Big, Easy Savings

When people try to save money, they often try to reduce the spending that they do most often and most visibly, since these are the purchases that they're most aware of. This is fine, but it's usually not the best place to start.

You might choose to buy a cup of coffee every day, but you only choose your rent when you sign a new lease and only choose your car payment when you buy a car.

These rare-but-large purchases make a bigger dent in your finances than the small, common ones. It's also mentally exhausting to regularly deny yourself from making relatively trivial purchases, which makes it a difficult strategy to maintain in the long term.

There are four big categories of expenses that, if properly addressed, will save you a ton of money with minimal recurring work:

  1. Housing: Don't pay for a larger place than you need. Consider living with roommates. Hotels are often cheaper than guest bedrooms.
  2. Vehicles: Live near work. Don't buy a car if you can avoid it, but get an inexpensive used one if you need to. Walk or bike when you can.
  3. Food: It's easy to spend a lot of money on eating out. If you're not yet a capable cook, learn a few simple recipes that you like and build up from there.
  4. Taxes: The government encourages retirement planning through 401(k) and IRA plans. Contribute to these as fully as you can. Avoid paying unnecessary taxes by using tax-advantaged accounts when possible.

This is a bit philosophical, but notice that these choices can also act in concert to contribute to your well-being. By living in a smaller apartment you avoid buying expensive furniture and decorations to fill the space. By living in a walkable or bikeable area near your work you'll get regular exercise and avoid the stress of commuting by car. Cooking will help you eat healthier and feel better. These things which improve your finances can, conveniently enough, also improve the rest of your life!

Getting these big things right will have far more positive impact on your finances (and your life) than most small purchases will. Feel free to buy that fancy pourover once you've got your big expenses in order.

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