Economics will put you to sleep; just ask my wife. Merely editing a ten page paper I wrote in college on the collapse of the Bretton Woods monetary system put my wife into a long, mid-day slumber. Caffeinated tea was no use in stopping economics fatigue. However boring the practice of reading economics can be, some of the concepts are really useful for saving time and money in personal finances. The Pareto Principle is such a concept.

The general idea behind the Pareto Principle is that for any outcome, 80% of the results come from 20% of the effort. For example, roughly 80% of my daily blog reads come from roughly 20% of referring sites. I’d wager that if you checked your phone records, about 80% of the minutes you spend talking on the phone comes from about 20% of the people you call. This principle is great for making informed decisions about personal finances and where you should spend your time saving money.

Take the family budget for example. While the numbers aren’t quite 80/20, according to government statistics three expenses made up 63% of the average family budget: housing, transportation and food. Making only small reductions in each of these expenses could save you thousands each year and there is no shortage of ideas for you to choose from.

(Share your family budget by taking the Dollar Challenge)

Housing

There are many ways to avoid regrets surrounding your housing choice. Doing due diligence on a neighborhood will prevent issues with local crime and poor schooling. Housing expenses require a different set of financial tools.

The average American family spends 34.43% of their total expenditures on housing. By far, this is the largest expense for families to manage and while it may seem like costs are fixed, there are a number of ways to lower your monthly costs.

• There is a home refinance boom in America and a lower interest rate could save you tons in interest. However, you will want to assess your current situation to make sure that the timing is right and the savings in interest, overcomes the closing costs.
• If you are in the market for a home, be on the lookout for potential opportunities. For example, your local government may have an opportunity to win the chance at buying a home at a reduced cost.
• If you choose to rent, make sure that you are taking the proper steps to get your security deposit back.

Transportation

Transportation is about 1.4 percent of Money Crush’s family budget, while the average family spends about 15.6% of their expenses on transportation. In other words, there are many ways to cut back on car expenses.

• Pathfire catch on fire? Repairing your own wiring system could save you $1,500.
• Invest in a much cheaper, leg-powered vehicle. Like a bike that has storage built in.
• Need flexible transportation, but don’t want to deal with bus schedules or parking costs? Urban dwellers can take advantage of car sharing.
• Substituting cars for other transportation options aren’t the only way to save. Another possibility is to take advantage of tricks to save on fuel.

Food

I’ve spent a good deal of time writing about ways to reduce the 13% of the average family budget that goes to buying food. Coupons are popular right now, but there are many other ways to reduce family’s third largest expense.

• Learn the marketing tricks that grocery stores use and avoid overpaying. There are also ways to take advantage of this style of marketing.
• Herb gardens are a great way to save at the grocery store. They require much less to grow than to buy in a bottle and they also can be decorative.
• 43% of the average family food budget is spent eating out, which means learning how to cook your own meals can have a big impact on your expenses.

There are countless ways to cut down on spending, but focusing on these three bills first will give you the greatest amount of savings.

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