I paid off the loan last year. The car now has close to 90,000 miles on it. I want to get at least another seven years and 100,000 miles from that car. As a hybrid, it averages nearly 40 mpg. That means I spend about half of what the average driver spends on fuel.


Food in the survey accounted for 12.2 percent of expenses. With the average household in the survey, that means average food costs come to $7,729 a year. Food has variable components, but it’s a fixed cost because you need to eat.

  • Food waste: Are you tossing out leftovers, spoiled food? Up to 40 percent of food in the US is never eaten. Plan better when you shop and dine out.
  • Meals out: Food away from home accounted for 43 percent of total food expense. Lunch out during the workweek is often what kills people budgets. Think about it. Even $5 every work day for the luxury of eating out equals $1,250 for a year. That’s half your IRA contribution right there. Aim for bringing your lunch most days and going out a couple of times a month. You’ll save time, too.
  • Drinks can be a great way to build and maintain your professional and social networks, which is valuable. But a weekly bar tab of $20 equals a $1,000 for the year.
  • Booze: The survey tracks alcoholic purchases for home separately from food. The average expense is $558 a year.  I’ve never been a drinker, mainly because it’s empty calories that I don’t enjoy and drinking usually happens past my bedtime. (Man, I’m exciting.)


I live in the San Francisco Bay Area, so I know how expensive housing can be. Luckily, that’s not everyone’s reality.

Rent on average accounts for 6.6 percent of expenses. For those in the survey who own a home, their payments of mortgage, interest, insurance, and maintenance accounts for 10.9 percent of expenses. With the average household in the survey, that means average housing cost ranges from $4,167 to $6,947 a year.

  • Renters–go for the less expensive place that’s still safe and reliable.
  • If you’re working on buying a house, buy less. Seriously. Buy less house. Once you sign the mortgage papers, you’re locked into those payments for years. My wife and I live in a less-than-average townhouse in a less-than-average neighborhood in the Bay Area. We’d love to have something with a bigger kitchen and a bigger garage for the Lexus SUV that she covets. At the same time, our small housing payments help us save money towards retirement and still afford to travel internationally every year to see family. It also allows me to work a more flexible schedule while I pursue writing projects like this blog.
  • Bonus points if you can find something to rent or buy where you can walk to public transportation and save on the high cost of transportation.

Spending Just 10 Percent Less

Cutting 10 percent on transportation, food, and housing saves the average household at least $2,145. It’s hard to consistently cut the smaller, variable costs in your life and save that type of money.

Consider that the average savings rate in the US is 6.2 percent. For the average household, that’s $3,943 a year.

Add the savings from a 10 percent reduction to the average savings rate, and the average household is now saving $6,088. That’s a big jump.

Do I Need to Save On My Monthly Budget?

How do you know if you need to lower your expenses and save more money? You can download my free savings calculator (no registration required).

There are only two ways to generate more income to save and invest towards hitting your R Minus 10 milestone: increasing your income or reducing your expenses. It’s good to do both, but it’s easier to start by lowering your monthly fixed expenditures for transportation, food, and housing.

(For reference, here are the numbers I used from the survey)

Lower Your Monthly Budget By Cutting These Three Expenses
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