Whether you love it or hate it, money is an essential part of life. Yet despite how important money is to adulthood, formal education rarely teaches us how to manage it.
It’s no surprise, then, that we often find ourselves wasting money without realizing it.
Recognizing this, I decided to create this article addressing common ways you might be wasting money. I know I’m guilty of several of them, and I’m sure you are too.
Instead of only focusing on what we’re doing wrong, however, I’m also going to look at how to correct these money-wasting behaviors.
Often, a few tweaks to your habits and routines are all it takes to be less of a spendthrift.
What Does It Mean to “Waste” Money?
As in my article on wasting time, I want to clarify that wasting money is somewhat subjective. Personal finances are, after all, quite personal. It’s up to you how you spend your money, and I’m not here to tell you that your spending is “wrong”.
But if you feel like you’re wasting money, it’s useful to be clear about what that means. I define wasting money as any spending that’s mindless or doesn’t add value to your life.
Again, this is personal and situation-specific. For instance, it’s a waste for a beginner guitarist to spend $2,000 on an instrument when a $500 model is more than adequate. But for a professional guitarist who uses their instrument to earn a living, the $2,000 guitar purchase makes sense.
With that in mind, here are some ways you might be wasting money (and what you can do instead).
Unused Subscriptions
It feels like everything these days requires a monthly or annual subscription. The phenomenon is so pervasive that there’s even a word for it: subscription creep.
If you aren’t careful, it’s easy to spend hundreds per year on subscription services you aren’t even using.
Fortunately, this is one of the easiest wastes of money to fix. All you have to do is:
- Review your bank and/or credit card statements from the past year
- Identify subscriptions you aren’t using
- Cancel unused subscriptions
If manually reviewing your bank and credit card statements sounds like too much work, there are even services that will automatically find and cancel unused subscriptions for you. Check out Truebill if you’re interested.
Note: I’m mostly referring to software and other digital subscriptions. But this category also includes in-person subscriptions such as unused gym memberships.
Eating Out for Every Meal
If you currently eat out (or order takeout) for most of your meals, then you have a serious opportunity to save money.
After all, a lot of additional costs come with both of these ways of eating.
Let’s start with eating out. Restaurants have to mark up the cost of their food to have any hope of covering their expenses (and even then, margins tend to be razor thin).
Not to mention, you’ll tip your server well if you’re a halfway decent person (if you can’t afford to tip generously, you can’t afford to eat at restaurants). All of this adds up to quite a bit more than you’d pay for food you make yourself.
Food delivery is even worse for your wallet. Many restaurants inflate the cost of their items on delivery apps to account for the extra logistical headache and the service fees that delivery apps charge. And on your end, there’s the delivery fee and tip for your delivery person.
Of course, sometimes it’s great to eat out at a restaurant or order in on a lazy Sunday. The key to financial health is to make these things you do every once in a while, not for every meal. I know this all too well since I used to spend way too much on takeout.
What changed? I resolved to make eating at home my default. I’ll still eat out for social occasions, and I let myself order delivery around once a week. But otherwise, I make all of my food at home.
If you’re spending more than you’d like on eating out, I suggest you try doing the same. Just be sure you have some tasty recipes, or the temptation to order out will be hard to resist.
Want to see just how much you’re spending on eating out? We recommend You Need a Budget (YNAB). Learn more below:
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These days, you can buy just about anything with a few taps or swipes on your phone. While this is a marvel of modern technology, it can sometimes be too convenient. Before you know it, those small impulsive purchases here and there can add up to hundreds per month.
So what’s the solution?
First, I recommend limiting the number of shopping apps you have on your phone. For instance, I’ve found that the added friction of opening the Amazon website is enough to keep me from buying junk I don’t need.
In addition, I recommend making a list of things you want to buy online. Every time you think of something to purchase, add it to the list. Then, review the list after 30 days. Often, you’ll find you’ve completely forgotten about whatever seemed like an “essential” purchase in the past.
If these tricks aren’t enough, consider cutting off your access to shopping websites and apps entirely. You can use an app like Freedom to block Amazon, Target, Wayfair, or any other ecommerce site/app that tempts you.
Buying Too Much Food
If you often find yourself throwing out uneaten food, then you have a key opportunity to save money. I know I could be better about it: just before I sat down to write this article, I threw away a moldy peach that had been sitting in my fridge for weeks.
Throwing away uneaten food is obviously an environmental issue, but it’s also a serious waste of money. You’re literally throwing cash in the trash. Fortunately, it’s a fairly simple problem to fix.
I’ve found these solutions to work well:
- Cook (or freeze) perishable food as soon as you buy it. I find this helps me avoid forgetting about items and letting them go bad.
- Be honest about what you’ll eat. You may think buying a giant bag of salad will get you to eat more greens, but that spinach will probably end up wilted and sad.
- Remix your leftovers. For instance, the chicken you grilled for dinner last night could be the basis of a salad for lunch today.
Credit Card Interest
This is easily the biggest waste of money on this list. You should never, ever pay credit card interest. If you find yourself in such a position, you’re spending more than you can afford.
Credit card interest adds zero value to your life. Indeed, it subtracts value. It’s a perpetual drain on your financial resources, limiting how you can spend your money each month.
Getting out from under credit card debt is challenging. But it is possible. Check out our guide to paying off credit cards to learn more.
Attending Every Social Event
Going out for dinner or drinks with friends is fun, but it can get expensive. I know, because I used to say yes to every single social event I could find. But as I’ve gotten older, I’ve begun to be more deliberate about which events I do and don’t attend. In the process, I’ve saved a fair bit of money.
I think the root of this waste of money is FOMO. It’s easy to think you’ll regret not going out, imagining all the cool conversations and fun times you’re missing. But if you aren’t feeling it, it’s okay to say no. You should respect your time; don’t let other people rule how you spend it.
Additionally, I want to mention a (very expensive) type of social event that becomes more common in your late 20s and early 30s: weddings.
Saying no to attending someone’s wedding is tough…at least at first. But after you’ve been to more than a handful, you start to realize how expensive it can get. Particularly if the wedding is in some far-off location.
Just remember that, unless the person is a very close friend or family member, they aren’t going to be offended if you miss their wedding. And even then, a true friend or loving family member will understand.
“Just in Case” Purchases
This next idea comes from Martin, our web developer and operations lead. You may be wasting money buying things that you think you’ll use eventually (but never end up using). We call these “just in case” purchases.
In Martin’s case, it was preordering video games. As he put it:
“Having long considered myself a person who plays video games, I just automatically preordered everything. It took a while to realize I wasn’t actually the kind of person who played that many games anymore, which allowed me to change that habit.”
For you, it might not be video games.
Perhaps it’s a cool outfit that you hope to wear one day.
Or an instrument you’d like to eventually learn.
Or even some kind of trinket you plan to give to your (still hypothetical) children.
All of these “just in case” purchases are a waste of money because they’re in response to an imagined future need or want.
Instead, try to make “just in time” purchases. Buy things when you need them, when you plan to use them immediately. Put everything else on a list to review in the future. As with impulsive purchases, you’ll probably forget about them with time.
Note: Some “just in case” purchases are worth it. For instance, you’ll probably never need to use the fire extinguisher in your cabinet, but you’ll be glad to have it if you do.
Showing Off
Buying something to impress others or to keep up a certain appearance is a waste of money.
No one is immune to vanity, of course. But if you’re consistently buying things to keep up with the Joneses, you should make some changes.
For instance, do you really need that new iPhone? Or are you buying it because it will impress your techy friends? Do you actually like eating oysters? Or are you buying them to look fancy in front of your date?
Conspicuous consumption is a big part of our culture; the temptation is ever-present. But next time you’re about to buy something luxurious or expensive, ask yourself if you’re just doing it to impress people. If the answer is yes, put your wallet away.
Lifestyle Inflation
Lifestyle inflation refers to the tendency to spend more as your income increases. It’s an insidious waste of money, as you often don’t notice it until you look for it.
Sometimes, it is worth spending more on certain items if you can afford them. Well-made clothes, for instance, will last longer than cheap ones and cost less over the long run.
But in many cases, the things you bought and the way you lived when you made less money are sufficient. Increasing your spending won’t make you happier or improve your life.
Instead of spending your increased income on fancier goods or experiences, put that money to good use.
Use it to build your savings, increase your retirement contributions, or pay off debt. If all of that’s in order, donate the extra money to a worthy charity.
Don’t Waste Your Limited Money
I hope this article has revealed some ways you’re wasting money without realizing it.
Don’t take the ideas too far and become a miser; hoarding your money isn’t healthy either.
But if you do realize you’re wasting money, you now have the knowledge to live a more frugal life.
Looking for ways to save money? Read this next.
Image Credits: burning money
Source by collegeinfogeek.com
