“Those who attend to small expenses are always rich” – John Adams

No matter how much money you may have, it is always important to reduce costs where you can. Being frugal in every day purchases is a great way to start. For example, bringing your own lunch to work instead of going out to eat. But this article is not about those types of compromises. Instead, we’re talking about cost reduction on big expenses.

With minimum effort, you can reduce of a few of life’s expenses. Many of these suggestions will take less than a minute. A few will take considerably more time. But if you take the time you can save thousands of dollars.

Cost reduction can be thought of as wealth creation. With the money you save you can invest in dividend stocks or other income opportunities. These five cost reduction strategies will give you a greater sense of financial comfort.

Cost Reduction #1 – Pay Less for Your Medicine

The cost of prescription medicine in the United States is absurd. It is a market without much competition and the pharmaceutical companies can make an enormous profit. But thankfully, the introduction of generic brands has helped with cost reduction. Generics increase competition and decrease prices. Here are some services that can help you find generics to reduce costs.


The same medicine can cost hundreds of dollars more at one pharmacy than it does at another down the street. GoodRx shows you pharmacies nearby that offer medicine at the lowest possible price. GoodRx also provides free coupons and special discounts that can further reduce your costs. The site is simple, easy to navigate, and completely free.

I searched for the lowest prices on 30 tablets of Lexapro, a popular treatment for depression and anxiety. The cheapest price was $9.00 from Walmart, but if you picked up your prescription from Walgreens the price jumped to $49.38. That is a significant difference and great strategy for cost reduction.

Partnership for Prescription Assistance (PPA)  

PPA is a free service that helps patients without drug coverage get free medicine or buy it at a reduced cost. Since it launched in 2005, PPA has helped connect nearly 10 million patients with access to medicine. To use PPA all you have to do is fill out a questionnaire asking which drugs you take, your income, and the type of insurance you have so they can put you in the correct program. Take advantage of PPA to reduce the cost of your prescription medicines.

Cost Reduction #2 – Pay Less in Taxes

Paying less in taxes is the holy grail of cost reduction. Many people blindly accept the sky-high taxes they owe the government. However, there are plenty of legal ways to lower taxes. Some of them are unconventional—but perfectly legal—and can reduce your tax bill by thousands of dollars a year.

Uncle Sam Will Pay You to Save

Depending on your income, you can receive a tax credit for saving for retirement in an IRA or 401k. For example, in 2019 you can contribute $19,000 to a 401k and receive a tax credit. If you’re in the 22% tax bracket, you’ll reduce your tax costs by $4,180.

If you are currently working this is a powerful incentive to save for retirement. Not only will you invest for the future, but you’ll immediately get some money back in the form of tax savings. The income limits change every year so make sure to check in with the IRS.

Charitable Giving

Reduce costs by donating to charity. Sounds great right? If you are old enough to withdraw funds from an IRA or 401k, you can donate those funds to charity tax-free. As a result, you could potentially save thousands of dollars in taxes.

Let’s say you are going to withdraw $10,000 from your IRA this year and want to donate $1,000 to your favorite charity. You will pay tax on the $9,000 you withdrew for yourself, but that $1,000 donation is tax exempt, saving you over $200. So, if you plan on both withdrawing from your retirement account and a donating to charity, be sure you donate directly from your retirement account. It is a great cost reduction strategy to lower your costs.

Go Green

Governments are incentivizing renewable energy initiatives. Tax credits are often available for people buying electric cars or installing solar water heaters in their homes. If you install a solar water heater, solar electric system, fuel cell, wind energy system, or geothermal heat pump the Residential Energy Efficiency Tax Credit allows you take a 30% credit on the expenses. So, if you spend $10,000 on a solar electric system, you can take $3,000 right off your taxes. Electric vehicles can have big tax credits, but that is often determined by politics and whose lobbyists donated the most. Check with the IRS to see what tax credits are available for renewable energy purchases

Cost Reduction #3 – Lower Your Investment Costs

Investing used to be for the wealthy and the elite. If you couldn’t afford a broker, you could not get your money into the market. Fortunately, that is not the case anymore. With all of the big discount brokers like Ameritrade, Schwab, and E*Trade you pay less than $10 per stock trade. Now with Robinhood you can even trade for free. By skipping out on advisors and stock brokers you reduce costs and keep more money in the market. To maximize your returns you need to reduce your costs.


Robo-advisors continue to become more popular. Using complex algorithms these computers choose your investments while considering risk and growth potential. You can adjust your portfolio to be conservative, aggressive, income oriented, growth oriented, and so on. Robo-advisors often use ETF’s as investment vehicles.

Robo-advisors are great because you can begin investing with little money. Some of the other e-brokers like Vanguard and Schwab can require as much as $50,000 for certain portfolio management. Wealthfront and Betterment, the two largest robo-advisors, typically charge 0.25% of your investment to start. That is still much less than a regular financial advisor would charge

Index Funds

Index funds follow indices like the S&P 500 or the Russell 2000. Index funds are great because they can reduce the possibility of human error. Whereas with actively managed mutual funds a fund manager is selecting stocks to put into the portfolio. If a fund manager is bullish on Apple, he will add more shares. But with an index fund it doesn’t matter of the fund manager thinks. If Apple makes up 2% of the index, then Apple will make up 2% of the fund.

In general, it’s good to avoid actively managed funds. Studies show that in 2016 less than half of actively managed mutual funds outperformed the S&P 500. From 2014 to 2016 only 8% outperformed. That means the most cost-effective way to invest is to buy and hold index funds. Why would you ever pay for an actively managed mutual fund when the studies show you won’t make as much money? Index funds are a key to cost reduction.

Cost Reduction #4 – How to Buy a Car for 25% Off

For starters, don’t buy a new car. The instant you drive that shiny new vehicle off the lot it is worth 20% to 30% less than it was before. Buying used cars is becoming increasingly popular with all these great sites like CarMax and Autotrader. When it comes to buying used cars, stick to certified pre-owned vehicles. Certified pre-owned vehicles have been inspected by a professional, have low mile-age, look good as new, and usually still have the manufacturer’s warranty. There are many sites that help with cost reduction through the car buying process.

How Much Should You Pay?

Kelley Blue Book is an authority on used car valuations. On their site you can adjust for a large range of variables: car model, mileage, price, region, and so on. You would be surprised how much prices vary by region. A car in a rural area will be less expensive than if you bought it in New York City or San Francisco. If you live in New York it might not make sense to buy your car in Indiana, unless the money you’d save is greater than the gas money you will spend to get home.

Haggling with car dealers is always unpleasant. Their number is too high, and your number is too low. One of the most common tactics used by dealers is trying to keep you around the dealership for a while. The psychology suggests that if you are there all day, you won’t want to go start the process somewhere else. But before you even step into the dealership, you should have the highest price your willing to pay in your head. And you cannot budge on that price. There is always another car somewhere else. Perhaps with lower mileage and a lower price.

Cost Reduction #5 – How to Travel for Less

Traveling is expensive. It is also one of the most exciting things in life. Seeing historical sites, eating different foods, hearing new languages, experiencing different cultures—it’s simply the best. Airfare and hotel costs are particularly expensive. We won’t be suggesting you hitchhike and stay in hostels. Although those will certainly help you travel at a reduced cost. We’ll show you a few tips that will help you travel for less.

Airline Affinity Cards

Many airlines offer credit cards that come with bonuses. Usually, they offer signing bonuses, and extra bonuses as you spend more money. When you sign up for the card, make sure you use the card for all of your purchases. Even if it is just $3 at the drug store, it all adds up. You can unlock more miles if you spend a certain amount in an allotted amount of time. There are many financial magazines and websites that rank airline affinity cards. If you are a big traveler, these credit cards are the best tool for travel cost reduction.

Don’t Stay at a Hotel

The gym, the bar, the pool, the restaurant, the concierge. These are things that make staying at a hotel such a luxury. They are not necessities. In the last few years short-term rental sites like Airbnb, VRBO, and Homeaway have become very popular. They allow travelers to rent an apartment or house for far less than you could stay in a hotel. While you will miss the amenities of a hotel, you can enjoy things from a more local perspective. You can also make use of the kitchen and cook some meals to save money. The booking process online is easy. Make sure to choose a property that has been well reviewed. Just by using Airbnb you can reduce your costs as a traveler


“Great things are done by a series of small things brought together”– Vincent Van Gogh

Cost reduction boils down to a series of small decisions. Being conscientious with your cash is not always fun. It’s fun to splurge on fancy purchases, or to spoil loved ones. But if you can reduce the costs in a variety of small ways, you can live a richer life. Many of these tactics will take less than a minute to incorporate. So, do yourself a favor and follow these cost reduction strategies. You will be happy you did.