At some point, that person in your life who achieved financial success a long time ago looked at the expensive coffee in your hand, rolled his or her eyes and said something to insinuate that’s what’s wrong with your generation. The small things matter, and they add up, but your coffee habit isn’t what’s blowing your budget.
Let’s say you roll through the drive through every day on your way to work and order a coffee that costs you $5. Sure, that money could go in your savings account. But really, it’s just costing you a total of $1,300 a year. It would take years of coffee deprivation to save up a three percent down payment. Cutting out the coffee probably won’t be enough. It’s going to take bigger steps.
Biggest Household Expenses
The Bureau of Labor and Satistics tracks spending, and they published a report that reveals spending trends for U.S. households. In 2018, here’s a breakdown of spending averages:
- Housing – 32%
- Transportation – 15%
- Food – 12.9%
- Insurance and pensions – 11.9%
- Healthcare – 8.1%
- Apparel – 3%
Numbers varied a little for married couples with children, singles or one parent households, but not by much. Interestingly enough, couples with children spent more on transportation, spending 17.1% of their income on their ride.
Look at your own expenses and see how big of a chunk goes to housing and transportation. You have to have somewhere to live and a way to get back and forth, but if your goal is to save for a down payment, you might be able to make some cuts. Downsizing to a smaller apartment for a year might help you save thousands, and there’s no sense throwing money away on rent. If your car is close to being paid off, keep driving it rather than taking on another loan.