When it comes to managing your money, there’s no “right” or “wrong” way to do it. It’s all about finding what works best for you! If you’re looking for a simple and effective way to save more, the 90/10 rule could be your answer. This strategy helps you focus on the biggest purchases so you can save the most money without worrying about every little expense. Ready to start saving smarter, not harder? Let’s dive in!
What Is the 90/10 Rule?
The 90/10 rule is simple: 90% of your savings come from 10% of your biggest purchases. This means if you focus on saving money on big things, like cars, houses, or vacations, you’ll save much more than trying to cut small costs, like coffee or snacks.
How Can You Use the 90/10 Rule?
1
Look at your big expenses
What do you spend the most money on? It could be a car, rent, or big shopping trips.
2
Find ways to save
Look for deals, compare prices, or buy used instead of new. For example, buying a used car instead of a brand-new one can save you thousands of dollars!
3
Make smart choices
Think carefully before buying something expensive. Do you really need it? Can you find a cheaper option?
Example of the 90/10 Rule
Let’s say you want to buy a car. A new car costs $30,000, but a good used car costs $20,000. By choosing the used car, you save $10,000! That’s a big amount of money. Now imagine how much you could save on other big purchases like a house or vacation!
Why the 90/10 Rule Works
Small savings, like skipping coffee or not eating out, do help. But saving on big purchases makes a much bigger difference. That’s why the 90/10 rule is so powerful—it helps you focus on the most important ways to save money. Remember, the 90/10 rule is all about saving on the big things. Take a close look at your major purchases, and you can start saving big right away!
Specific Actions You Can Take
1
House
A home is often the single largest purchase most Americans will make in their lifetime. Here are three ways to reduce costs when purchasing a home:
Buy Below Your Means: Instead of stretching your budget to its maximum, aim to purchase a home that is well within your financial comfort zone. This will not only reduce your mortgage payments but also allow for extra financial flexibility.
Shop Around for Mortgages: Different lenders offer varying interest rates and loan terms. Shopping around for the best mortgage rate can save you tens of thousands of dollars in interest payments over the life of the loan.
Consider a Fixer-Upper: Homes in need of repair are often priced lower. If you’re willing to invest some time and effort into renovations, you can increase the home’s value while spending less upfront.
2
Car
A car is typically the second-largest purchase for most people. Here are ways to cut costs:
Buy Used Instead of New: New cars depreciate in value the moment they are driven off the lot. Buying a used car, even one that is only a few years old, can save you thousands while still providing reliable transportation. The Shocking Truth Car Dealers Don’t Want You to Know
Pay in Cash if Possible: Avoiding an auto loan and paying in cash can save you money on interest. Even if you can’t pay the full amount in cash, making a larger down payment reduces the amount you’ll need to finance.
Shop During the Right Time: End of the year, holiday sales, or end-of-model-year sales are times when dealerships offer bigger discounts. Timing your purchase can lead to significant savings.
3
Vacations
Vacations can be a significant expense depending on the destination and duration. Here are ways to reduce vacation costs:
Travel During Off-Peak Seasons: Traveling during less popular times of the year can result in lower costs for flights, accommodations, and attractions. Off-peak travel offers substantial savings while still allowing you to enjoy your destination.
Use Travel Rewards and Credit Card Points: Leveraging travel rewards, airline miles, or hotel points accumulated through credit cards can significantly reduce your out-of-pocket vacation costs, often covering flights or hotel stays entirely.
Book Accommodations Outside Tourist Areas: Staying slightly outside major tourist spots can dramatically reduce accommodation costs. For example, booking an Airbnb or a hotel in a nearby town or suburb can save you money while still providing access to the main attractions.
4
College Education
College tuition is another significant expense for many families. First you should always ask yourself if it makes sense. (How to Calculate is College Feasible) Here are ways to reduce the costs:
Attend a Community College First: Starting at a community college for the first two years and then transferring to a four-year university can save thousands of dollars on tuition.
Apply for Scholarships and Grants: Scholarships and grants are free money that doesn’t need to be repaid. Applying for as many as possible can greatly reduce the cost of college without taking on additional debt.
Live at Home: Living with family while attending school can save a considerable amount on room and board, which is often one of the largest expenses after tuition.
5
Wedding
Weddings are often expensive milestones in many Americans’ lives. Here are ways to reduce costs:
Limit the Guest List: Smaller, more intimate weddings are becoming increasingly popular. By reducing the number of guests, you can significantly cut down on the cost of catering, venue, and invitations.
Choose an Off-Season Wedding Date: Opting for a wedding date in the off-peak season (typically winter or late fall) can lead to substantial discounts on venues, vendors, and other services.
DIY or Borrow for Décor and Attire: Consider doing some of the décor yourself or borrowing items like table linens and centerpieces. Similarly, renting or buying a second-hand wedding dress can save thousands.
Conclusion
The 90/10 Rule is a powerful tool for saving big on major purchases by focusing on the 10% of decisions that have the biggest impact on 90% of your spending. By being strategic and deliberate with how you approach large expenses like homes, cars, vacations, and more, you can maximize your savings without sacrificing quality or value. Whether it’s choosing to buy a used car, negotiating mortgage rates, or traveling during off-peak seasons, the 90/10 Rule encourages smarter spending habits that lead to significant savings over time. Implementing this rule can help you take control of your finances, build wealth, and achieve long-term financial security.
