How to Reduce Living Expenses

Peter Hafner |

Wouldn't it be nice to have more money? To be able to put a little bit in your savings account? This might be possible for you if you make some changes to reduce your living expenses.

This sounds like a great idea but what actually goes into reducing your living expenses? Will you have to uproot your entire life just to save a couple of dollars? There are many options on how to reduce living expenses, depending on how much you would like to save.

If asked, would you be able to pick out what you spend the most money on?

Average annual expenditures of all consumer units in the United States in 2016 by type

According to a 2016 study by the United States Bureau of Labor and Statistics, the three biggest living expenses for the average American household are housing, transportation, and food.

These are shocking numbers and it might seem like there is nothing that can be done to change them but there are steps you can take to reduce living expenses.

The cost of buying a house over 30 years, how to reduce expenses?


Everyone needs housing. There are good reasons why it is the number one expense of Americans. After all, shelter is one of the basic human needs.

If you really want to cut costs on your housing, you may want to move to Ohio. According to U.S. News, it is the number one state in Housing Affordability. Michigan, Iowa, Nebraska, and Indiana follow it.

You could also try joining the Tiny House Movement and downsizing to a space between 100 and 400 square feet. According to The Tiny Life, the average cost to build a tiny house is $23,000 if built by the owner, while the average cost of a standard-sized house is approximately $272,000.

If a tiny house it too extreme for you, you can always downsize into a smaller house or apartment. Just make sure you know how much home you can afford.


With transportation being the third biggest expense for the average American, there is no doubt that it is important. Everyone needs a way to get from point A to point B.

If you already have a car you can reduce your future costs by being a safer driver. Accidents can not only be a headache to deal with, but they are also costly. 

You can also extend the life of your car by taking good care of it. Taking your time when braking and accelerating can keep your breaks and tires in good shape longer, and lower your gas consumption.

Carpooling is good for the environment and your wallet. And there is always the option to limit your driving. On a nice day, consider walking or riding a bike to your destination.

How much Americans spend on food annually, how to reduce expenses?


Like shelter, food is another basic human need. No wonder it is the third biggest expense for Americans. While you might not want to cut down the amount of food you eat, you can take steps to eat cheaper.

Eating foods like rice, lentils, or beans can help cut costs. Soup can also be a delicious and inexpensive meal to prepare. I like to make this Tuscan Lentil Soup.

Preparing food at home can also help you cut your food costs. Bring you lunch to work instead of eating out. Out of the $7,023 the average America spends on food each year, $3,008 is spent on eating out. That's over 40% of the annual food spending!

Another option is to grab your coffee at home instead of buying a cup from a café. According to Business Insider, the average cup of coffee will cost between $1 and $5, while making it at home costs between 16 and 18 cents per cup! By making this small change you can save over $1,000 each year.

Unhappy casual woman holding bank card thinking about how to reduce living expenses


Clothing is something I spend a lot of my money on. I have found that thrifting can be fun and cheap! I use to buy lightly worn clothing. There are other sites, like Ebay or The RealReal to buy used clothing. You could also stop by your local thrift store if you don't like buying clothes online.

Entertainment can get quite expensive. Going to the movies, concerts, and shows can add up and create quite a dent in your expenses. Attending free or low-cost events around your town can be a fun way to get out without breaking the bank. Most towns or cities list any upcoming events on their website.

The Bottom Line

These cost-cutting strategies may seem great in theory, but they will not work for everyone.

The best way to reduce your expenses is to find what works for you. Make a list of everything you spend your money on and start crossing the items off that you can cut.