Have you ever felt that pain of regret after making a purchase you didn’t truly need – or want? We all have. But imagine the impact of repetitive, mindless, unnecessary expenses harming our financial health. Today’s post highlights eight frequent ways we waste money. Together, we’ll uncover why these might be financial missteps and offer more value-driven alternatives to ensure you save money.
Discretionary Spending: What Is It?
Before we list the eight things you might be wasting money on, let’s first understand the concept of discretionary spending. This refers to non-essential expenses that can be adjusted based on our available funds. It’s the portion of your income you choose to spend on leisure, hobbies, and other ‘wants’ rather than ‘needs.’ Financial experts often suggest allocating around 10-15% of your monthly income to discretionary spending, depending on your individual circumstances. Knowing how you waste money can help you make more informed spending decisions and start an emergency fund.
1. Expensive Hotel Rooms
Why We Waste Money on Hotel Rooms: The allure of luxury and a heightened travel experience often convince us that we deserve the best, especially on vacations. The notion that a lavish room might make our trip more memorable can be tempting.
Why It’s a Waste of Money: Luxury accommodations often come with a hefty price tag, and the truth is, most of us are out exploring rather than staying in our rooms.
Instead, Spend On: Save money on quality, budget-friendly, and safe accommodations with great reviews. The saved money can be used for experiences or extended travel.
2. Sports Tickets and Apparel
Why We Waste Money on Sports: Being part of a community or fan base creates a deep sense of belonging. Splurging on tickets or apparel can make us feel closer to the team, part of the action, and more committed as a ‘true fan’.
Why It’s a Waste of Money: Premium sports tickets can cost an arm and a leg, and while showing support for your team is great, frequently purchasing branded apparel adds up to a lot of wasted money.
Instead, Spend On: Save money by watching games at home with friends or at a local pub. Buy one or two quality apparel items and care for them.
3. Alcohol at Restaurants
Why We Waste Money on Alcohol: Social pressures and the ambiance of a dining setting can make us feel that ordering alcohol complements the meal. Additionally, some may view it as a treat or a way to fully enjoy a night out.
Why It’s a Waste of Money: Markups on alcohol at restaurants can be astronomical.
IInstead, Spend On: Save money by enjoying drinks at home or having BYOB gatherings. If you do go out, opt for happy hour deals.
4. Daily Coffee Shop Visits
Why We Waste Money on Coffee Shops: Beyond the caffeine fix, coffee shops often represent a daily ritual, a break from routine, or a social outing. The atmosphere, the sense of community, and the convenience can be hard to resist.
Why It’s a Waste of Money: That $5 daily latte adds up to over $1,800 of wasted money in a year!
Instead, Spend On: Investing in a quality coffee machine at home. This way, you save money by getting your daily coffee fix for a fraction of the price.
5. Most Name-Brand Products
Why We Waste Money on Name-Brand: Brand names are often associated with status, quality, and reliability. We’re also influenced by marketing and societal pressures to own what’s considered “the best” or “trendy.”
Why It’s a Waste of Money: You’re often just paying for the brand name, not necessarily quality.
Instead, Spend On: Research and save money by finding quality off-brand products or wait for sales and stock up.
6. Underused Subscriptions and Memberships
Why We Waste Money on Subscriptions: The idea of potential use, fear of missing out, or simply forgetting to cancel can lead to ongoing payments. Initially, we might be drawn to a promotional offer or the idea of self-improvement.
Why It’s a Waste of Money: Many of us sign up for subscriptions and memberships that waste money because we hardly use them. Think gym memberships, magazines, or online streaming platforms.
Instead, Spend On: Save money by using pay-per-use services or find alternative free resources. Only keep subscriptions you use frequently.
7. Latest Tech Gadgets
Why We Waste Money on New Tech: Being seen as up-to-date, the thrill of new features and societal pressures can be compelling. The tech world moves fast, and there’s a constant push to have the newest and most advanced items.
Why It’s a Waste of Money: The tech industry is fast-paced. Buying every latest gadget can quickly become expensive, especially when your current one works fine.
Instead, Spend On: Wait for reviews, consider if you truly need the upgrade, or save money by investing in quality tech that lasts longer.
8. Fast Fashion
Why We Waste Money on Fashion: The ever-changing world of fashion taps into our desire to look contemporary and stylish. Affordable prices make it easier to frequently update wardrobes without feeling the pinch immediately.
Why It’s a Waste of Money: Fast fashion items might be cheap but often don’t last long, so you frequently have to replace them. Fash fashion also contributes to environmental degradation.
Instead, Spend On: Save money by investing in quality, timeless pieces that last. Consider sustainable brands or thrift shopping.
Awareness of where you are wasting money, especially in the discretionary category, can significantly improve your financial health. It’s not about depriving yourself but about making choices that offer better value for your hard-earned money. Always remember, it’s not about how much you earn, but how wisely you spend. Happy saving!
5 Books to Help You Save Money
The Total Money Makeover by Dave Ramsey
Dave Ramsey, a personal finance expert, provides a comprehensive plan for getting out of debt and achieving financial health. His “baby steps” approach offers straightforward strategies for saving money, clearing debt, and building wealth.
Your Money or Your Life
This book, by Vicki Robin & Joe Dominguez, presents a nine-step program for transforming your relationship with money and achieving financial independence. It goes beyond just saving money and delves deep into the relationship between money and personal fulfillment.
The Simple Path to Wealth
Based on the author’s own experiences and insights on money, this book is a guide to financial independence and retirement. J.L. Collins provides clear advice on investing, saving, and understanding the stock market.
The 80/20 Principle: The Secret to Achieving More with Less
This book by Richard Koch is centered around the Pareto Principle, which suggests that in many areas of life, 80% of results come from 20% of efforts. While it’s not strictly a finance book, the 80/20 Principle can be applied to personal finance by focusing on the most effective strategies to save money, invest wisely, and reduce unnecessary expenses. By identifying and concentrating on the 20% of financial habits that will give you 80% of your desired results, you can optimize your money management and grow your wealth more efficiently.
The Money Book for the Young, Fabulous & Broke
Suze Orman, a renowned financial advisor, tailors her advice to address the specific financial challenges young adults face. The book covers various topics, from student loans, credit card debt, buying a first home, and making sense of retirement accounts. Orman’s approachable style and actionable advice make it an essential read for those in their 20s and 30s looking to establish a solid financial foundation.
