It’s The Little Expenses That Add up

Everyone is somewhat familiar with the economics of the coffee: $5 isn’t a lot of money. But $5 a day, every day adds up quickly: “A coffee a day is going to cost you almost $2,000 per year,” Still, if your only indulgence is a daily coffee, you’ll probably say to yourself, “I earned it.” If you are looking for my opinion I would recommend that you stop buying coffee.

The problem is that it’s probably not. In fact, you probably have a number of little things that add up quickly and it’s killing your budget.

Most of us consider our expensive monthly bills such as our mortgage and utilities when we design our budgets, but smaller expenses can derail a budget if they are ignored. Many Americans don’t keep a budget at all and without a budget, small expenses can easily fall through the cracks.

Just to break down some of the numbers for common little expenses if the person had instead saved the money and invested it at 8%. The results are as follows:

  • Pizza delivery: $25 a week, $18,661 over 10 years, $158,731 over 30 years.
  • Coffee/donut: $4 a day, $22,389 over 10 years, $190,453 over 30 years.
  • Smoking:    $35 a week, $26,125 over 10 years, $222,223 over 30 years.
  • Manicure: $40 a week, $29,857 over 10 years, $253,969 over 30 years.
  • Lunch at work: $10 a day, $37,322 over 10 years, $317,462 over 30 years.
  • Golf: $75 a week, $55,983 over 10 years, $634,924 over 30 years.

Have I caught your attention? Although you might not spend $25 a week on pizza you could change the item to something you do spend $25 a week on and the math still adds up.

So to help here are 13 small daily expenses to look out for and to think about first before you continue to spend on them.

1. Extra car trips

Currently, gas is pretty affordable. According to AAA, the average gas price at the end of January 2016 is $1.822 per gallon for regular gas. This is a significant drop from the average one year ago ($2.038 per gallon). Most people would agree that car travel is fairly affordable right now when it comes to paying for the gas itself. However, extra car trips can easily cost you unnecessarily if you aren’t careful.  While the cost of gas is low now, it won’t stay that way forever.

If you frequently go to to the grocery store without a list, forget something at home, or forget to do errands while you are out, and then you later have to go out again, your gas bill can add up. If your car gets 20 miles to the gallon, and you make 40 miles worth of extra trips in a week, that would cost you an average of $3.644 per week, or $189.488 per year (and that’s if gas prices stayed low!)

2. Breakfast on the go

Many of us eat out for lunch once in a while during a busy work day, or when we have an important meeting that takes place at a restaurant. These lunches can easily add up to a significant extra expense, but if you expect them, you might include them in your budget. Breakfast out on the other hand, is often necessary because we are running late and we don’t have time to eat at home. According to the USDA, nearly a third of every U.S. food dollar earned is spent on eating out services.

While you can certainly pick up breakfast cheaply at a fast food restaurant, if you have to do so several times a week (or even each month), this expense will add up quickly. If you spend even $3 once per week, that would equal $156 per year. If instead of grabbing breakfast from a fast food restaurant, you bought granola bars for $2 and a bag of fruit to grab in the morning, you would save money.

 3. Wasted food

Spending money on food that you are never going to eat seems like a pretty awful idea. According to the The Natural Resources Defense Council (NRDC), 40% of food in America goes uneaten each year (which equates to about $165 billion each year in wasted food). The loss of this food happens in many different situations; in regards to food that you yourself might be wasting, much of it is probably happening at home. Americans throw away about 25% of the food and beverages that they purchase; that means the average family of four loses $1,365 to $2,275 annually. While throwing away leftovers or tossing out expired food might seem like a small expense, if you do it regularly, you will end up wasting a lot of money. The NRDC recommends making smart shopping decisions, keeping expiration dates in mind, cooking what you will eat, and finishing leftovers as a way to save money and waste less food.

 4. Entertainment

Entertainment spending is a big part of Americans’ paychecks. According to the Bureau of Labor Statistics, the average annual expenditures for entertainment in 2014 was $2,728. It’s great to be entertained, but that is a lot of money to spend each year. Entertainment spending easily gets out of hand because the individual amounts are usually small. Spending $9 to go to a movie seems reasonable, and even $40 on a concert ticket seems fair if you really like the band. However, entertainment costs can add up quickly. If you want to have fun without spending so much money, consider watching movies on Netflix, having a game night, or getting together with the guys to watch the Superbowl.

5. Late fees and unnecessary extras

Late fees can be avoided. A $4 fee for a late movie doesn’t seem like too much, but when you factor in the fact that you paid $3 to rent the movie, paying a late fee is ridiculous. Using Redbox is a great way to have less expensive late fees, but in general, late fees are a unnecessary waste of money. If you frequently face late fees because you forget to pay your bills, you can enroll in automatic payments. These can be set up to deduct automatically from your checking account, or you can use a credit card if you are worried about insufficient funds.

Unnecessary extra expenses can also add up quickly. Many electronic items (as well as some other items) come with optional warranty plans that you must pay for if you choose to add them. These warranties are sometimes necessary, but often they are worseless (take for example a $20 watch that can include an optional $15 two-year warranty.) Most stores allow returns for a certain amount of time; usually the warranties are a waste of money unless you are making a big purchase.

6. Lapsed promotional offers

How many times have you signed up for a free subscription or premium channel, only to notice charges on your statement because you forgot to cancel before the promotional period ended?

Steer clear of promotional offers unless you have a reminder in your smartphone or planner to cancel services before charges are applied to your account.

7. Sales

You’ve waited several months for a particular item to go on sale, and it’s finally 50 percent off. But one problem remains: You have to put it on your credit card.

If you give in to temptation, it’s only a matter of time before your spending plan lets you know. Instead, set aside funds now for the next time the item goes on sale.

8. Redbox

If you frequently visit Redbox, leave the storage container in a visible place so you won’t forget to return it the next day and incur fees.

9. Pampering

Every now and again, you’ll need to visit the salon or indulge in a day at the spa. There’s nothing wrong with unwinding on your downtime, but you should engage in pricey activities only if your budget allows it.

10. Cellphone use

Unless you have an all-inclusive, unlimited plan, caps apply to minutes and data usage, and you’ll pay extra if you go over. Plus there are charges you might not be aware of until they appear on your bill.

If your cellphone bill fluctuates each month, take a moment to give the provider a call and inquire about more cost-effective options that may be available to you.

11. Alcoholic Beverages

Going out for dinner is one thing, but when you add beer, wine, and cocktails into the mix, it can take your bill from budget-friendly to sky high. Drinks add up fast, and especially if you’re going out on the weekend, you shouldn’t expect to have just one.

If you give yourself a budget for drinks per week, you’ll know exactly how many nights of revelry you can afford – and whether you should stick to water or soda with dinner during the week, rather than shelling out extra for that Moscow mule.

12. Impulse Grocery Buys

Believe it or not, there is such thing as going to the grocery store too many times. Although some people prefer to hit their nearby market a few times per week to pick up food in smaller quantities, planning fewer trips can help you save money.

That’s because the more often you go to the store, the more likely you are to grab a box of cookies that sounds really good right now or pick up some gum and a new magazine at the register. These odds and ends add up fast, so going to the store less often can help you stick to a tighter grocery budget.

13. All the random ‘extras’

Life happens and so do expenses, so it’s best to be safe and have a solid emergency fund. You can also hedge against the risk of running out of funds each month by incorporating some extra money into your spending plan.

Small purchases or expenses seem innocent enough, but if you make enough of them, or you forget to keep track, they can quickly add up and leave you way over budget. In the end, we need to make a decision: do we satisfy our short-term indulgences, or do we plan for our long-term future? I think the best answer is to do both. Just because you spend $15 a day on a fancy lunch doesn’t mean that you can’t also save and invest $15 that day as well. People always talk about “live life to your fullest now” and “invest in your future” as though they are mutually exclusive. They aren’t, you can do both. What are your indulgences? How do you stop yourself from spending and save more instead?

 

 

“Never spend your money before you have earned it.”
– Thomas Jefferson –

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