This blog has primarily been about saving money and investing – but the flip side to that is finding ways to cut your expenses, you don’t end up with a 30% savings rate by blowing your money on stupid crap. Over the last 5 years I have caught myself (or my wife) doing at least one thing in the below 5 categories…..
This is one of the biggest money wasting traps I have fallen into – going to break it down into a few parts
Groceries – Food waste in America is estimated to be 30-40% (per United States Department of Agriculture) – If you spend $200 bucks a month, you could be throwing out $60-80 in wasted food. Buy only what you know what you are going to eat, if the supermarket is close to your house, go 1-2 times per week and only buy what you want to eat over the next few days. If it is farther away plan out your meals and stick to the list – make a mental note of what gets thrown away or expires for next time. Side note – pay attention to price per lb, I think we paid $13 for a bag of grapes once.
Eating Out – I love eating out – sushi is amazing and difficult to make yourself if you can even find sushi grade fish in your local supermarket – but hammering down lunch 3 days a week because you are to lazy to make yourself lunch is pathetic (I remember the feeling). Take 3 minutes the night before and pack a lunch (sandwich, tacos, leftovers,etc) – if you have a fridge at work you have absolutely no reason to eat out – when I am really lazy, I bring everything needed to make lunch for 2-3 days at a time and just make it before I eat (yep I am that guy). We still eat out about once every two weeks, but have cut out the fast food trips and everyday meals from the plan.
Gas Stations – Whats $4 for a pop and bag of chips a few times a week? Only adds up to a few hundred dollars a year – twice a week would be $416…… Not only is this a waste of money on terrible health choices – its a terrible financial decision based on price per ounce. $1.89 for a 20oz pop is 9.45 cents/oz – if you buy a 24 pack of 12 oz cans (288 oz) for $5 (common on sale price in MN) it is only 1.7 cents/oz. Kinda crazy that convenience cost 5.5X for something as simple as a Coke. If you know you are going to drink more than the 1 – buy the case at the grocery store. When I was working construction, I always chuckled at the guy who “wasn’t making enough” but spent $20 at the gas station everyday on cigarettes, energy drinks, pop and snacks.
Coffee – Browsing through the internet, the rule of thumb seems to be around 9 grams of ground coffee beans per cup of coffee. In a standard bag of coffee, there is 340 grams, so you would be able to make 38 6 oz cups. Since no one drinks 6 oz of coffee these days – lets cut that in half and say 19 12oz cups. A bag of Starbucks coffee is $14 – putting each cup at about .74 cents – the cheapest drip coffee I see at coffee shops is $2 – about 2.7X as expensive as coffee you made at home. If you went with Folgers, you can make 115 12oz cups for about $18 bucks – 15.2 cents per cup! I used to drink coffee from Dunn Brothers 3-4 days a week, they have a sweet app that you just tap at the register. That ended up to be there downfall when I got a monthly bill totally over $40 bucks – now we may get coffee once every 2 weeks.
The subscription model – truly beautiful for execs and investors – they take your credit card information and charge you the same amount on the same day every month. It doesn’t matter if you actually use their service, that money is gone. They almost lull you into a ignorant money spending bliss.
A few subscriptions that I have got caught on – Hulu, we primarily use NetFlix and I think we added Hulu because one show we wanted to watch was there exclusively. About 2 years later I noticed the charge on our checking account, 7.99. Not a deal breaking amount, but over 2 years that is close to $200 and I would rather spend that money elsewhere. I once subscribed to a credit score reporting service (before they switched over to free) where the first month was free, and charges kicked in if you didn’t cancel. After 8 months of $15 charges I finally got a call in during their 9-5 hours to cancel.
I recommend checking in on subscriptions you use yearly (cable, internet and cell service come to mind) to make sure you are still getting competitive rates. After the introductory period ends – rates shoot up without you having to sign for anything. Call around and see if you can find a better deal, these companies sacrifice a lot to attract customers.
All you need to do is troll craigslist and you will see all of the “hobbies” people have up for sale at a discounted rate – there must be something ingrained in the human brain (or marketing plans are that good) to tell you to go spend $450 on a new driver when you golf 3 times a year. Buy a $500 snowboard set up for a one time Colorado trip. Spend 15K on a boat that sits in the garage.
Don’t take this as “don’t spend money on your hobby” take it as “only spend money on hobbies you actually are going to enjoy for a long time” – if you want to venture out into a new interest, buy something used to start and make sure it is something you are going to stick with before sinking thousands of dollars into it. The other option is to rent (or even borrow) the items you infrequently use – boats, golf clubs, etc.
When I was 16 I remember buying a $450 paintball gun setup that I used under 10 times, sold it when I was 18 for $100 bucks. I have been much better about easing into hobbies since then – most goes towards brewing beer and fishing.
Carrying over your credit card balance is a very obvious problem – but so many people do it I had to put it on the list. The average credit card rate is around 15% – it is a pure insanity to pay that much interest every month, its the reason I have the yearly goal of “Do not pay ANY interest on my credit card” (see the rest of my goal here 2016 Financial Goals). If you are carrying a balance currently, try using some of the above tips to cut your spending and allocate it to extra principal payments. I could probably write an entire post about the evils of irresponsible CC use, but one other thing to watch out for is what it does to your credit score. If you have a maxed out card it affects your Credit Utilization Ratio – which can lower your score and raise interest rates on other loans.
I do use a credit card for every purchase I can (including cable/cell phone) to collect rewards points and actually wrote part of this post on the plane to Arizona with a free ticket – using CCs responsibly gives you a free 30 day loan and if you find a card with awesome perks it can pay off pretty quick. I recommend using Nerd Wallet – Best Credit Cards to search for one that applies to you (I use the US Bank Flexperks Travel Rewards card).
Few things to note
- Drastic changes are less likely to take hold for the long term, slowly backtrack from bad habits
- This article was written to the flip side of Increasing your savings rate – there is no point in reducing spending in one area to spend it on another
- $1 doubles every 10 years at a 7% return rate – think of how much the above habits cost you with that in mind
Action Items: Review your bank accounts and look for unused subscriptions, repeated purchases that add up to significant amounts of money (Gas stations/Coffee/Etc) and take notes on what can be reduced moving forward. I know there are other areas that people waste money on – these are ones I can personally relate to – I suggest making your own list so it really sinks in. Please share anything you think should be added or any personal experiences you have.