In This Post, We’ll Talk About What To Do If You’re Wasting Money
As a financial advisor, I encounter a lot of customers who are perplexed as to why their money is diminishing rather than growing. They’re investing, paying off debt, and paying their bills on time, and they’re doing everything properly. Nonetheless, they get the sensation that they are squandering their money unwittingly. What they don’t comprehend is that we may all lose money without even recognizing it in the blink of an eye. Everyone wastes it, but the manner in which they do so isn’t necessarily clear.
Do you ever dread checking your bank account because you know you’ll end up questioning yourself, “Where did all my money go?”
You, like many others, are probably unaware of the different ways in which you lose money. Sure, those daily Starbucks excursions add up, but there are other expenses you may be overlooking.
… And it’s these hidden charges that are draining your bank account the most.
The most common way people waste money is through something known as the lost opportunity cost. This is any dollar you’ve handed away unnecessarily (or even inadvertently) that you can no longer invest to gain additional money over time. Here are six of the most frequently missed opportunity expenses that you may not realize in your day-to-day life but that pile up to put a burden on your money in the long term.
What To Do If You’re Wasting Money
We live in an era of easy-access subscriptions, and it’s all too simple to sign up for many services without realizing it… Netflix, food delivery services, gym memberships, periodicals, and so forth. They’re inexpensive separately, so keeping track of how much you’re paying on your aggregate subscriptions might be difficult.
Consider your existing subscriptions and decide which ones you believe provide value to your life.
Do you have the newspaper delivered every Sunday with the intention of reading one part and then discarding the rest?
Instead, look for it online; most magazine and newspaper subscriptions provide a limited number of free articles every month. Also, check sure you’ve canceled any subscriptions you don’t use that you might not be aware of, such as recurring payments that don’t notify you when a payment is due.
2. Fees charged by banks and ATMs
Do you ever find yourself having to use an ATM despite the fact that it is a fee-based service? It’s an all-too-familiar feeling: you need cash fast but don’t have access to your preferred ATM. It’s simple to dismiss it as a few dollars and go on, but those few dollars add up quickly.
Instead, carry at least $20 with you at all times. If going to the bank isn’t your thing, consider collecting money back at pharmacies or grocery stores.
3. Fees and interest on credit cards
You state, Elisabeth, that you pay your credit card payments on time! While paying your payments on time is critical, it does not guarantee that you will not incur credit card fees. There is an annual cost on most (but not all) cards, while some levy balance transfer fees, over-the-limit fees, international transaction fees, and so on. It’s not simply the costs that get you in trouble.
The higher your interest rate is, the more perks you get from your credit card, such as cash back or miles. Rates as high as 29.97 percent have been seen! In comparison, the most recent average is 16.71 percent, which is a new high.
You could think you’re getting a good bargain with your credit card rewards, but be cautious. On average, you’ll pay $150 in annual credit card fees and $1,500 in annual credit card interest.
4. Purchasing name-brand items
We live in a consumerist culture where brand names and advertising entice everyone. Most grocery shops and pharmacies, on the other hand, provide the same (exactly the same; examine the contents) items for cheaper costs. The label is the only difference!
5. Public Utilities
Because most of us do, I’m not going to ask you to recall every time you turned on the air or heat in your home without thinking about it. Or how frequently you see a light turned on while you aren’t using it. The fact is that it’s all too easy to go about our daily lives without thinking about how much energy we’re wasting.
Did you know that devices may use power even when they’re switched off when they’re connected in? This “phantom energy” can account for up to 15% of the item’s total electrical use. The most important thing you can do is be aware of your energy use and switch off whatever you aren’t using right now.
You’ll be benefiting the environment as well as your money account this way.
6. Going out to eat
According to studies, dining out is the most common way for Americans to spend money. Only 10% of those polled claimed they like cooking, 45 percent were ‘ambivalent,’ and 45 percent despised cooking, according to researcher Eddie Yoon. As a result, many Americans are subscribing to meal kits, paying for delivery, and eating out.
According to the Bureau of Labor Statistics, Americans spend $3,008 a year on eating out. It’s especially tempting to dismiss them as little transactions: why not spend $10 on lunch instead of bringing your own to work? However, dining out adds up quickly and might be more expensive than you anticipate. In 2016, one couple discovered they had spent $30,000 on eating out!
What is the true price?
These costs might add up quickly if you aren’t paying attention. The average American loses around $2,334 per year if we look at the most prevalent fees and charges. It may not appear to be a significant sum, but keep in mind that any money spent on a lost opportunity cost is money not invested.
Consider this: if you had put aside $2,334 each year and invested it at a 6% annual return for 20 years, you could have amassed $91,009.02. Yikes! Paying these fees may be simple or convenient, but it’s crucial to think about the long run. You must ensure that your money is working for you rather than disappearing down a drain of expenditures you are unaware of.
Let’s get this party started.
I provided some particular suggestions for avoiding or repairing these missed opportunity costs, but here are three basic guidelines for avoiding those expenses, preserving your money, and maintaining financial stability and predictability.
1. Stay within your financial means… But don’t forget to enjoy yourself!
Of course, you won’t be able to save money if you spend money you don’t have. Being thrifty, on the other hand, does not have to mean giving up the things you like. By no means am I suggesting that you stop enjoying life, but rather that you become more conscious of your expenditures and what you can cut down on. In reality, the thinking is crucial in this situation.
According to studies, those who feel financially confined make inferior financial judgments. So, rather than thinking of living within your means as a limitation, think of it as a strategy to reach the financial objectives you desire.
2. Make a daily spending list.
It may seem boring to write down every dollar you spend during the day, but it’s a terrific way to learn about your spending habits and fully understand where your money is going.
Additionally, writing down your costs helps to consolidate the knowledge in your long-term memory, which means you’ll be more conscious of your spending patterns. And as one’s awareness grows, so does one’s power to change. You may become aware of spending problems in areas you were previously unaware of, such as eating out or purchasing brand-name items.
3. Create a budget, a budget, a budget!
It’s time to change your spending habits once you’ve figured out your current ones.
A monthly budget will assist you in keeping track of your spending and determining how you want to spend your money. Whether you’re saving for your child’s education, retirement, or that vacation you’ve always wanted to take, sticking to your budget can help you achieve your objective.
Are you ready to start being more conscious of your money, adjusting your behaviors, and developing healthier patterns? We all want to avoid wasting money, and it’s completely avoidable as long as you’re aware of your spending and how you may cut back or avoid missed opportunity costs altogether. The trick is to be conscious of your finances… You may stop losing money to unneeded fees and charges by planning, noting down your daily spending, and adopting a more thrifty lifestyle.
Note: All Image credits to pixabay.com