What are Non Discretionary Expenses and Why Cutting Back on Them can be Impractical

What are Non Discretionary Expenses and Why Cutting Back on Them can be Impractical

When looking for some extra savings, you’ll find that non discretionary expenses are a bit tougher to cut back on than discretionary expenses. Go ahead and try telling your landlord that you’re going to cut back on expenses and only use your bedroom and bathroom, and therefore only pay that portion of rent and see what happens. OK dear God, please don’t actually do that.

So, what are non discretionary expenses. Non discretionary expenses are in essence required (read with a grain of salt as some may argue that things like groceries can be discretionary). Rent/mortgage payments, utilities, student loan payments, credit card payments, groceries, gas and insurance for your car if you are car bound. The “fixed” costs that allow you to live.

Can you cut back on rent? Sure, but only with a good amount of effort. It takes time to screen a roommate and move them in, it takes time to find a cheaper apartment, or move back in with your parents, it takes time and possibly money to refinance your mortgage and even then the rate will need to be lower to make it worth it.

Getting these costs down to a sustainable amount takes planning. And possibly a bit of sacrifice on your part in the way of discretionary income, but we’ve already talked about that. Let’s take a look at a few examples of “fixed/required” expenses.

Rent and Mortgages

I bought my first “home” back in 2010. A great time to buy in the Denver market. I wanted a place with a yard, at least two bedrooms, in a walkable area. A garage would be awesome as would a second bathroom, but I knew not to hold my breath.

What I didn’t know, was the only way I could afford what and where I wanted, was to be house poor. Very house poor. Or rely on a roommate in order to make the mortgage. Sadly, the mortgage company I was pre-qualified with was completely on board with allowing me to put myself in that situation if I so chose. (I had a pulse, so I had approval.)

Affordable Condo Refusing to be House Poor
The outside of my first condo. A far stretch from what I wanted, but the mortgage was fantastically low!

It was very humbling when I emailed my real estate agent and told her that condos were probably the way we needed to go. I really didn’t want to buy a condo. I ended up buying a condo. It ended up being an amazing purchase that later allowed me to get myself completely out of debt and set me up for my early “retirement.”

My point with this example is that as much as you just can’t see yourself in a studio apartment, a one-bedroom condo, or even back in your parents basement (where I lived while saving up my down payment), these options may be the best choice financially.

Yes, you made it all the way through college and you deserve that $50k a year starter job with the two-bedroom, one and a half bath house and a picket fence that surrounds a perfectly sized yard. But you’re probably not going to get either right away. That’s OK. Those are called goals. They’re a good thing. They keep you motivated. The rental house with two other roommates is just temporary. Even when the roommates are called Mom and Dad.


Utilities are most likely not where you are going to find huge savings. Aside from making sure to turn off lights, take slightly quicker showers, and be water conscious when watering your lawn. There’s not a ton you can do here.

Yes you can unplug your charges, TVs, and anything else in an outlet when you’re not using them, but if it becomes a pain to keep plugging them in all the time, give it up. It doesn’t save you that much in the long run.

The one area that I have found helpful is the water heater. Typically, water heaters are set to 140 degrees Fahrenheit. Turning the temperature down to 120 degrees will save you a bit of money and still give you and your household plenty of hot water to use on a daily basis. Again, the savings won’t be substantial, but it might buy you a weeks worth of morning lattes.


This is where Dave and I tend to butt heads a lot. It would be very hypocritical of me to tell you that it is financial responsible to cut down on your grocery budget and only buy the cheap, economical items. And there’s a few reasons for this.

Most cheap grocery items are incredibly unhealthy. Think of those Cup-O-Noodles that you survived on in college. Or Hamburger Helper. All pretty tasty, but packed full of processed ingredients, sodium, and who knows what else. Have you ever wondered why poorer Americans are typically the most obese? McDonalds dollar menu, that’s why.

Quality Choices When Buying GroceriesNow I know buying organic everything is decently unreasonable, and grass-finished beef is crazy expensive when compared to the bulk meat you can buy at Walmart but they are healthier for you in the long run. It is up to you to find the balance between budget and health.

My argument every time Dave sends me to the grocery store by myself (which he knows I will take full advantage of and buy the quality…OK, expensive…items that I like), is that we will be paying for it one way or another. We can either spend the money on quality food and feel good, or spend it on increased health costs: medications, doctor bills, elderly care facilities when the food-induced Alzheimer’s hits, etc. And quality food just tastes better.


We could get into good vs bad debt, but that’s a huge debate that I’ll stay away from for the time being. Anyway, starting with credit cards. For the love of God, pay off your credit cards every month. This is how you get the fun stuff like cash back or miles without paying for them.

Credit cards tend to charge the highest interest on debt, so if you are paying them interest, you are wasting money. That one percent that you got back by putting that new computer on a credit card just got wiped out by the first month of 18.995% interest charges when you didn’t pay off the statement balance. No good. Pay cash or pay off the card every month.

If you currently have a credit card balance that you can’t pay off and therefore have to pay interest on, make this a priority. There are tons of strategies to help you with this that we can go into in detail later.

Student loans can be debilitating. They also cannot be discharged in bankruptcy, which is and will always be my argument on why student loans are not “good debt.” With that said, they are better debt than credit card debt.

To save money here, internet around and see if refinancing with a private company is a good choice for you. You will be giving up certain advantages if you are thinking of refi-ing a government loan, but those advantages may not pertain to you.

Shop around, compare interest rates and types (fixed vs floating). This choice is yours, but refi-ing my 6.5% government loans to a 2% floating rate private loan helped me a ton when I was paying off my tens of thousands of dollars in student loans.

Car Expenses (if you are car bound)

Car loans are the same as credit cards in my eyes. Just pay cash. And buy used. Unless your car is your hobby, it is just the vehicle that gets you from point A to point B.

Without going through the numbers (we’ll do that in another post), by buying a new car with a five-year loan, you would be paying 4.21% (the national average interest on auto loans as of 2019) on a depreciating asset. When you drive that car off the lot, the value of it just tanked.

Don’t believe me? Try taking it back to trade it in for something else. See what they give you. Pay it off if you have a car payment, treat it right, and run that sucker into the ground. Then pay cash for another used, reliable car and repeat.

Then there is car insurance. First off, shop around every year. Every year! This may be trickier if you have your homeowners insurance bundled in, but at least call your company to see what you can do to get the cost down. Every year.

Insurance companies tend to increase rates annually and don’t really like to make it obvious that they are doing so. So again, shop around.

Maintenance is important. Get a mechanic that you can trust for the big stuff. And as much as I know my brother will kill me for saying this (he’s a very good mechanic for a Chevy dealership in the Denver Metro-Area), but I will not fault you for going to Walmart or Meineke for an affordable oil change or any other routine maintenance.

The Benefit of Keeping Your Fixed Costs Low

Exiting the Cubicle If you want to increase your savings, you should make sure your non-discretionary expenses are manageable. In all honesty, I don’t expect you to be fired up to change your entire living arrangement so you can save an extra $100. But think about getting fired up about paying off your debt. Maybe explore your insurance options.

Or maybe re-read the post on Discretionary Expenses and take a realistic look at where you can cut back there. So much more bang for your buck.

The savings you gain by getting your non-discretionary expenses down, and by cutting back on discretionary expenses gets you closer and closer to being financially independent. The more you save, the quicker you can quit working for someone else. The more money you spend, the more time you spend in a cubicle.

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