Written by Eliza Hunt. Go check out more of her writing at lizarosewrites.com.
It’s Monday...again. Your alarm mocks you as it blares somewhere near your head. You hit snooze, groan, roll over and try to really enjoy those last few precious moments of sleep...
Next thing you know, 45 minutes go by (what?!). You fly out of bed in a flurry of clothes, trying to comb your hair, brush your teeth and put your socks on at the same time.
Most of us can agree that Mondays are a bit rough. Everyone’s slow getting up and going. But surely, coffee will fix that.
But in your rush to get to work on time, you forgot to make coffee…again. That’s okay, you think to yourself, there’s a shop right down the block and they make an amazing latte.
When you get there, your stomach rumbles. Loudly. People turn to stare at you and you shush your stomach. You guess you didn’t realize how hungry you are. But that’s okay, this place sells amazing quiche, you’ll just grab a slice.
After a couple hours, you decide to go burn one on your break. You step outside and take out your pack of cigarettes to find you only have your lucky left. Shit, you think, you’ll have to buy a new pack already.
The coffee and quiche were great, but they didn’t fill you up. Of course, you forgot to pack lunch, so you run out to Panera for a soup and salad. Yeah, it’s a bit more expensive, but the food is soo worth it, right? You decide to grab yourself a little extra for an afternoon snack in case you get hungry.
Uh, oh. It’s only 3 pm, and you’re feeling that afternoon slump settling in. Time to caffeinate! You decide to run back to the coffee shop and grab a quick cup o’ joe - it’s only $2 after all, and you could really use the boost.
On your way home after work, you stop to get gas and a pack of cigarettes. You remember you don’t have much to eat at home, so you also stop at McDonald’s to grab a 10-piece and fries. While you’re there, you grab a McDouble and a McChicken for later.
When you get home, you grab the mail and skim over it: bill, bill, bill, bill and more bills...it’s getting to be that time of the month again. And it feels like the expenses just never stop - when will you catch a break? It’d be really useful to win the lottery right about now - should you go out and buy a ticket? You never know with those things...
Maybe the problem isn’t your bills, after all. Maybe you’re just not handling your money as wisely as you could be.
Let’s add up all of the expenses I listed in the scenario above:
Morning Latte: $5
Breakfast: $6
Pack of Cigarettes: $10
Panera Soup/Salad/Snack for Later: $20
Afternoon Coffee: $2
Gas: $40
McDonald’s: $10
If you add up these expenses, you’ll quickly realize you just spent $93 that day! Of course, not all of these are daily expenses. However, if we added up all your monthly expenses, you could easily spend $200 to over $400 a week on non-necessities. That doesn’t even include things like credit cards, insurance, student loan payments, groceries, car, utilities, rent, etc.
Imagine if you cut out, or at least back on, most of these little, unnecessary expenses. According to a new report by GoBankingRates, a personal finance website, Americans could save $5,339.35 on average by cutting out discretionary spending.
That’s a lot of lattes.
Non-necessities include items like coffee, dining out/takeout, entertainment, clothing, ride shares and alcohol.
According to the report, despite varying costs across the country, takeout and food delivery alone amounted to more than $2,000 per year in expenses for Americans. Buying a coffee every morning added up to more than $700 annually. New clothing and accessories cost Americans around $750 each year. Ride shares, like Uber and Lyft, put a surprising strain on many wallets, costing Americans about $1,000 per year. Other expenses, like concert tickets and alcohol, each added up to around $350 a year in expenses.
It also looks like young people have the most to gain by tracking spending habits and better budgeting. More than any other generation overall, millennials spent more on non-necessities, especially clothing and eating out.
Americans spend the most money on very necessary items, like housing, groceries, utilities and health insurance. However, GoBankingRates found that spending on unnecessary items often eats up whatever is left after necessary expenses, leaving little for retirement savings and other long-term money goals.
Most families actually spend more than 100 percent of their income after taxes on monthly expenses alone. If you’re struggling to keep up with the bills, cutting some of your extra costs is key to accumulating any sort of savings over time.
Even if you only saved $100 a month by trimming daily expenses by about $3 a day and put this money into a high-yield savings account over the next 10 years, that sum would be worth almost $50,000 in 30 years (assuming a two percent return).
If you took that $100 a month and invested it into the stock market, hypothetically that could amount to about $122,700 over 10 years, assuming a seven percent rate of return.
Let’s play a little game of Would You Rather now: would you rather set yourself up for a comfortable retirement and financial freedom down the road, or sleep in that extra hour in the morning, instead of preparing for your day?
I bet I know which one you picked after seeing those numbers.
Now for the big question weighing on your mind: how do you know which expenses to cut down on and by how much? Sounds like it’s time to track your spending habits and build a spending budget to follow each month.
Keeping track of your spending habits might seem like a monumental task, but it’s absolutely necessary to maintaining your finances. In order to get the most accurate and complete picture of your average monthly expenditures, track your expenses for the next 3 months. Break down your expenses into various categories, such as housing/rent, groceries, utilities, healthcare, gas, phone, car expenses, credit card payments, cable, website/streaming subscriptions, entertainment, dining out, etc.
When you lay out expenses and calculate averages for your categories, it’s easy to see where to cut unnecessary costs. For example, if you buy a coffee every morning, cut this cost completely by brewing your own coffee before work. If you frequently eat out, cut this back to just once or twice per week to save money. Often times, we just don’t realize how much we are spending, which leads to overspending on non-necessities. However, laying out your finances and planning your spending ahead of time saves you a lot of money in the long run.
Comb through your spending categories to determine which expenses are necessary/fixed and which expenses you can cut back on. You’ll save more money each month in no time when you give a little TLC to your finances.
Also be sure to calculate how much money you’re bringing in monthly. This is easier to calculate, since it’s a little more fixed than your monthly expenses. Make sure you are calculating any money you want to put away in savings or invest into your budget. You’ll be surprised how much extra money you can save each month by spending a little time organizing your finances.
Pay off your credit card balance each month. If not, you’re overpaying for these purchases (they collect interest). There are a variety of methods, like the avalanche and snowball ones, for creating a plan to pay down credit card debt in a manageable way.
Cut ties with your cable company and invest in streaming services and a digital antenna. Of course, make sure it will be saving you money first, but in most instances, you’ll save a bundle.
Reevaluate your insurance needs, including life, auto and other individual/employer-provided insurance policies to make sure they still fit your needs. You might be paying for services or coverage you no longer need.
Make sure you’re paying for gym memberships and fitness classes you actually use. Take advantage of free trials. Supplement expensive group classes with outdoor or at-home workouts.
Rethink costly holiday traditions and give experiential or heartfelt homemade gifts. It’s the thought that counts after all, right?
You might not like this one, but when you quit smoking, you save more than just the cost of the pack. On average, smokers earn less than nonsmokers. And smokers spend more on insurance, like life insurance, long-term care insurance and health insurance, costing you more in the long-run.
Cut down on cell phone expenses. Opt for a no-contract option, keep your phone longer, use Wi-Fi when possible and/or limit background data use.
Cook more at home and prepare meals in advance. Cooking at home is usually less expensive than dining or ordering out, which is a nice treat but not so great for your wallet when done frequently.
Avoid overpaying for financial services. Financial advisers help you manage your investments, savings and budgets, but overpaying for these services quickly depletes any money you save. If you’re only investing a small amount of money, look for institutions offering lower fees.
Shop strategically during sales instead of paying full-price for items. There are a ton of ways to cut costs when purchasing clothing, video games, shoes, toys, furniture, etc. Catch holiday sales, use reward apps, shop secondhand and take advantage of store loyalty programs.
Those little daily extra expenses really add up over time. By cutting down on these expenses, you could potentially save thousands of dollars a year. Imagine what you could do with an extra $1,000, $2,000, $3,000, $4,000 - heck, $5,000 - every year (I’m thinking a week-long vacation to the Maldives, what about you?).
That extra money you save can be invested into your business instead, where it can grow exponentially. The more time, attention and money you invest in growing your business and generating more revenue, the more money that comes back to you in the long-run.
What could you do for your business with an extra $5,000 each year?
