Save big by "living small"
April 17th, 2017
The idea of “living small” is subject to interpretation – it depends on the accustomed lifestyle of those who use the term.
A venture capitalist millionaire in San Francisco, for example, could be “living small” by driving a Model X Tesla instead of a gas-guzzling luxury SUV. Meanwhile, one woman near Vancouver is living in a 128 sq. ft. home she built, as part of bigger movement to truly live small.
For a Chicago-based couple who committed to downsizing their lifestyle in order to save money and shave off a whole bunch of debt, the definition probably lies somewhere in between.
Matt, a licensed CPA who also writes a “financial independence” blog called distilleddollar, chronicled how he and his fiancée managed to triple their savings while paying down an onerous student loan in just three years. He claims to have pocketed $50,000 last year, thanks to his cost-saving regimen.
As you can guess, this took some committed belt-tightening and an enthusiastic embrace of “small living”. Matt prescribes 17 money saving strategies on his blog, but in the spirit of frugality, we’re going to save you some time by recapping the highlights.
Small living equals big savings
For young people living in major Canadian cities like Toronto and Vancouver, red-hot rent prices have become a daily discussion.
Matt suggests doing more with less when it comes to your living situation. Instead of paying hundreds, maybe even thousands, more a month for that extra bedroom to keep your desk, dusty workout machine or unplayed guitar in, he recommends downsizing to a one-bedroom and pocketing the difference.
The average rent in Vancouver, for example, is estimated at $1,900 per month according to padmapper, while a two-bedroom hovers around $3,000. That’s over $12,000 a year extra you would save by sacrificing the second-bedroom luxury.
“Live big in a tiny home,” writes Matt, who claims to have saved $12,000 by living in a one-bedroom, as compared to a two-bed, two-bath “palace”. He also suggests negotiating down your rent with your landlord. This could get you laughed out of the building and right back to the vacancy listings, but it never hurts to ask.
Park your dreams of car ownership
As we’ve detailed here and here on the Exchange, owning a car can be a cancer to your bank account. Whether it’s insurance, gas, repairs, or car payments, your income flow is definitely going to sputter from all the outbound expenses.
No surprise that Matt suggests going car free to better balance your budget, among other lifestyle improvements. "This single decision has made me healthier, happier and wealthier over the past year than nearly any other decision," writes Matt, who says he is saving $9,000 a year by walking to work.
The idea of a walkable commute doesn’t always have footing for those who live further away from work in order to save money on surging downtown rents. So here’s six other ways you can cut down the cost of your commute.
Chew on these savings techniques
In this Instagram era of friends posting images of sumptuous tacos and Neapolitan pizzas being devoured in cool restaurants, it’s not easy to stay home and boil up a box of mac and cheese.
But eating out can be a major drain on disposable income. Matt estimates a savings of $5,000 a year by going out less and cooking at home more. Not only did this turn out to be a healthier lifestyle choice, but it inspired him to take a closer look at ways to cut his grocery bills in half.
The trials of self-denial
It may sound like the mantra of a Buddhist monk, but the trials of self-denial simply means cutting back on the excess wants while focusing on the needs. These are the small (or big) luxuries in life: the expensive Starbucks treats, frequent trips to movies, weekend getaways, dry cleaning, unused gym memberships and, as we already discussed, eating out on the regular.
No one is suggesting you live like a depressed hermit, but if you properly analyse your lifestyle and spending habits, there’s undoubtedly going to be big opportunity to save. And remember: this doesn’t have to be for the rest of your life - just long enough to reach your financial goals. Now go enjoy that mac and cheese!