How To Spend Freely – Reduce The Big Three

| May 4, 2021

spendThere are so many things we’d like to buy, but only have a certain amount of money to spend. But life isn’t about depriving yourself. It’s about being self-aware of what truly makes you happy and allocating your resources (time, energy, and money) to optimize those things.

We need certain necessities like a place to live, a way to get to work and other places, and food to live. These expenses are typically known as housing, transportation, and food.

Housing, transportation, and food are expenses personal finance experts refer to as the big three. These expenses are known as the big three because we typically spend well over half of our budget on just them.

And so, one simple and effective way to control your monthly budget is to control the big three expenses, or reduce them as much as possible to allow yourself room to spend freely.


Most will find that the largest of the big three expenses is housing expense. If you can significantly reduce your housing expense, your financial situation can dramatically improve. The average amount spent per year is almost $19,000, which is $1,583 per month. If this can be reduced by just a few hundred, over time, that can really help your budget. But how? Consider these options:

  • Downsizing to a smaller home.
  • Renting out a room or section of your home that you don’t regularly use.
  • Refinancing your mortgage to a lower interest rate and thus a lower monthly payment. It’s important that when you refinance your home, it can possibly reset your loan duration period depending on the terms of your refinance. So you may be paying a lower monthly cost but over a longer period of time.
  • Moving to a less expensive area. This is especially useful if you can work from anywhere which is the case more and more these days.

It’s important to understand that a large home doesn’t just have a large mortgage, but other large expenses too such as property taxes, utilities and overall maintenance.

Many financial experts say that your monthly mortgage payment should be about 28% of your monthly income. But you should challenge yourself and take steps to get it at 25% or less.


Are you driving around in a big Sport Utility Vehicle (SUV) with just yourself most of the time? Can you really rationalize why you purchased it in the first place? It may be fun to drive at times, but let’s face it, when you’re driving you can’t see the exterior or your vehicle and can’t take time to appreciate the interior because you have to pay attention to the road!

SUVs and luxury SUVs cost more to purchase and cost more to operate (premium gas, lower gas mileage, bigger tires, higher oil change cost, etc.). If you drive a lot and usually by yourself, it doesn’t make financial sense to own a large SUV.  The annual cost to own a medium size SUV is about $10,000.

In reducing transportation costs, you can consider buying a smaller 4-cylinder vehicle that provides gas efficiency, a hybrid or even an electric vehicle. If you do not drive much at all, determine if you even need a vehicle.  So many things can be provided right to your door these days like groceries, food from restaurants, and large bulk items. Of course if you live in a big city that has public transportation options, it may be an even easier decision to let go of your vehicle.

I drive around an old Honda Civic that has been paid off for years. It has less than 150,000 miles on it, never had any major maintenance (knock on wood) and I’m hoping I can push it to 200,000 miles and beyond. Basically, I plan to drive it into the ground.

I’ll admit I have a fancy SUV too. However, we bought it used and at half the cost because it was in a major accident and then repaired. I would never buy any vehicle brand new going forward simply because it is a depreciating asset, and a good chunk of that depreciation takes place the moment you drive it off the dealership’s lot.

We use our SUV when the whole family is going out which is usually on the weekends sometimes.


The average cost of dining out is about $3,000 per year. And with Uber Eats and Grub Hub, it’s so easy to order food. But this cost adds up. It’s not that hard to cook your own food. The benefits of making your own food include the following:

  • It’s cheaper. You can buy a pound of brown rice for around $2.00. You can buy a pound of chicken for roughly $3.00. That’s $5.00 and can make at least five meals or $1.00 per meal. The average meal out is around $9.00. So, you could potentially save $8.00 per meal by cooking at home.
  • It’s healthier. You know exactly what you are putting in it and can limit the bad things (sugar, salt, oil, starches) and load up on the good ones (vegetables, whole grains, and lean protein).
  • You can cook items in bulk, so you don’t have to spend time in the kitchen preparing meals every day.
  • If you have a family, cooking together can create a bonding experience and memories.
  • You can unleash your creativity and enhance your cooking skills by trying new recipes.

We cook about 3 items per week. They last throughout the week. We do eat out, but that’s usually about once per week.  And it you’re going into work; you can save major money by consistently taking lunch from home to work instead of buying.

Reduce The Big Three Thru Goal Setting

It’s good to set a reasonable goal for reducing your spending in each of the big-three spending categories. Here’s a sample table to show you the difference small reductions can make to large expenses:

Category Current Annual Cost Proposed Reduction Revised Cost
Housing $24,000 10% $21,600
Transportation $10,000 10% $9,000
Food $3,000 5% $2,850
$37,000 $33,450
Source: Simple Money Man

Annual Savings: $3,350

It’s a great feeling when you’ve paid yourself, paid the bills and still have money left over. Everyone can enjoy this feeling. But it’s important to understand where your money if going and if you really want the big three to be your necessities or your wants.  If you can reduce the big three expenses, it can really provide some room in your budget to allow you to spend on things that really matter in your life.

Note: This article originally appeared at Simple Money Man.


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Category: Personal Finance

About the Author ()

Hi there! A bit about me; well, I’m in my 30’s and have a steady job in Accounting & Auditing. I’ve been in the Finance & Accounting profession for almost 15 years and have held positions with a CPA firm performing audits of Federal agency programs, a Finance Services Fortune 500 company based in Baltimore, MD, a Federal agency in Washington DC, and currently am working for the State of Maryland. I have a CPA license and a CIA certification that I earned many years ago (full disclosure: may not remember some of the stuff I learned….c’mon it was years ago and like a gazillion topics). What you will get out of this blog: You’ll (hopefully want to) read about simple concepts, simple stories simple language and simple examples all related to money and personal finance cause I’m a simple man. You may also notice a touch of humor in my writing too (hopefully that doesn’t get annoying cause it’s just how I roll). What you may not get: sophisticated writing, complete sentences, corecet spelling (I do know how to spell correct though), and a bunch of stats, figures, and references to things (sometimes you may get a bit of that stuff).

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