According to a mid-October Moody’s analytics report, Americans are spending nearly $450 more each month to purchase the same goods and services that they bought a year ago as a result of high inflation.
The majority of budgeting advice emphasizes reducing recurring discretionary costs like streaming subscriptions and restaurant meals. Such actions might be challenging to maintain, and they might not result in sufficient savings to have a long-term impact.
If you’re prepared for a more active approach, you might want to consider downsizing your main budget expenses, such as your rent, car payment, or mortgage.
Potential Savings? According to the Bureau of Labor Statistics, Americans spent an average of $22,624 on housing and $10,961 on transportation in 2021. These two items accounted for more than half of their annual spending.
Significant reductions in these costs could result in more than enough savings to keep up a lifestyle that leaves room for greater discretionary expenditure.
However, downsizing also necessitates significant lifestyle adjustments, such as relocating to a smaller house or a region with a lower cost of living or switching from a premium car to a standard model.
The Challanges: While downsizing may have been a no-brainer in the past for someone wishing to drastically reduce their spending, quickly rising mortgage rates have made the calculation more difficult.
Your monthly payment on your current home might be lower if you locked in a low mortgage rate in the previous few years than it would be if you moved to a less expensive home with a mortgage at the current rates.
Unless you relocate to a less attractive area, recent inflation may make it challenging to discover considerable discounts if you rent.
Some individuals are taking a different approach and increasing their budgets by building a passive income stream. You can even invest as little as $100 in rental properties and start receiving rental income.
To read about the latest developments in the industry, check out Benzinga’s real estate home page.
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