1. You don’t track your cash
You can’t fix your financial boat until you identify the leak. If you know you’re not making ends meet, but you don’t know where it’s all going, spend a month tracking your cash.
You don’t need a fancy spreadsheet or software program: Just collect every receipt of everything your household spends each day. Jot it all down — do it at the end of each day, the beginning of the next or at the end of the week. Look at where the cash is flowing out of your pocketbook. This awareness alone could make you think twice next time that bug to buy bites.
2. Cappuccino-rich, cash-poor
If you’re like a lot of people, many of the receipts in your pocket are for caffeine pick-me-ups. That drip-feed coffee habit costs half of American workers nearly $1,000 per year, according to a 2012 survey by Accounting Principals. That $20 you spend each week at Starbucks may not seem like a lot in the moment, but the total annual cost suggests it’s time to pack a thermos from home.
3. Drinking and smoking your cash
The average American spends $1 out of every $100 on alcohol each year, according to the Bureau of Labor Statistics. Part of the problem, as NPR’s Planet Money notes, we now spend more time drinking at restaurants or bars than in the past — 40% of alcohol is bought at bars or restaurants, compared to 24% in 1982. We’re not drinking more, it’s just that the cost of booze at restaurants and bars has jumped by 79% in that time, whereas the price of store-bought alcohol has dropped by 39%. Bottom line: Maybe you should entertain more at home.
And if you’re a smoker, rising taxes are making the habit even more costly (beyond the obvious health risks). On average, smokers spend 14% of their income on cigarettes. That’s a hefty raise you are giving yourself as you eliminate a deadly habit: win-win!
4. You don’t plan your meals
More than buying coffee, not packing a lunch is a huge leak in the average household’s spending. The 2012 Accounting Principals survey shows two-thirds of American workers buy their lunch rather bring one from home, costing an average of nearly $2,000 a year.
Worse, Americans throw away 40% of the food they purchase each year — about $165 billion worth, which works out to $2,275 in the bin for the average family of four, according to the Natural Resources Defense Council. Planning your meals ahead of time will save the food and cash you are wasting each day.
5. Losing money by saving money?
Your attempts to save cash can be penny-wise and pound-foolish. Saving money by delaying an oil change today can later cost you expensive service repairs on your engine. The cash you save delaying a mammogram could cost you a fortune in medical bills down the line. Sometimes, you have to spend a little money to save big bucks.
6. Gym membership: Use it or lose it
Number one on the annual list of New Year’s resolutions is getting in shape, according to a study in the Journal of Clinical Psychology. Number three? Improve personal finances. Unfortunately, these two goals butt heads. Why? Statistically speaking, you are probably not using that gym membership deal you purchased back in January: 67% of health club members never grace its doors despite spending an average of $39 a month, according to StatisticBrain.com.
7. You don’t auto-save
The best way to save cash is to not think about it. Set up an automatic transfer from your checking account to a high-yield savings account, or set up an auto-pay into your 401(k) account with your employer. At Bank of America, whenever you make a purchase with an enrolled account, they’ll round up to the nearest dollar and put the remainder in your savings account. For example, if you spent $1.45, they’d charge you $2 and put $0.55 into savings.
Or try this trick: Every time you receive a $5 bill (or any other denomination), set it aside and put it in your savings account at the end of the moth.
8. Your credit card interest rate is too high
Why pay more on your credit card debt? Switch to a lower-rate card. A balance transfer credit card can give 0% APR on transferred debt for 12 to 18 months. Check to make sure the balance transfer fee doesn’t cost more than what you’d save in interest. If you can’t get a lower-rate card, call your bank and tell them you’d like a reduced interest rate or you’ll switch to another provider. They may hook you up with a better rate.
9. Home heating and electricity
Easy way to save cash: Put on a sweater. Lowering your thermostat temperature by 3 degrees can help you save almost 10% on your heating bill, according to estimates from the Energy Information Administration, putting up to $100 back in your pocket during the average winter. Adding a plastic film to your windows (available at most hardware stores) can save you almost 15% on your heating costs.
Did you know that about 15% of the average $1,900 that Americans spend per year on home energy costs comes from DVD players, modems, cable boxes, TVs, cordless phones and other appliances sipping power on standby? Unplugging can save cash.
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Illustration by Brian Yee.