According to the 80/20 Principle, 20 percent of actions will provide 80 percent of results. This is especially true when it comes to frugality.
When you break it down the majority of money I personally save falls into two main categories: housing and auto. By renting a one-bedroom house in a less than ideal area, I saved $200 a month back when I first moved here in 2011. Since rental prices have went up slightly since then I’ve saved even more.
By allowing my daughter to become my roommate instead of simply encouraging her to move into her own place I increased my savings even more by halving my already low expenses. While this also has the added benefit of providing my daughter with a safe place to live at a price she can definitely afford (while teaching her how to manage money), that is simply an added bonus.
Eliminating my vehicle saved me another thousand dollars a year. While I didn’t have the burden of a car payment (or the cost of the full-coverage insurance that comes along with it), that savings has added up as well.
I manage to save $5,000 a year on just these two expenses alone. The other little frugal decisions I’ve made pale in comparision. To be blunt, I would either have to take a second job (I would need to work an additional 34 weeks a year at my current $150 a week public job income) or locate a position that paid twice the hourly wage that I currently earn if it were not for the money I save in these two areas if I didn’t want to reduce my standard of living.
If you are serious about saving money I urge you to give these numbers serious consideration. While eating out less, eliminating phone service, cancelling subscription services, and other things do save money, you will receive higher savings if you focus on just these two areas of your life.
Running the numbers has shown me that making your own laundry detergent and simply living on less is not enough if you want and need to save serious money. It’s the big expenses that really destroy your budget. However, if you are interested in paring your expenses even further, I urge you to check out my books The Shoestring Girl and The Minimalist Cleaning Method.
Have you ever analyzed where the bulk of your money goes? Please share your stories in the comments below.
2 thoughts on “Frugality and the Pareto Principle”
It is amazing that you live on as little as you do and saving on rent and car expenses plays a huge role, you are so right. I admire you for how you manage it all. According to my research, we shouldn’t spend more (out of our gross monthly income) than 30% on housing and 10% on vehicle expenses. Keeping those expenses to less than that sure does save some major moola. I was just looking at my latest expenses and was shocked/embarassed/pissed that I have spent way too much on going out to eat. I think it is an attitude problem -“oh, I worked hard, I am tired, I am going to treat myself.’ But the meal is outrageously expensive for the quality. It is not worth it. I do a spending analysis every other month or so but I know I could benefit from doing it more often. I know I could also benefit from tracking my spending, keeping a notebook of every dime spent. Once again, you have inspired me to do better. Thanks.
I completely understand the desire to treat yourself. Sometimes I have to remind myself that I AM treating myself when I save money. The more money I invest now, the sooner I’ll achieve financial freedom. It’s still hard, but the reminder makes it better. That said, there is no harm in the occasional treat, and when done wisely it can inspire you to continue forward.
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