The Trimurti of Household Budgeting

brahma shiva vishnu

Personal finance types, myself included, often recommend making small lifestyle changes to save more money for retirement.  A prominent example is the latte effect, which holds that cutting out a daily cup of coffee can theoretically save 1,000’s of dollars (it can).  This kind of advice, however, really gets under some people’s skin.

Take Annie Lowrey for example, one of my favorite economic reporters from the NY Times, now working at NY Magazine alongside another of my favorites (on the political side), Jonathan Chait.  Lowrey recently had a feature on Mr. Money Mustache, but before that she published a short critique of the latte effect advice typically dished out by personal finance gurus.

coffee and cookies

not really a latte, but possibly same amount of sugar

Her main point was that, yeah, sure, a person can save a little bit of money on a daily latte, but that’s not really going to be what makes or breaks them financially.  It is the larger expenses that matter the most.  Telling people that they can simply buy less coffee to achieve an early (or even on-time) retirement is misleading and also, from a political point of view, diminishes the real financial challenges that struggling lower and middle-income families face.

And she’s right.  The latte effect does work, but only at the margins.  The real financial leverage is to be found elsewhere.

The Hindu Triad of Household Budgeting:

The Hindu Triad, also known as the Trimurti or the Hindu Trinity, is the Hindu idea that there are three principal forms of God, namely:

  • Brahma (the creator)
  • Vishnu (the maintainer)
  • Shiva (the destroyer)

Similarly, in the world of FG ROI personal finance, there are three principal forms of Budgeting, namely:

  • Housing
  • Transportation
  • Food

These are the three principal forms of Budgeting in my book because they account for the vast majority of a typical household’s spending:

typical american spending pie chart

Source: NPR

These three budget expenses have the power to create, maintain, or destroy the Average American’s net worth.  Looking at it from an absolute dollar perspective shows just how important housing is in this equation:

typical american spending bar chart

It is important to make the distinction here that I’m looking at housing strictly as an expense.  Some might consider it an investment in the case of paying down a mortgage (versus renting), but really, a home tends to be an inferior investment on average, barely keeping up with inflation over the long-run.

So, to get back to and really drive home the point about the latte effect, here’s how a daily $4.00 latte compares to all the other expenses:

typical american spending bar chart with latte

The latte expenses are pretty small in the grand scheme of things (about 3% of total spending), but they’re still important as part of a larger spending-reduction strategy.  However, for someone not saving anything at all, cutting lattes out by itself won’t be sufficient.

It would take 20 years of investing the latte savings simply to pay for a single year of retirement.  Might as well just keep drinking them and rely on social security down the road.  That’s not my true recommendation, but I couldn’t really blame someone in a really tight, somewhat hopeless financial situation for making that decision.

Saving is like rolling a giant snowball.  If someone starts out with just a tiny blueberry-sized ball of snow, it is going to take a long time to roll a big, grass-flattening, twig-crunching snowball.  It’s much easier to start with a bigger, football or basketball-sized mound.

To take the metaphor even further, if one wants to gather a basketball-sized mound of snow, it is better to start higher up in the hills where there is more accumulation and the snow is deeper than to go looking for snow down in the valley where there is just a dusting.

snow mtn

the easy snowball-making territory

For personal budgets, housing expenses are like the deep snow at the top of the hill.  This is the place that people can usually save the most money.  Further down the hill are transportation and food.  Then all the way at down in the valley are things like shoes and books.

The smart snowball roller lets gravity do the work for them, starting at the top of the hill and rolling it down to the valley, letting it pick up whatever spare change there is along the way.  This is the best path for a budget.

No more metaphors:

In more concrete terms, this means first and foremost, live in a less-expensive house (1)(2) or get roommates.  Allocate maybe 20-30% of the budget to housing instead of 40%, but also try to live close to work because each 10 miles of a commute cost roughly $3,700 per year in transportation expenses.  Maybe work from home.  And if that can’t happen, there’s always public transportation, walking, or biking.  Or if driving is a must, get a smaller, used, economy car, and avoid rush hour.

Then finally, cut back on food expenses.  Cook at home more, buy or make your own less-expensive alcohol, bring lunch to work, maybe garden, and yes, I’m going to say it, get rid of the daily latte! 😉

dinner table

homecooked has its charms too

Between these three expense categories, the Hindu Triad of Household Budgets, a typical American family could theoretically save 15% of their income on housing, 10% on transportation, and 5% on food for a combined savings rate of 30%.

If a family starts young, these changes could mean retiring early at 50, which is still a long career but significantly shorter than the alternative scenario of working another 15 or more years to retire at 65, 70 or even later.

Simply focusing on housing alone could have a substantial impact on savings rates and working years.    If there could only be one place to focus, this would be it, not only for the large savings possibilities but also for the automation potential.

Housing is a recurring contractual expense, which, once set at a lower level, doesn’t require any additional willpower to maintain.  Compare this to having to avoid the temptation of take-out after a long day at work or with the kids…. Way easier to set it and forget it with housing than to have to turn down friends for drinks or forgo the AM latte (gasp!).


As a kid, I remember hearing some life prioritization advice that really stuck with me.  The speaker had an empty mason jar that she wanted to fill with a few medium-sized rocks and smaller pebbles.  On her first attempt to fill the jar she started with the pebbles and then tried to add the larger rocks, but they wouldn’t fit.  Her second attempt she started with the larger rocks and then poured the pebbles over the top.  Everything fit.


The point of the demonstration was that the most important things in life should have the highest priority, the biggest things (family, friends, health, etc.) need to be addressed before moving on to the smaller things.  The same principle holds true with budgets.

Housing, transportation, and food are the biggest items in most budgets, the Hindu Triad of Household Budgets, and, hence, represent the best opportunities to cut expenses, increase savings, and retire early.  So spend well and Namaste 🙂

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  1. You are definitely on to something. We have been cutting back and cutting back on things here are there but it is our housing costs that are the largest proportion of our budget and the expenses related to our house can’t really be cut. We totally underestimated the amount of maintenance required – focused instead on the sticker price and monthly payment. It is the one area we can make the biggest progress and the one that we struggle with most mentally – take away every comfort we have but don’t take away our house. Working on it though.

    • Man. I’m not a homeowner yet, but I can only imagine. Goes to show that maybe it pays to be extra extra conservative when budgeting for a house.

      On the flip side, though, and I’m reluctant to admit this, but sometimes it makes a lot of sense to spend more on a house. Outside of work, it’s the place where the majority of time is spent. There is some sort of value to be had in having a comfy, pleasant place to live, to avoid moving more frequently and venturing out more, etc.

      Sounds like you’ve got that kind of setup, and I’m actually pretty jealous. Hard to quantify that kind of ROI 🙂

  2. I love all your analogies!

    I felt very similarly when I was paying down debt – the way to do it was to super reduce all my expenses. So I took a few years out of the normal 9 to 5 life and did jobs that covered all of my living expenses, even if they were sort of strange. It made it possible to pay off all my loans 2.5 years after graduating. I probably could’ve done it a little faster if I really wanted to.

    • Impressive… I like your pragmatic approach! I’m personally a big fan of focusing on sustainably reducing expenses first and foremost because it lowers the amount of money needed for the rest of a lifetime, but that doesn’t mean that bringing in more revenue can’t be an important part of the equation as well. Thanks for the visit!

  3. marvin mcdude says:


    While the narrow category of “lattes” may not make a significant impact on future retirement date, the much broader category of “inessential things that include lattes” will have a massive impact. Maybe that’s why I’ve always viewed lattes as quite insidious: it’s not that the lattes alone will break the budget – your math shows that – it’s that once you’ve given yourself permission for a latte, a gajillion other tiny wants gets justified along with it… and that, my friend, is quite significant. What you first thought was just a latte now becomes… those cool Asics you saw on Zappos, or that nifty garbage bag holder at Target, and the list goes on and on…

    Know what I’m saying brother? 🙂

    • But I love my Asics!! No, really, I’m with you McDude. The advantage with the smaller unnecessary/luxury purchases category is that it could theoretically be eliminated completely, whereas we all need a place to live, food to eat, and a way to get around, so those categories can only be cut so much.

      That being said, the magnitude of opportunity factor favors tackling the big three first because the dollars returned per decision/cut are likely to be highest there. There is a reason that many of my highest ROI’s (and MMM’s top suggestions) revolve around housing, transportation, and food.

      It’s sort of like managing 5 rental properties that rent for 10,000 a piece (NYC prices I guess) versus managing 50 rentals that rent for 1,000 per piece. The administrative headache of 50 makes it less attractive.

      In the same way, I’d rather wear out my financial willpower on the big expense categories first before worrying about all the other smaller, but supremely legitimate opportunities such as impulse Target garbage bag holder buys (who has those!?.. just kidding… judgement free zone 😉 )

      But since we’re on the subject of luxury/unnecessary spending, I found this great article today that claims gratitude can help out a lot with impulsive spending (and patience and self-control more generally).

  4. Great post FG. A smaller home that was easy to pay off early was a significant contributing factor to reaching financial self sufficiency. And, my husband and I definitely followed the order: smaller mortgage to begin with, then downgraded our vehicles and now we shop more consciously. Well, I can tell you, without any reservations that it absolutely works.

  5. Yes I can totally see how housing becomes people’s biggest expense. Lucky ( tounge in cheek) I had debt and my biggest expense was paying it Down so now that’s gone it all goes into savings. Now our housing is the biggest expense as in a spending chart.but it you including total earnings then its not.

  6. marvin mcdude says:

    Once you’ve already purchased a home, downsizing the house can be tricky. Let’s say I sell my 250K house and downsize to one that is 175K. At 6% sellers fee (ballpark), I just lost at least 15K, and likely more when you include moving costs and loan closing costs. On a 30 year loan at 4%, it takes about 4 years to get your money back. Yet another reason why I think the latte (nonsense) category is highly underrated here! Cheers! 😛

  7. This is AWESOME. Your chart comparing a year’s worth of lattes against the 3 major expenses hits the nail on the head. Lowering your housing costs is the single most important thing you can do to keep your finances on-track.

  8. DealForALiving says:

    Are you suggesting that people have to fundamentally challenge the biggest expenses in daily living rather than just eliminating a simple luxury? You also made me think about how the U.S. Government likes to fight over budget items that account for fractions of the total pie because they’ve given up on discussing the big ticket items.

  9. Great post!

    I would also consider taxes as a huge household expense. By decreasing your taxable income, you can retire earlier…and usually not affect a latte habit.

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