The 4 Biggest Ways to Stretch Your Income

The other day I was talking to somebody (who, um, shall remain nameless) who was lamenting the fact that he couldn’t find enough discretionary income for an annual family vacation.

I found that fascinating considering Eddie (oops!) drives a brand new BMW and lives with his family of four in a modest Southern California neighborhood.

Of course, life is all about choices.

Eddie — oops, I did it again — may be upset that he can’t afford to take the wife and kids to Hawaii or Yellowstone, but that’s his opportunity cost of tootling around town in a brand new luxury car.

Guys like, ahem, you-know-who, are always looking to stretch their income. Heck, to be honest, I think we all are to some degree.

If you’re looking to stretch yours to its maximum potential, here are four of the biggest ways:

1. Buy a used car

There are plenty of luxury car owners who struggle to pay their bills — or constantly complain they’re short of cash.

Why is that?

Well, Experian found that the average monthly car payment last year was $452. Now, according to this handy paycheck calculator, a family of four living in the state of California with an annual household income of $40,000 receives $2706 per month after withholding state and Federal taxes. That means two car payments would consume one-third of the household’s monthly income on cars — leaving just $1802 for groceries, utilities, rent, and other bills.

Good luck with that.

Nobody understood the financial benefits of used cars better than my dad, who brought home a very modest salary when I was growing up. He saw the folly of driving a new Mercedes to the grocery store each week only to be left with just enough cash in his wallet to buy store-label pork & beans for dinner. As a result, he always did his due diligence and only bought affordable, well-maintained, used cars that he kept for many years.

2. Eat at home

Speaking of pork & beans …

Almost everyone knows that dining out is horrendously expensive. After running the numbers for my household, I found that we spend an average of five times more money per meal when dining out compared to eating at home.

Eating breakfast at home, brown bagging your lunches whenever possible, and reducing restaurant trips can free up lots of spare income, folks.

Last year we saved over $3500 by simply choosing to eat dinner at a restaurant every other week instead of twice per week. And if you want to stretch your food budget even more, don’t toss those leftovers! We save an additional $1400 annually by eating them at least once per week.

Add it all up and that’s enough for a modest family vacation.

3. Refinance your home loan

I’ve refinanced my home loan five times since 1997, dropping my monthly mortgage payment each time. The last time I refinanced I was interested in ensuring I had the lowest payments possible, so I not only refinanced to a lower interest rate, but I also extended the loan term from 15 to 30 years.

What are the results of all that refinance activity?

Well, my initial mortgage payment in 1997 was roughly $1450. Today it’s a less than $650. Over time, I’ve freed up roughly $800 in additional monthly income.

4. Downsize to a smaller house

Let’s face it, a lot of people out there end up buying more house than they realistically need or can afford, putting undue strain on the pocketbook. For those times when refinancing isn’t a viable option, you can always consider downsizing to a smaller home.

True, that may seem a bit drastic. But if you’ve already cut your expenses to the bone everywhere else and you still find it difficult to make ends meet, then drastic times call for drastic measures.

Besides, people downsize all the time. In fact, last night the Honeybee and I were watching an episode of House Hunters. In it, this middle-aged couple said they were looking to trade their very large old house for a smaller “green” home that was easy on the environment.

That’s not my cup of tea, but to each his own. Still, the couple on TV seemed to have their stuff together.

“I like these two. They’re practical!” I said to the Honeybee.

“Really? In what way?” she asked.

“Well, now that their kids are off to college,” I said, “they’re selling their big old house so they can downsize into something more appropriate. It’s a win-win; they exchange their old over-sized home for a brand new smaller house — and they get to pocket the difference too!”

Not three seconds later, I found myself choking on a cupcake I was munching on after the narrator announced that the couple was in the market for a 3500 square-foot McMansion (with solar panels, of course).

“So much for being green,” the Honeybee snickered, not sure if she was laughing at me or the couple on the screen.

“Or practical,” I answered, before regaining my composure. Then, almost as an afterthought, I mumbled, “I wonder if they know Eddie.”

“Who?” the Honeybee asked.

“Never mind,” I said.

And with that, I grabbed myself another cupcake.

Photo Credit: m anima


  1. 1

    chris says

    reading your blog from the Australian end of the world, it is also interesting to observe cultural difference with the use of money. To me the American obsession with eating out seems strange. We do out, but nit regularly an rarely with the whole family. And eating out for breakfast jsut doesn’t raise an interest. But where I live in Perth there seems to be an obsession with the quality and size of your house. I have one new car I bought so it would have up todate safety features for my teenage children to drive. But mum and dad, we recently purchased a 1991 Toyota Corolla with low kilometres, can’t believe how wel it runs and the lack of ratlles and creaks in the body.

  2. 2


    Hi Chris. You Aussies are the best! It is my dream to visit your country one day — hopefully soon!

    Yes, Americans love to eat out. I know a family that eats fast food or other restaurant meals for dinner roughly five times per week! What an incredible waste of money. I don’t think it is any coincidence that the entire family is, to say it nicely, definitely over their “fighting weight.”

    Here in southern California, a lot of people buy into the automobile manufacturer’s marketing campaigns and believe they are what they drive. It’s an image thing. An illusory one, but an image thing just the same.

    I’m not anti-luxury car, mind you; if you can afford one and that’s your thing, then I see nothing wrong with it at all. But when you have folks giving half their monthly take home pay to the bank just so they can be seen driving a flashy car, and then struggle to pay their other bills, well, I just don’t get that.

    As for me, I could easily afford a luxury car but I choose to drive a more modest practical car and pocket the money for other perks. But that’s just me. :-)

    Thanks for reading and I hope you visit again!

    All the best!

  3. 3

    Sabz says

    Hi Len,
    I really enjoy reading your blog. This is some really practical advice. Unfortunately many people are sucked into the keeping up with the Jones’ mentality and end up paying the price for it. I used to buy a daily Starbucks since that’s the thing everyone did at my small yuppie office. But you learn n hopefully not make the same mistakes again!

    • 4

      Len Penzo says

      Hi, Sabz. You know, we started a coffee club at work — for the cost of one fancy Starbucks coffee, I end up getting all the coffee I can drink for an entire month!

  4. 5

    Jenna says

    I enjoyed reading this. I always wondered how much it costs to own a large home versus one like mine, a 1000 sq ft condo in respect not only to monthly mortgage but insurance, utilities, and the like. Would love to see some comparison charts. I love living in a smaller place than my friends because it is less work to keep up, and there is a built in deterrent to buying too many things to clutter with.

  5. 6


    I’m 100% the “Buy a Used Car”. If you get a car thats a year or two old your going to save a lot. For the most part, it will look and feel just like a new car and you’ll not have to suffer huge drop in value as soon as you drive it off the lot. I’ve considered refinancing my home several times in the last year but keep holding off. I can’t stand the thought of raising the amount I owe by 2-3 thousand dollars in closing costs. I’m probably being blinded somewhat by that and should re-analyze what I could potentially save.

    • 7

      Len Penzo says

      In my case, Jose, the closing costs are small potatoes that will never be missed in the grand scheme of things — but that is a topic for another thread. :-)

    • 9

      Len Penzo says

      I’ll say, William. I went to lunch today with a couple friends and dropped $7.50. That’s $7 more than the cost of a homemade PB&J!

  6. 10

    Lola says

    I saw that episode of House Hunters. I only remember because I was truly appalled by the whole thing. Who “down-sizes” to 3500sf?? Yeesh.

  7. 12

    Allyn says

    As a whole, Americans are obsessed with big houses. On average, Americans and Aussies have the largest houses (2200 sq ft+) and folks in the UK have the smallest (1000 sq ft or less). (see Not only does a large house have a larger monthly payment, but it costs more to heat and cool. I am a big proponent of downsizing. I am absolutely fascinated with this “tiny house” movement that’s been gaining populairy in recent years. (see They’re like the modern-day version of a vardo. Granted a family of four couldn’t consider living in such a small space, but I think my husband and I could be quite happy in 300 sq feet (or less if the space was used very efficiently).
    We also rarely eat out. It is much too expensive, but an easy out if both halves of the couple have full-time jobs. I think eating out or getting take-away two or three times a week becomes the norm when both people work full time.
    I’ve had one new car in my life. I got it at a year-end clearance sale to get the old models off the lot to make way for the next year’s models. It was a new car, but I think of it more as a left-over.
    I wanted to read this article and discover a great way to stretch my income, Len; but it looks like I have it covered, at least on these points. :)

    • 13

      Len Penzo says

      Sorry I couldn’t have been more help, Allyn. :-)

      As for the small houses, I’m with you. It’s an interesting phenomenon — and the homes really know how to maximize their space — but I don’t think they are very practical unless you live alone. A couple may be able to pull it off, but I suspect they would be at each others’ throats after awhile!

      I’ve actually been planning to write a post on the topic of those small houses for awhile now, but I keep pushing it back.

      • 14

        Allyn says

        A lot of couples probably couldn’t handle the small space, but my husband and I would be fine. We lived for a couple of years on a houseboat. It was pretty cramped quarters but we have very compatible personalities, so we managed without any problems. The ‘big’ tiny houses are pushing 300 square feet, which I think would be good for us.
        I’m also fascinated with the idea of converting cargo containers into living spaces. (see

      • 15

        Theresa says

        My parents both grew up poor in Newfoundland. They had large families (9+ kids) living in 3 bedroom houses under 1500 sq. ft.
        Amazingly(insert sarcasm), they all survived and grew into fully functional adults. My mothers only complaint was that she shared that bed with 3 sisters, one of whom pee’d the bed until she was 14. It was a mattress stuffed with straw so the smell was horrendous.

        I in turn grew up in Canadian military housing with 1(gasp)bathroom. When we built our house, we only built one bathroom. 15 years later we still have only one washroom . Another one would be nice, but absolutely NOT a need.

        Just found your blog and am interested to read back through.

  8. 16


    I also know many luxury car owners who claim not to be able to afford some of the basic things in life.
    When I explain about cars being depreciating assets and priorities for spending your money I am normally met with blank looks.

  9. 17


    All the four options as advice are well taken.

    However, there are other venues as well that can save you big.

    Contribute more in your 401(k). Many companies match a certain percentage as well. That’s absolutely free money that many folks miss. It’s like getting a bonus every year.

    If not 401(k), contribute to your IRA the maximum amount the law allows you.

    These tax-free savings will go a long way till / and in your retirement.

    Go to IRS website and read about it.

    To grow money, one of the best ways is to invest it. Dollar-cost averaging is a proven and successful method.

    Revisit and adjust your portfolio at least once a year.

    If you don’t have the time and can’t do it yourself, find a good – I mean a good – financial adviser to guide you through the maze of investing.

    • 19

      Kimberly says

      Eating gluten-free is definitely a challenge. I’ve found it much cheaper purchasing a nice grain mill and milling my own GF grains. We steer clear of packaged and processed foods as they typically have other nasties added when the gluten isn’t there.

  10. 20

    Beckybeq says

    Hm, gonna need some other ideas here Len. 😀
    1,300 sq ft on the house with no plans to move in the next decade or two. We had the good fortune to refi into a 15 year loan at 3.5%. The payment was actually lower than our 30 year loan. No heating costs in the winter as we installed a wood stove & we get wood for free (except for the cutting/splitting/stacking part).

    We eat out once every week or two – we’re limited because our son is on a gluten free diet for autism. Breakfast is a good meal out for us because it tends to be cheaper and bacon & eggs are gluten free and delicious.

    Only bill I see that is way out of whack for us is our grocery bill – about $150/week for four. But with the gluten free for my son, and having to work around a low fat diet for my husband’s Crohn’s disease, that’s the best I can do.

    • 21

      Len Penzo says

      “Breakfast is a good meal out for us because it tends to be cheaper and bacon & eggs are gluten free and delicious.”

      Grrrreeat tip, Becky!

  11. 22


    That’s ridiculous. I guess they must be rich to downsize to a 3,500 sq ft home. Driving an economy car instead of luxury car will free up a bunch of money in the long run. Luxury cars are expensive to maintain.

  12. 23

    Cher says

    I pin (Pinterest)articles I am interested in, as do a LOT of people. If you have a graphic attached to your articles, it would make them easier to pin. I have to pin an ad graphic now, and that doesn’t reflect your great articles. Just my 2 cents.

  13. 24


    There’s loads of ways to cut costs. The average car has 4.5 owners in the UK. Cars are lasting longer now so getting a good used car is a way of saving. However there is a downside here. Gas guzzlers new and old are taxed heavily per year, in addition to tax on petrol in Europe, the like of which would make Americans scream! So older cars can be very expensive to run. We have just sold our very low mileage Mercedes A-class that we bought new and yes, lost some money. But we are replacing it with a car which will do twice the mileage and will cost nothing per year to tax. So you have to do the sums.

  14. 25


    I agree with all comments abover as Americans we’re obsessed with everything big, big food big houses, big cars….I don’t understand the eating out. My wife makes so much better food for half the cost of a meal in any resturant. I’d rather save that money for a nice family vacation, memories are priceless. Loved your post.

    • 26


      Jon, I think a lot of people “want it all”, so they spend their money as if they can have it all. The problem of course is that we can’t have it all, so but most people spend all of their money before making the conscience decision on what they want to spend their money on based on what they value the most.

      Nice job, Jon, that you are aware of this and make that conscious decision; instead of having the decision be made for you (by running out of money!)

  15. 28


    We used to eat out a lot, and our excuse was that we still had to eat, and we’d only be saving a couple of dollars eating at home. Now that we’ve buckled down and started eating at home almost exclusively, we’ve been saving a LOT of money. It’s kind of exhilarating. We have been eating very well, and have a lot of extra money at the end of the month.

  16. 29


    Nice post! Unfortunately, many people have a bad relationship with money in the respect that they live by the ideal that “they work hard for their money, so they are going to enjoy it.” But we all have limited money (to one degree or another) and with limited money comes having to make choices.

    However, most people don’t make those choices until they are forced to, because they have nothing left. Eddie may place a really high value on family vacations, but by the time he gets to thinking about it, the money is already gone.
    Decide what you value the most and work yourself down from there with how you allocate your money.

  17. 30


    We cut down on eating out, reorganized insurance policies,
    remortgaged, BUT THE BIGGEST THING we did was to find other sources of income, there was a time I was delivering newspapers and we still have a small lawn care service, BUT we learned to get things in order and you can too.


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