Stop me if you’ve heard this before, if you want to get ahead financially you need to … wait for it … spend less money.
I know, it sounds so simple, right? Yet, if it was really that easy, we’d all have a balanced “budget.”
Let’s be honest, spending money can be fun. Like, really fun. In fact, it’s been shown when you spend money, the pleasure center of your brain is activated, triggering a delightful rush of dopamine. Turns out, “retail therapy” really is a thing. Dopamine isn’t called the feel-good hormone for nothin’!
Buying stuff can literally make us feel good. At least for a short while. Unfortunately, those good feelings are long gone by the time the hefty credit card bill arrives, and you’re left with a more long-lasting feeling – regret.
If you want to curb your spending, but don’t know where to start, here’s a list of the 5 most common places where people waste money each and every month. How much better would life be if you cut out mindless spending and replaced it with spending on things that really mattered?
5 Common Places People Waste Money
1) Digital subscriptions
Digital subscriptions are a great thing if you value the service offered AND you use them. However, if you’ve turned into a subscription collector, it’s time to take inventory. Ask yourself a simple question: “Can I get by without one or two of them?” The answer is almost always “yes.”
Try going a few months without and see if you really miss it. If you do, feel free to add it back in. If not, pocket the cash or find something more worthy of your hard-earned dollars.
Here are a few examples of digital subscriptions to look for:
- T.V. Streaming – Netflix, Hulu, Amazon Prime, Disney+, AppleTV, HBO Go
- Audio – Spotify, Audacity, Amazon Music, Apple Music, Pandora, SiriusXM
- Digital Magazines and Newspapers – New York Times, The Washington Post, USA Today
- Apps – where to start? meditation apps, gaming apps, workout apps, the potential # of apps is endless
2) Non-digital subscription services
While we’re discussing subscriptions, let’s also review any non-digital services you might be paying for. Same question applies: “can I get by without one or two of them?” Examples of non-digital subscriptions include:
- Box services – Book of the Month, Fabfitbun, Rachel Zoe Box Stye, Fabletics, POPSUGAR Must Have
- Food delivery services– Freshley, Hello Fresh, Blue Apron, Chefs Plate
- Magazines – Any and all print magazines set to autopay
Non-digital services tend to be a little more obvious. I mean, it’s hard to forget you’ve subscribed to a food delivery service when they keep showing up at your door. However, you can still assess whether or not these services are adding value to your life. Are you using the items in your subscription box? Are you enjoying the food you are having delivered each week? Always ask yourself, “what else could I be using these dollars toward?”
3) Gym Memberships
*Given the many shelter-in-place orders, this one has less resonance at the moment. However, when things go back to normal, so too will our tendency to pay for things we don’t use.
Oh, we’ve all been there. You decide it’s time to get in shape, sign up for a gym membership and then, despite your best intentions, your motivation wanes, and the gym membership goes unused.* And because hope springs eternal, there you are continuing to pay monthly fees because – you are definitely going to start back up again “next week.”
*this was true even before COVID made it impossible to go to the gym
Stop fooling yourself.
If you can’t remember the last time you went to the gym, cut your losses and cancel the membership. If you still want to get into shape, there are tons of free ways to do it. Whether you lace up your shoes and go for a run outside or workout at home using free online options like Fitness Blender. You don’t need an expensive gym membership to exercise.
Notwithstanding, we all know the real issue isn’t the gym membership. It’s not going to the gym. Spending money on top of not going just makes a bad situation worse.
Another option is to use the gym membership as an incentive. Make a deal with yourself. If you can prove to yourself you’re serious about exercising, you’ll reward yourself with the gym membership.
Goal: Walk one mile, three times per week, for 2 months
Reward: Sign up for a month by month contract at your local gym
Goal: Go to the gym for 30 minutes, 3 times per week for 3 months
Reward: Pay in full for the annual membership (it’s usually cheaper if you pay annually)
If you can’t do the work to get the membership, what makes you think you’ll do the work once you have it?
4) Insurance You Don’t Need
Being adequately insured is an integral part of a sound financial plan. However, you may be paying for insurance you don’t need.
Take inventory of your coverage. The coverage that most people need includes things like:
- Health insurance
- Life insurance
- Long term disability
- Auto insurance
Some examples of insurance that you may not need are:
- Rental car damage insurance – This is likely already covered through your auto insurance policy or a credit card.
- Life insurance for children – This is usually not necessary as you don’t rely on your children financially.
Extended warranties – Have you noticed how many consumer goods come with the option to buy the “extended warranty?” This isn’t by accident. It’s good business for manufacturers but usually a poor deal for consumers.
- Auto-related insurance – Many car dealerships make more money off the extended warranties and “rust proofing” warranties than they do off the purchase of the car.
- Disease insurance – You can buy insurance for all kinds of diseases — cancer insurance, stroke insurance, dread disease insurance (seriously). But, a better idea is to purchase a good medical policy that covers everything and not just specific events.
- Accidental death and dismemberment – These policies are incredibly restrictive and payoff far less frequently than traditional life or disability insurance policies. Plus, do you need more money because your injury/death occurred via an accident?
Deciding whether or not to buy insurance is not always straight forward. Anyone who’s collected on an insurance policy was glad they had it. Of course, how many more felt like they wasted their money because they didn’t have any claims?
We all take risks in our lives. That’s part of the deal. If you have plenty of money and can afford to buy all of the insurances listed above, so be it. Nothing wrong with that. But, if you’re not independently wealthy and have to prioritize, take a closer look at these and determine if the bang is worth the buck.
Finally, if you are unsure of whether or not you should have a particular type of insurance, speak to a financial professional to determine the answer that is right for you.
5) Gift Cards You Don’t Use
Okay, this last one isn’t really an “expense,” but when you have a pile of gift cards you never use, it’s essentially the same as flushing money down the drain.
If you’re guilty of receiving gift cards and forgetting about them, you’re not alone. Up to $3 billion in gift cards go unspent every year. Let’s stop contributing to this statistic.
There’s no secret to this one. Use. Your. Cards. Stop hoarding them for that perfect opportunity and use them. Put them in your purse, in front of your primary spending card, so when you’re out shopping, you have them front and center. If you have gift cards to specific stores or restaurants, plan your shopping and dining out around them. Worst case, regift them – everyone loves gift cards!
As you can see, none of this is rocket science. In fact, many of the items seem insignificant when taken by themself. It’s almost like “what’s the point?” However, when you stack these small, “insignificant” steps on top of each other, their impact is significant.
But don’t take my word for it. Give it a shot and see for yourself. After all, seeing is believing.