People waste 70 percent of their money on these 3 things

People waste 70 percent of their money on three things – if you save there, you can retire early

Your retirement is still light years away, you think? Maybe, but if you get to the prime of life without having invested your money well, then retirement gets pushed back a little more.

Saving enough in 40 years of work to live well for the rest of your life is not so easy. But you can learn a lot from those people who reached their financial goal for retirement years before the actual age of retirement.

Grant Sabatier, a self-made millionaire in his mid-30s who runs the financial blog Millennial Money, pointed out on his website that U.S. Americans spend an average of 70 percent of their money on their homes, transportation and food (when you factor out income taxes and Social Security).

Does this sound familiar?

In some parts of the U.S. (such as New York), this percentage is even higher. Same in Germany, if you live in cities like Munich or Stuttgart. These high expenses mean that many don’t want to think about saving at all. But that’s where your best opportunity to save for retirement lies, say Sabatier and other experts.

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If you spend less in housing, transportation and food, "you can pay the rest right in," Sabatiert writes at Millennial Money. And further, "If you move into a smaller apartment, walk to work and cook at home, you can save 25 percent or more."

To pull this off, you’ll have to get creative, of course, but here are a few guidelines.

Housing

One-third of U.S. residents pay too much for housing. There is a guideline you should use to pick an apartment: It should only cost you 30 percent of your gross income or less each month.

But to make the best progress on saving, your best bet is to cut back on housing even more. If you can find an apartment to spend less than 25 percent of your net income on, you’ll be doing very well.

Even billionaire Warren Buffett tries to keep his housing expenses low. Buffett lives in a modest home worth just 0.001 percent of his wealth.

Warren Buffett house Omaha

Transportation

In addition to housing, transportation is a real money guzzler, according to data from the U.S. Bureau of Labor Statistics. U.S. Americans took out more loans for cars than for college last year.

It’s good to have a safe car. But keep in mind that you’ll have to pay around 500 euros over six years. If you really want a car: Either pay for it now, and if not, pay it off in less than three or four years.

Food

As Business Insider reported, eating out accounts for 43 percent of the average U.S. family’s total food spending – here’s where you can really save big.

One area where you can save a lot, if you don’t want your social life to suffer, is prepared foods (rather buy individual foods that you can cook up into different dishes). Food supplements cost a lot of money and don’t do anything anyway.

Sabatiert was able to save more than a million dollars in five years this way. So for him, cutting back a little in these areas has paid off.

"At the end of the day, it’s a personal choice, but I was happy when I moved to a smaller apartment closer to my job and ate out less at restaurants," he writes. "And now that little subtle difference has paid off – I have 13.000 dollars a year saved this way."

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