Do you like
the idea of financial independence? Part of the FIRE equation is cutting costs.
Miranda Marquit • November
24, 2021
Many people dream of
retiring early. In fact, there’s even a movement these days, called FIRE, that offers the hope of
financial independence (“FI”) and the ability to retire early (“RE”) from the
grind.
However, it’s important
to note that in many cases, FIRE requires a great deal of planning — and
sacrifice. You might need to reduce or eliminate some spending to set aside
enough money to reach your FIRE goals.
Let’s take a look at some
of the expenditures common to U.S. households, according to the Bureau of Labor
Statistics (BLS). Then, we’ll look at ways to reduce spending so that you’re
more likely to reach FIRE status.
Note: The following
annual costs from the BLS are for households
of all ages and many sizes,
including families, single people and more than two people living together.
1. Shelter
The average spent on
shelter by U.S. households in 2020: $12,604
Want to reduce your
housing costs? Consider getting a roommate or downsizing. You could even move
in with relatives for a time.
However, if you prefer to
maintain your own home, you can turn it into a moneymaker. Rent out a room
through a vacation rental website like Airbnb or VRBO (Vacation Rentals By Owner), rent out
your whole home when you’re not there, or explore the other options we detail
in “9 Ways to Earn Extra Income With Your Home.”
You’ll pay off your
mortgage faster, reducing your costs and providing a place to live debt-free
after you retire.
2. Groceries
The average spent on
groceries by U.S. households in 2020: $4,942
Looking to cut your food
bill? While coupons can help, there are other ways to
reduce what you spend each week — from buying bread at bakery outlets to
learning to make your groceries last longer.
See Also:
The 3 Biggest Regrets of Retirees —
and How to Avoid Them
On top of that, if you
want to make some extra money, there are ways to earn cash delivering
groceries. A little extra, set aside from your gig, can get you to FIRE status
that much faster.
3. Vehicle purchases
The average spent on
vehicle purchases by U.S. households in 2020: $4,523
If you want to avoid this
cost, one way is to get your car to last a little longer. That will eliminate
the need to buy something else.
If you do make a vehicle
purchase, consider buying a late-model used car. Some gently used models can
save you a lot of money compared with the price of a new model.
4. Eating out
The average spent on
eating out by U.S. households in 2020: $2,375
Maybe it even makes sense
to spend more on groceries while spending less on eating out. Cooking at home
is usually a lot cheaper than getting take-out or even using meal kits. It certainly costs less
than eating at a restaurant.
That doesn’t mean that
you can’t go out. With a little planning, it’s possible to slash your
restaurant costs, as we detail in “A Former Restaurant Critic Shares 11 Tips for Dining Out.” All
your savings can be put into an account designed to help you reach FIRE goals.
See Also:
7 Income Tax Breaks That Retirees
Often Overlook
5. Gas and motor oil
The average spent on gas
by U.S. households in 2020: $1,568
Keeping your car running
can be costly. There are ways to save at the pump,
though. Taking the time to reduce what you spend on gas can pay off in the end.
Another way to save money
on gas is to use public transit if it’s available and reliable. Plus, if you’re
not using your car, you can make extra money by renting it out. That
can offset some of your costs and even increase the capital you end up with,
helping you get to FIRE.
6. Clothing and footwear
The average spent on
clothing by U.S. households in 2020: $1,434
One of the best ways to
save on clothing is to shop at thrift stores or secondhand shops. For pointers
from a veteran thrift store shopper, check out “11 Secrets to Finding Quality Clothing at Thrift Shops.”
There are also plenty of
online sites offering gently used clothing, including brand-name and designer
clothing. You can even make money off the clothes you no longer wear by selling
them online using a service like thredUP.
7. Cellphone service
The average spent on
cellphone service by U.S. households in 2020: $1,253
Looking to save hundreds
of dollars a year on cellphone service? Consider switching carriers, joining a
family plan or buying your phone outright instead of buying it on a payment
plan. With a little planning and creativity, you can get the connectivity you
crave for less.
For help finding cheaper
service or a cheaper phone, stop by our Solutions Center and check out Money
Talks News’ phone and plan comparison tool.
8. Car insurance
The average spent on car
insurance by U.S. households in 2020: $1,575
Take the time to shop
around for car insurance each time your policy is up for renewal, and you could
save money each month. If you don’t have time or don’t want to comparison shop,
a third-party service like The Zebra or Gabi can
do it for you and give you quotes to choose from.
Or, avoid the need for
car insurance completely by using public transportation.
9. Alcoholic drinks
The average spent on
alcoholic drinks by U.S. households in 2020: $478
Want to reduce your
drinking bill? The best way to save is to give it up. If that’s not your style,
consider buying alcohol at a warehouse club. You
can get a lower price, and those savings can fuel your FIRE effort.
Not a warehouse club member?
That’s not a problem for some chains, including Sam’s Club —
you can buy wine, beer and spirits there without a membership.
10. Prescription drugs, over-the-counter drugs and vitamins
The average spent on
drugs and vitamins by U.S. households in 2020: $476
You can slash
prescription drug costs by as much as 50% by using tips such as paying with a
discounted gift card or even paying out of pocket for some medications, as we
detail in “5 Ways I Slashed My Drug Costs up to 50%.”
Take the time to shop
around and compare prices, too. There are free websites that make this easy, and
you might be surprised at how much you can save.
11. Cleaning supplies
The average spent on
cleaning supplies by U.S. households in 2019: $170
This category includes laundry detergent, which
can be expensive. You might be surprised to learn that you might not need
laundry detergent at all on lightly soiled clothes. But if you do need
detergent, it’s relatively easy and inexpensive to make. See “3 Easy Ways to Get Laundry Soap for Nearly Nothing.”
Other cleaning supplies
are just as easy and cheap to make on your own, as we detail in “Never Buy These 7 Overpriced Cleaning Products Again.”
There’s no reason to spend a lot on cleaning supplies.
Disclosure: The
information you read here is always objective. However, we sometimes receive
compensation when you click links within our stories.
https://www.moneytalksnews.com/slideshows/11-expenses-to-cut-now-if-you-want-to-retire-early/
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