In a previous post, I looked at the three big fixed costs of housing, food, and transportation. After reading that, you might have asked, “How else can I lower my bills?” Now I’ll look at the other big three fixed costs: utilities, insurance, and taxes.

Lower My Bills For Unavoidable Costs

“Tis impossible to be sure of anything but death and taxes.”
Christopher Bullock, “The Cobbler of Preston,” 1716

In the US, Benjamin Franklin gets the credit for the sentiment that Bullock captured more than 50 years earlier. Both of them also miss two other inevitable costs of life: utilities and insurance.

To map out more savings, I again 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 both pre-tax and post-tax income. The average household income in the survey is $63,606.

Notably, and just like in my previous post, 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.


Insurance for home, car, and health equaled 10.1 percent of after-tax income. With the average income in the survey, this came to $6,413. This was nearly the same amount as housing (10.6 percent).

  • Shop around. There are plenty of insurance companies willing to compete for your home and auto insurance. Most offer a discount if you buy both types of insurance from them. With our current healthcare system, it’s harder to shop around for health insurance. At a minimum, if you get your health insurance at work and your employer offers more than one plan, do your homework during open enrollment.
  • Buy only what you need. If you’re generally healthy and have some emergency savings, you can raise your health insurance deductibles and lower your premiums. If your car is older and you plan to drive it into the ground, switching to liability-only coverage (instead of comprehensive) can save you money. Also, insure your car just for the miles you actually drive. I’m bad at this. I know our cars are insured for more annual miles than we drive, and I just haven’t made the call to update that. There are also car insurance plans like Metromile that charge based on actual usage.


Utilities in the survey accounted for 5.5 percent of expenses. This came to $3,470 for the average household. Utility costs do fluctuate by location and time of year, but they are still fixed costs in that you need the services year after year. In many places, you’re required to pay for services like garbage and sewer.

For this article, utilities included electricity, natural gas, water, and all types of phone service: land lines, cell phones, and calling cards.

  • Pay attention to conservation and efficiency: Yes, there’s a difference between the two. Conservation means not using something. Efficiency means using less of something to get the result you want. Power and water utility companies offer many programs and resources for lowering your consumption and increasing your efficiency. Both will reduce your bills.
  • Again, buy just what you need. Do you really need a new smart phone every two years? Research is showing the people are holding on to their phones longer. What about that landline? We still have one in our house because the security system requires it. Most people with cell phones don’t need a land line, too. It’s not like we all have phone modems for getting online.


Taxes are a little different from the other fixed costs I’ve examined in this post and the other, related post. Still, it’s a big fixed cost that you can lower.

Average federal income tax in the survey was $7,819. Average state and local taxes came to $2,098. That’s a total average income tax bill of $9,917. With an average pre-tax income of $75,753 in the survey, that means that the average household had an effective income tax rate of 13.45 percent.

See my previous post about effective tax rates.

  • Maximize your tax incentives. For better or for worse, the US tax laws contain loads of incentives. Lots of plans for retirement savings, college savings, buying electric cars, installing solar power and more feature tax incentives. The incentives aren’t a reason to buy something you don’t want or need. But if you’re in the market for a major purchase or investment, it doesn’t hurt to shop for incentives.
  • Consider municipal bonds and other tax-free investments. If you’re working hard at saving and investing towards your R Minus 10 milestone, you’ll notice that you earn dividends each year and probably have to pay income tax on those. Buying municipal bonds and other tax-free investments let you avoid those taxes. I’ll talk more about tax-free investing in later posts.
  • Group your charitable donations. The 2018 tax law raised the standard deduction, which made itemizing less attractive for many people. You might find it better, tax-wise, to save up and donate large amounts every two or three years to make itemized deductions worthwhile. Charities won’t like this approach, but it may lower your bills.

Spending Just 10 Percent Less

Combined, insurance, utilities, and taxes totaled $19,800 for the average household. Saving 10 percent on these fixed expenses puts $1,980 in your pocket.

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 in these fixed costs to the average savings rate, and the average household is now saving $5,923. That’s a big jump.

Couple those savings with the $2,145 as outlined in my previous post, and the average household could be saving and investing more than $8,000 a year.

Do I Need to Lower My Bills?

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 in the long run it’s easier to generate savings by lowering your monthly expenditures for utilities, insurance, taxes, and other fix costs.

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

(Image courtesy of Pixabay)

Three More Expenses to Cut For No-Willpower Savings
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