New on the Property Ladder? How to Cut the Cost of Living

The average annual cost of living in the United States for a single adult with no children is $28,458. With food estimated to cost $271, healthcare at $273, housing costing $560, taxes taking £372, transportation coming at a price of a whopping $493 and other necessities esteemed in the region of $401: the monthly cost of living in the U.S. is $2,371, and this is all without having to spend money on childcare!

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Does this sound daunting to those of you who are taking your first steps on the property ladder? If you do feel apprehensive about getting your life of independence up and running after seeing those figures, then that’s nothing to worry about: it’s only natural to think about how you’re going to manage all of the financial expenses that you have never really dealt with before. What you should worry about, however, is trying not to exceed that estimated annual cost, as well as worrying about how you can beat it. And there are a number of ways in which you can beat it — if you really want to, that is, because it can require some dedication.

Starting with the first in that list of expenses: your monthly expenditure on food. Who knew eating could end up costing you $271 a month? But it doesn’t have to cost that much, even if you love food and have no intention of cutting back on your eating habits. Whether you’re planning on eating alone, cooking for others, binging on snacks or making your lunch for work, there are many ways to become frugal when it comes to food. One bit of advice is to plan out your shopping trips and shopping lists before you head to the grocery store, and stick to them! Don’t give in to the impulse monster inside of you that is screaming that that ‘deal’ is everything you could ever need, and that snack will be a great financial venture. Now, this isn’t to say that you shouldn’t look out for deals and that you shouldn’t put treats on your shopping list, it’s to say that you should work them around your budget that you set yourself beforehand. Also, you should aim to schedule your shopping trips around your payday so as to not only get this imperative expenditure out the way as early in your new financial cycle as possible, but so you can give yourself a coherent timetable for your spending. Small expenditures, especially the ones we don’t plan for, eventually add up to big money spent, so make sure you stick to that budget.

Now, on to healthcare, possibly the most bitter pill to swallow (no pun intended) when it comes to expenditure. The price of U.S. healthcare has reached a new peak, but could come down under new legislations and the proposed repeal of Obamacare. But even if a decrease in the cost of remaining fit and healthy doesn’t come to fruition, there are ways to make sure you are getting the most out of the fees that you do pay. These include doing research into different insurance policies — you want to try and find a plan that includes your doctors and our medications, plus one that provides care for any chronic conditions. Something to remember is that information found online is not always complete or even completely up to date, so it is best to call the doctors personally to make sure they still participate in the insurance plans that you are considering.

Next up is the cost of making sure you have a roof over your head every night. This is the area that, understandably, drains the most out of your finances. Unless you’re still living at home with your parents and revelling in the cheap monthly rates they charge, most of your monthly outgoings will be spent on housing costs: as seen above with the monthly average being $560, but it doesn’t have to be quite as substantial as that. There are ways to save money on home insurance, for example, including: combining home insurance policies with car insurance (or any other type of insurance) policies in order to tap into discounts, deals and savings; remaining loyal to an insurer to see that your premiums come down year after year; and improving your credit rating by avoiding filing claims frequently. If none of this is of any interest to you, however, you could even look at an apartment for rent in a country that isn’t the U.S., if you ever feel that your American dream has turned into too much of a costly nightmare. Or, an idea that is slightly more ‘out there’ is to move into a school bus. Yes, you read that correctly, a school bus.

But, back into the real world, there are taxes that you have to deal with. But, it doesn’t all have to be doom and gloom when it comes to dealing with it; there are ways that you and reduce the bills induced by tax. Firstly, you should check if you qualify for the earned income tax credit, which applies to low- and moderate-income taxpayers. Karl Frank, author of the book Go Tax Free, urges anybody who is earning less than $50,000 a year to check whether this credit applies to them. However, if you want to take matters into your own hands, then you could start a start-up business. Becoming an entrepreneur can improve your tax situation because business owners are able to take more control over how they pay taxes. They have the option of keeping more money in their company instead of drawing it down as income, and they can also count certain costs as expenses. And becoming a business owner doesn’t even mean you have to add the financial headaches of said business to the ones you already have with the cost of living. Even if you don’t think your start-up warrants the hiring of an accountant, it does in order to both focus on the tax issues of registering the business and to make your business seem bona-fide. Plus, you never know, your business could even take off and go from start-up to market leader, meaning you’d never have to worry about having to cut the cost of living ever again. But if this all seems a bit far-fetched for your liking, then you could settle down and start a family as there are a number of benefits of having children when it comes to taxation. Whichever way you go in trying to cut the costs of tax, however, be sure to avoid these ten common tax mistakes.

As previously mentioned, you can combine car insurance with home insurance in order to not only save on housing costs, but to dig into the $493 (or thereabouts) that you’re spending on transportation. But this isn’t the only way you can bring that figure down. If it is a car that is eating away at the money in your wallet, and you don’t fancy walking to work every morning (or it just isn’t practical), then there are a few ways to cut down on car-based expenditure, some of which you’ve probably never tried. One way is to remove any excess weight from it, because the less weight your car carries, the more fuel efficient it will become. If you lighten your load before you travel, you will also lower your car’s fuel consumption; other ways ways to cut down on this include: checking your tire pressure; when at the pump, keeping the hose in the tank until the pump shuts off in order to make sure you allow all the fuel to put out of the nozzle; and, when appropriate, using cruise control. Other ways can be found here. But if it’s not cars that get you from A to B, but flights, then there are ways to cut down there too. If you’re a high-flyer, then you should look to optimising connecting flights as much as possible, as well as considering multiple routes.

And then, finally, it comes down to cutting down, or even eradicating, spending money on other necessities. First of all, you should take care in deciding what actually are ‘necessities’; the first thing to examine are things that you do not need. Unlike the other payments mentioned above, these expenses are not necessarily needed, so they are considered discretionary. If you have any discretionary expenses that aren’t contributing to your life, i.e. gym memberships that you aren’t using, gadget insurance for gadgets that have long passed their sell-by date, or even subscriptions to streaming services that you are using maybe once or twice a week. Make sure to check these tips to help you keep from spending money unnecessarily.

So, there you have it. A few hints and tips in helping you both deal with and cut back on the cost of modern day living. And remember, it’s not all about expenditure. You can make a profit from climbing the property ladder too.