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The Big 3 Budget Items

budgeting financial independence Jun 18, 2022

(How Cutting the Cost of These Three Budget Categories Can Help Supercharge Your Savings Rate)

“The Big 3 Budget Items” for most are housing, transportation, and food. In fact, Americans currently spend over 61% of their incomes on these three categories alone! The bread and butter of reaching FI (financial independence) is to have a high savings rate. Many in the FI community have savings rates between 50% – 70%! However, do not let that discourage you, as you do not need that high of a savings rate to succeed. However, the more money you save, the sooner you’ll reach FI. If you’re able to cut back in these three major categories, then you may not even need to take the time to budget for all the smaller expenses that actually bring you joy, thus allowing you to avoid the headaches and stress that come from budgeting. You can then use all the saved money to invest for your future, allowing you to reach financial independence sooner. After looking at your monthly expenses that you have tracked, are housing, transportation, and food the top three expensive categories for you as well? 

Let’s first discuss housing. Some people choose to rent, and others choose to buy. You must first consider what is right for you during your current time of life. For example, if you’re in PA school in another state than where you’re originally from, and don’t think you’ll likely live there after PA school, renting likely is an excellent option for you. If you were to purchase and then sell a house shortly thereafter, that certainly could be costly to you. 

Whether you are considering renting or purchasing a house, consider the concept of geoarbitrage. Geoarbitrage is the notion of moving either to another town, state, or even country to experience a lower cost of living, which can drastically help increase your savings! In a lower cost of living place, both the rent and the cost of a home are likely cheaper than more expensive places. For example, states like California and New York are known to be expensive places to dwell. However, a PA may consider moving to a state in the Midwest where the cost of living is more affordable, and it may even be possible that their income is increased if the area has a shortage of providers. Now let’s consider an example of someone already living in the Midwest (where I call home), and say they are currently living in a large city or capital city of a Midwestern state. Well, if that person were simply to move one county over, they may be able to purchase a house a few minutes away while getting more bang for their buck in a different county. They may also get to enjoy lower property taxes. This would be an example of how you can use geoarbitrage within your own state.

Many people also will choose to move to another cheaper country for geoarbitrage. If you’re considering geoarbitrage in the future before you retire, the list of PA-friendly countries where PAs are able to practice is growing every year, and some examples include Canada, the United Kingdom, the Netherlands, Ghana, and South Africa. Otherwise, many retirees will move to countries with low cost of living to allow their retirement funds to go further. Central and South America are popular FI geoarbitrage destinations, as well as South East Asia, though there truly are so many options abroad. 

Another excellent suggestion for saving on housing is the concept of house hacking. House hacking is the idea of renting out a portion of your residence to offset the cost of the home. Some people will purchase a duplex or triplex, and live in one of the areas, while renting out the rest to tenants. Others will purchase a house and rent out rooms or spaces to roommates or tenants. The generated income will likely cover most, if not all of the mortgage, allowing you to live for free while building equity in the property. You likely will continue this idea until you and your partner start your lives together, though many couples will choose to continue this concept if the roommates or tenants are in a more separate area of the property. This is of course assuming that everyone would be onboard with the idea! Housing costs consume approximately one-third of people’s living expenses, so this is an area where cutting back on cost will help drive your savings rate!

Next on our list of “The Big 3 Budget Items” is transportation. There is quite the spectrum of transportation options, but the key is to choose something cost-effective, yet reliable. Some in the FI community don’t even own a vehicle, as they choose to walk, bike, use public transport, use a rideshare service, or some combination of those options. 

If you do choose to drive a vehicle, the consensus is that buying slightly older, used vehicles to drive is likely the most cost-effective option. Ideally, you would drive that vehicle for several years before purchasing another vehicle. New cars lose value immediately when they are driven off the lot. Now you may be asking, “What about leasing?” Leasing a vehicle sucks money from your income every single month, adding to your monthly expenses total. On the other hand, you may be able to purchase a slightly older vehicle fully with cash, or at least have a short-lived affordable loan. When you lease a vehicle or buy a new vehicle, you are the one taking the larger hit on the depreciation, whereas if you buy a used vehicle, someone has already done that for you. 

Now, when you’re considering a used vehicle, it is important to find one that should be dependable. You definitely will need a reliable car during PA school and for rotations, and you certainly will need one once you start working as a PA. Your used car will eventually need some repairs over the years that you own it, but those repair costs likely will pale in comparison to the cost of a new vehicle or a leased vehicle. 

Unfortunately, leasing a vehicle was one of my biggest financial blunders so far. Let me set the stage of this decision. Throughout undergrad, PA school, and even into the start of my PA career, I drove a small, used, though reliable car (Hyundai Elantra) that my kind, generous mother had purchased for me for quite a reasonable price. I drove that car for 9 whole years, through the Minnesota winters. Let me tell you, I certainly became quite the defensive driver in that little thing, as big trucks and plow trucks certainly would not move out of my way (it was up to me to move, or to get run over!). This little car that I drove for 9 years was actually quite a FI choice. However, here comes the financial blunder…

While considering vehicles, my husband and I decided that we would like a larger vehicle that would handle better in the snow and on the icy roads, and that could tow either a trailer or our fish house just in case his truck stops operating. (Ice fishing is quite an important hobby for us that we absolutely enjoy!) Our vehicle search ultimately led us to a popular SUV model (Jeep Grand Cherokee). At the time, we decided that leasing may be a good idea, as it seemed as though we were essentially renting a vehicle for some time, and most vehicles do not appreciate in value, unlike houses. This was our logic back then. Once we looked and tested a few of these vehicles, my dear husband got convinced we should upgrade to the version that has a more powerful engine, sunroof, better stereo system, but wait for it… AND it can park itself. You read that correctly: the car can park itself both via parallel parking and 90 degree back parking. Do you know how often we have used that feature? Approximately 0 times. All of these upgraded features brought our monthly payment amount up from the original model that we had considered by at least $200 over the course of the 39 month lease. Yes, this was an extra $7,800 over the course of the lease, and would have been worth even more if it would have been invested over the years!

Now, even though I say my husband was sort of the instigator when it came to getting the upgraded version of the Jeep, I was fairly easily persuaded as I convinced myself that I had been “working hard” and “deserve it” after driving that somewhat chintzy car for 9 years. We still have a few more months’ worth of payments on our unnecessarily futuristic vehicle, but after that, we already have plans for me to instead drive an older, yet well-cared-for vehicle. I’m just going to have to get over the fact that I won’t look as “cool”, and instead focus on the fact that we will be saving several hundred bucks a month, which will help us to achieve FI. 

The third and final item of the “The Big 3 Budget Items” is food along with beverages. If you’re like many Americans, it can be difficult to try to cut back on the cost of your dietary consumption. Many will eat out at restaurants, frequent fast food places, or purchase frozen, processed food to prepare. These habits are typically both more costly as well as not as healthy as cooking meals at home. Some barriers to saving on the cost of foods include time, ease, the quality of the food that you may want to purchase, and the idea that food and beverages are celebratory. Let’s address each of these barriers. 


It takes time to both purchase food and to prepare or cook the food. It takes time to literally create the grocery list before you take the additional time to go to the grocery store to shop. My husband and I both despise grocery shopping for this very reason. My sister and brother-in-law actually enjoygrocery shopping. They view it as an outing where they can spend time together. Weirdos. But great for them! To save on time (and our sanity), we usually instead use a grocery delivery service such as Shipt (click here to save $10 on the annual membership cost).

Disclosure: This link is a referral link, and I would receive a small amount from Shipt if you choose to use Shipt as well.

 Sure, I do pay a bit more on the cost of the food as well as for the tip to the deliverer; however, it saves so much time and sanity for us, that we would happily pay for the difference. Again, a huge part of your journey to FI should be you trying to discover what you value (or what you don’t value) in life. 


It is so easy to just go to a restaurant or a fast food drive-thru to get dinner instead of preparing a meal at home. After the end of a long day of seeing patients, cooking dinner is not necessarily at the top of the things I look forward to when going home. However, there are a few tricks that can help. For example, I absolutely love using Pinterest to find new recipes. Currently though, only easy, straightforward, and delicious recipes can be found on my Pinterest boards. Another idea to help make cooking easier would be to try to cook large amounts, so that the leftovers can be used either for lunch the next day or for another dinner or two. Some people will even meal prep on a weekend to prepare all their meals for the whole upcoming week in a few hours. 

Quality of Food

Some people feel as though they only can purchase organic produce and meat, which can be costly. If you have this desire, consider shopping at farmers markets, purchasing a CSA to periodically get bulk vegetables, or growing your own vegetables or fruit. Many national grocery chains also sell organic food at reasonable prices. Another great idea to get quality food at excellent prices is to purchase food that would be considered too “ugly” or too “imperfect” to be sold at full price. Check out Imperfect Foods or Misfits Market. You would get to enjoy the the same great tasting foods that just appear a bit unusual for a lower price. 

Mixing Food with Fun

Food and beverages have been touted as necessary for any celebration. I can hear some of you already groaning about this as you do not want to give this up, but hear me out. I am the first to want to go out to eat to celebrate something. Others will choose to go out for a few drinks to celebrate various milestones, holidays, or accomplishments in life. However, you can still enjoy the celebration at a lower cost. If you do elect to still go out, choose a place that is affordable. Consider ordering something on the appetizer menu as your main meal to save. Go during a happy hour to enjoy the same food with a lower bill. Instead of going out, you could enjoy a meal at your house with friends and family for a fraction of the cost. Often, friends or family members will gladly help by bringing a side dish, turning the celebration into a potluck. 

Again, consider what you value about your food and beverage consumption. Do you truly value spending all that cash on restaurants that often? Or could you dial it back by only dining at restaurants a few times a month? One item that I value is some good coffee. I grew up drinking Caribou Coffee (a delicious coffee shop chain started in Minnesota) since I was about a 10yo girl. No joke – thanks to my mother for getting me hooked on it! Instead of going through the drive-thru daily to get my caffeine fix, my morning starts by brewing some freshly ground Caribou beans (Mocha Java beans are the best!) at home, which allows for the delicious taste at a fraction of the cost. And let’s be honest, how hard is it to only get the coffee beverage when going through a drive-thru? Those scones and breakfast sandwiches are always so tempting to add to the order! 

A final suggestion to cutting back costs in this category is to learn to love drinking water. Seriously, drinking water is either free or incredibly cheap compared to all the alternatives (pop – aka soda or soda pop, juice, coffee, tea, and even milk). Additionally, as I’m sure you’re aware, drinking water has so many health benefits! I’m always amazed how little water many of my patients consume, leading to constipation, kidney stones, or frequent UTIs. 

In conclusion, if you’re able to get a handle on your spending in the “The Big 3 Budget Items” (housing, transportation, and food), you’ll soon see how your savings rate can increase drastically. This will allow you to supercharge your savings rate, thus launching you on your way to FI! 


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