A recent report suggested that 64% of American consumers are living paycheck to paycheck¹. Interest rates are higher than they’ve been in years. Rents are up in many parts of the country, and many would be home buyers are having trouble purchasing with interest rates as high as they are. In today’s economic environment, it’s more important than ever to be mindful of where our money is going and to reduce our expenses when possible.

Housing

You probably won’t be surprised to hear that housing expenses often take up a large portion of the typical American’s income. Regardless of whether you rent or own your home, it is important that you manage your housing costs. A common rule of thumb states that you should ensure that your housing costs are no more than 30% of your gross monthly income.² Housing costs include the amount that you pay for your rent (or mortgage) in addition to your utility costs.

Consider a Roommate

If you are trying to reduce your housing expenses, you may consider the addition of a roommate depending on your life circumstances. Obviously, this isn’t always possible, and you’ll want to check with your landlord if you are renting. If you don’t mind the thought of sharing your home with someone else this can be a solid way to take a bite out of your costs. A popular option for would be buyers is a technique known as “house hacking.” This technique involves buying a property and renting out part of it in order to offset your mortgage costs. Some people even choose to purchase a duplex and rent out one half of it whilst living in the other half.

Insurance

If you own your home, you’ll likely know just how expensive Homeowner’s Insurance can be. Insurance premiums have skyrocketed within the last few years, so it may make sense to shop around and try to find a lower cost insurer. Often you can save a significant amount of money simply by switching to another insurer or bundling your home and auto insurance under one provider. Additionally, it may make sense for you to raise your deductible or reduce coverage in some areas as this can lower your overall premium.

Save on Utilities

Utilities such as electricity are good candidates for scrutiny as you can often save money in these areas with minimal impact to your quality of life. Simply raising your air conditioner’s temperature a few degrees when you aren’t home can save you as much as 10% on your energy bill.³ You might also opt to use a ceiling fan more often instead of your air conditioner. Ceiling fans can cause it to feel cooler which allows you to raise your thermostat to a higher temperature without feeling discomfort.⁴

1. https://ir.lendingclub.com/news/news-details/2022/48-Percent-of-Americans-with-Annual-Incomes-over-100000-Live-Paycheck-to-Paycheck-9-percentage-points-higher-than-first-reported-in-June-2021/default.aspx ↩︎
2. https://www.cnbc.com/2021/07/14/how-much-of-your-income-you-should-spend-on-housing.html ↩︎
3. https://www.carrier.com/residential/en/us/products/air-conditioners/best-temperature-for-ac/ ↩︎
4. https://www.energy.gov/energysaver/fans-cooling ↩︎