Housing is the area where most people can see their most significant savings. Most people live in too big of a house and spend more than necessary on housing. The average U.S. home size has gone from 1400 sq. ft. in 1970 to 2330 sq. ft. in 2004. Granted the average American has gotten larger during that time period too but it isn’t like they are taking up that much more space.
My housing cost has been around $400 the past few years. With a little effort I could reduce that and I probably will before the year is up. I think $400 a month is a reasonable target for your housing expense. It is much easier to do here in the Midwest than in other areas but it is possible in more areas than you would think. My best friend lived in the S.F. Bay area last year and paid $400 a month for a room in a house right by the ocean. Even in some high cost areas you can find reasonably priced housing if you are willing to be a little unconventional.
If you find the $400 amount too constricting you could consider keeping your housing expense at 20% of your income. That would still keep your housing cost below average and should allow you to save a significant percentage of your income.
If you still think it is impossible to do this in your area then you might consider moving to a different location. I’m going to do a separate post on location in regards to frugality.
If you need some ideas on how to lower your housing cost check out “Twelve ways to become rent or mortgage free” at Wise Bread or check out Jacob’s post on living in a RV at Early Retirement Extreme.