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Frugal Living Tip - Manage the Big Expenses

By: Aaron-- 2010-01-29 2:00 am --

Just as you can't squeeze blood from a turnip, it's not easy to find savings by looking at portions of your life where you don't spend very much.

That's why G.E. Miller writes at 20somethingfinance.com about the importance of seeking savings where you spend the most money.

Miller cites a report from the U.S. Bureau of Labor Statistics showing that the average household devotes more than half of its annual expenditures toward two categories - housing (34.1%) and transportation (17.6%).

So if you really want to live more frugally, suggests Miller, it makes sense to take a hard look at your housing and transportation expenses.

For instance, if you live in or near a big city, using public transportation, walking or bicycling might be able to save you a big chunk of the $8,758 that the Bureau of Labor Statistics indicates the average family spends on transport.

Of course, as many of Miller's readers point out, people trying to reduce both housing and transport expenses may encounter a Catch-22 scenario. You can usually find cheaper housing in an exurban or rural area, but those places tend to have poor public transport options. Or you can move closer to a big city and cut your transport expenses but have to contend with an expensive housing market.

How can you get around this dilemma?

On the transportation side, even if you need to drive a car, the type of car you drive can have a major impact on your finances. If you drive a large gas-guzzling SUV, you may be able to trim your fuel bill by downsizing to a compact or mid-size car.

Even if that's not realistic because you need to transport a lot of people and/or packages in your vehicle, you might be able to still find savings either by choosing the most fuel-efficient car in its class (check the U.S. Government's Fuel Economy website to compare mileage ratings) or by shifting to a less luxurious nameplate. For example, the Ford Motor Company owns both the luxurious Lincoln and mainstream Mercury brands. Buying the least expensive Lincoln SUV (the MXK) would require more than $38,000, but you could save a boatload of cash by choosing the Mercury Mariner instead for as little as $23,000 and change.

Similarly, even when it comes to housing costs, you can often find deals (especially in this real estate market) if you're willing to be flexible. Are you willing to sublet part of a house from a homeowner having trouble making payments on her mortgage? If so, you could potentially do a good deed (helping the homeowner avoid foreclosure) while simultaneously getting a good deal on a home in a good location.

Loans can be hard to get in this climate, but if you have the cash, you might also be able to find good deals on housing in prime locations by including short sales, foreclosures and real estate auctions in your search.

Have you successfully figured out a way to lower transportation and/or housing expenses? Or do you think that lowering expenses in those areas is unrealistic and that people are better off applying frugal habits in other parts of their lives?