“How did I spend my last pay check?” As an adult, you’re bound to have this question at least once in your life.
There will also be times when you’ll feel like money is slipping through your fingers. This is an inescapable feeling; most times, it’s because you’ve been wasting money without realizing it. After all, formal education barely teaches us how to manage money properly.
But while there are many obvious ways you could be wasting your money, the not-so-obvious money wasters are the ones you should be most worried about. This article discusses 7 ways you might be wasting money without realizing it and what to do about it.
Unused Memberships and Subscriptions
Almost everything these days requires a subscription. This phenomenon is so pervasive that people have found a name for it: ‘Subscription creep.’
Sometimes you just want to take advantage of the free trial to try out a new fitness app, streaming service, and subscription box. But in the same way it’s easy to sign up for the free trial, it’s just as easy to forget to unsubscribe before the trial period is over. By the time you remember to cancel it, you have been charged for one or two months.
Solution: Use apps and services that remind you to cancel subscriptions. These apps may help you identify specific apps or services you’re paying for, but not using. Alternatively, set a reminder on your calendar one day before the free trial expires.
Delayed Credit Card Payments
Credit cards are almost unavoidable. They make shopping and spending money easy, give you easy access to loans, help you build your credit, provide you with a straightforward way to record your expenses, and more. But they have one significant disadvantage leading to money wastage: interest.
Most credit card companies charge ridiculously high interest that is often compounded. If you don’t pay the full balance each month, interest is added to your principal, and you’ll be charged even more . Delaying your monthly credit card repayments can also affect your credit worthiness; leading to higher interest rates.
Solution: If you can afford it, repay your credit card statement by the due date in full. This can increase your credit score and eliminate late fees. A score of 670 and more is considered good, and it can improve your access to loans and other credit cards with better terms.
If you can’t make your payments in full every month, ensure you service as much debt as possible and always pay more than the monthly minimum required.
Paying for Convenience
Technology has revolutionized everything. These days, you can get almost anything done at the touch of a button. While this can help simplify your life, it can also wreak havoc on your budget. Often, you’ll pay a premium for the convenience; making products and services more expensive. For example, diced vegetables at the grocery store will cost more per pound than whole produce.
Small convenience fees are easy to overlook, but add up.
Solution: Before you pay for something, ask yourself, “Is this necessary?” For instance, before you purchase diced veggies, ask yourself, is there any value addition for paying the premium price?
Just like there are emotional eaters, there are emotional spenders. Some people tend to spend money when they’re in a certain mood––some people go on an online shopping spree when they’re in a bad mood to seek comfort.
Being able to buy yourself anything you want is a great privilege. But emotions change constantly, so you shouldn’t let them drain you financially and derail your journey to financial freedom.
Solution: Instead of giving in to every emotional impulse, find better ways to take care of your emotions that won’t drain your finances. And plan for everything you need to buy, so you can stay ahead of your budget and ensure you don’t waste money on things you don’t need.
Overspending on Car Insurance
This is one area of wasting money that is often overlooked because many people think the more the insurance covers, the better. But this isn’t always true.
Solution: Do your research and ensure you’re not paying a premium you don’t need. These are some insurance types where you may cut costs:
- Car insurance: This is a vital insurance, but most people often overpay for it. Fortunately, there are ways to bring your premium costs down. For example, bundling your car insurance with other policies or choosing a company offering discounts to motorists who drive less than the average number of miles per year can significantly reduce your monthly payments. Additionally, you could benefit from loyalty discounts if you’ve been with the same company for more than ten years (and you’re claim-free).
Lifestyle inflation is a phenomenon that affects many of us. It refers to the need to increase your spending as your income increases.
It’s normal to want to improve the quality of your life once you start making more money. You may need to move to a more spacious apartment, or you might want to buy a better car so you can spend less time at the mechanic.
However, if the way you lived before your income increased was sufficient, buying more luxury or spending more on fancy consumer goods may not make you happier.
Solution: Instead of wasting money buying stuff that doesn’t contribute to your savings or generate your income, look for more fulfilling ways to spend it. This can be in the form of contributing to your retirement fund, paying off your debt, or donating to a worthy charity.
Living Beyond Your Means
An old English adage goes, “Comparison is the thief of joy.” In this case, comparison is the thief of money.
In the social media era, it’s a competition to see who has a better life, known as FOMO – people spending their hard-earned money for fear of missing out.
But people have different budgets. They may be able to afford to pay more because they earn more, have less responsibility, or lack financial discipline.
Solution: Know your financial position and avoid the temptations of trying to keep up with others. Create a budget that helps you track your expenses. Write down every cent you spend and account for it. If you must spend money on something, try to find deals or cheaper alternatives.
Break These Habits and Stop Wasting Money
So there you have it. We’ve discussed everyday habits leading to money waste and explored practical solutions. If you want to change how you spend your hard-earned money, pick what works for you and run with it.
Most of these money vampires are discrete––you might not even notice them at first. As you make changes, you’ll start to notice your paycheck lasting longer, and you are putting a little more towards your savings.
About the Author | Magnus Eriksen is a copywriter and an eCommerce SEO specialist with a degree in Marketing and Brand Management. Before embarking on his copywriting career, he was a content writer for digital marketing agencies such as Synlighet AS and Omega Media, where he mastered on-page and technical SEO.