Would you like an early retirement? How does financial independence sound? Whether your retirement goals include shifting to part-time, making a hobby your new career or 10 am tee times by age 60, making smarter decisions with your money now can make those goals attainable.

Living expenses vary from place to place, but whether you live in New York, California, or Utah, financial planning is paramount. Simply establishing more efficiency in your spending habits will go a long way in creating that nest egg you need to retire earlier. Here are three areas of spending that can often be streamlined to reach your financial goals faster.

Americans Spend 70 Percent of Their Income on Three Items

According to the Bureau of Labor Statistics*, the average American spends approximately 70% of their net income on housing, transportation, and food. These are obviously necessary expenses, but their sheer size mean that improvements may have a large impact. Let’s take a look at all three and review some advice on the best ways to save some of that money.

#1 – Housing

This is usually the largest expense in our financial lives. Whether you own or rent, housing takes up a large chunk of your paycheck. Still, we’re lucky here in Utah – financial planning is much easier than in places where housing can be much more expensive.

That said, here are a few things you can do:

If moving to a cheaper / smaller house isn’t feasible, then explore refinancing at a lower rate. Seemingly small reductions in rate can yield a reduction in tens of thousands on your total mortgage payment. By investing the money you save every month, you receive interest instead of paying it out in your mortgage, which can create a huge swing in your financial fortunes. These savings can grow into a sizeable chunk of the nest egg you need.
- Advanced tip: Lending institutions will often refinance all your collateralized loans from other institutions, like mortgages and car loans, into one bundled lower rate – often saving hundreds monthly on payments. Talk to your financial institution to see if this could work for you.
If you rent, think about buying. It is quite common to find a mortgage that is actually cheaper each month than your current rent. Considering that your payments build your equity in the home, this switch can be a powerful tool in establishing financial independence.

#2 – Transportation

There’s nothing quite like that new car smell. There’s also nothing quite like how much a new car depreciates the moment you drive it off the lot – as much as 20% within the first year or so. With vehicles becoming more reliable from year-to-year it makes more financial sense every year to buy a certified used car in lieu of a new one. By saving 20% on the purchase price, you can pay it off years earlier. When you finish paying off your car, I suggest you keep making the payment – into your retirement accounts! Keeping the vehicle long after it’s been paid off and continuing to make the payments into your retirement accounts amounts to a great financial move.

There are other money saving options in regards to vehicles to help you retire early – can you give up one vehicle in the household, and carpool / bike / take public transportation? Do you need collision coverage on that older car? There are plenty of places to save money here if you look.

#3 – Food

Every financial guru harps on lattes and junk food purchases for a reason: they are a huge money vacuum. So is eating out. Some people save minimal amounts for retirement while eating out 4-5 times per week. If, by eating out less, you saved $50 per week for the next 25 years and put that money in an investments account earnings 6% annually, you would have over $160,000 extra put away for retirement at the end of that time.

Stay home and cook more. Don’t buy prepared foods. You’ll not only save money – it’ll bring your family closer together, and it’s healthier. There’s almost no downside. Make eating out a treat instead of a habit.

So there you have it – three places you can look to add a few dollars to fund an early retirement.

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