You must gain control over your money or the lack of it will forever control you. ~ Dave Ramsey
As if the retirement crisis wasn’t enough for Americans, a recent study indicates that America is also lagging in their savings. The report identifies that as many as 21% of Americans do not set aside any portion of their income for long-term or short-term financial goals. What comes as a surprise is that student debt isn’t responsible for this shortfall in savings. Americans are simply spending too much on their corresponding income level. A financial vices survey from Bankrate indicates that the average American spends over $2,900 annually on restaurants or buy-outs, coffee or other beverages, and lottery tickets.
Our team decided to identify daily spending habits that are eating through your monthly income, leaving very little for retirement or other savings.
Nothing could smell better than that fresh-brewed coffee in the morning. Many people prefer to make a stop at Starbucks on their way to the office for their daily dose of caffeine. Little do they know that these regular trips are burning a hole in their pockets. Acrons, an investing app, found that more than 34% of Americans spend more money on coffee than they allocate to stock or bond investments. That’s not just alarming but indicates how we put instant gratification over long-term savings. For someone buying a large caffe latte at Starbucks twice a day, it would cost roughly $200 a month, and for those choosing flavored lattes, their monthly coffee expenses would shoot up to $300. If you are in $30,000 to $35,000 income group, you’ll spend close to one month’s income on coffee alone. No wonder you didn’t have money to save!
Who has the time to cook every day? It’s much easier to spend $10 on lunch, and after all, you sweat it out all day in the office, so you deserve that luxury. The U.S Bureau of Labor Statistics reveals that the average American household spends over $3,000 annually on dining out. This figure includes eating at restaurants, takeouts or delivered food. Any reasonable person would question why restaurants overcharge for their meals, and it’s quite simple. Restaurants are built to make profits, so they add markups of up to 300% to cover their additional expenses, cost of the food, and their profit margins. If you would instead prepare lunch at home or limit your restaurant visits, you could have that $15 meal for $5 at home. Additionally, you’ll be eating much healthier when cooking at home.
Isn’t it easy to pay a dollar for your favorite movie on YouTube? Unfortunately, most of us are guilty of paying for on-demand entertainment. A recent survey reveals that as many as 55% of the American households have a subscription for at least one video streaming service, spending over $2.1 billion monthly. Netflix reported revenue growth of 35.08% in 2018 on a year-over-year basis. The same holds for several other on-demand entertainment services. In fact, the growing demand for streaming content has made companies invest heavily in the segment. If you’re looking for a culprit in your monthly budget, look no further than your video streaming service. If you hold one or more of these subscriptions, we’d suggest to replace them with a book or taking a skill-development course instead. You’ll not only save money, but it will help you grow your career.
The health risks associated with smoking are quite well known around the globe; however, very few people are aware of the financial cost of smoking in their life. An average pack of cigarettes costs $6.28, which means if you smoke a pack every day, you spend over $188 monthly on smoking itself. It leaves you $2,292 poorer annually or $22,920 every decade. This cost could rise to $3,854 annually or $38,540 in 10 years in cities like New York. We did a similar analysis for alcohol. If you drink three drinks a day ($10 per drink), thrice a week, you’re spending $360 monthly on alcohol alone or $4,320 annually. In short, smoking and alcohol not only destroy your health but it also devoid you of significant financial resources. If you have an addiction, we would suggest you join a support group or visit a rehabilitation center as soon as possible.
Nothing could match the feeling of buying your favorite food, eating out, grocery shopping, or online purchases with a single swipe of your credit card, and you certainly feel like a king until the end of the month. This habit of swiping plastic has cost Americans dearly with a national credit card debt of $974.2 billion. In fact, the average American household credit card debt, at $8,284, is just $177 away from becoming unsustainable. Hard to realize that how a simple habit could turn into a financial nightmare for an entire nation! The chances are that you also hold a credit card debt. Our suggestion is to start using cash where you can, as it will help you realize how much money you spend daily. Research indicates that using cash for everyday purchases makes you a conscious spender.
The solution to any financial problem or bad habit is to acknowledge it. Once you realize that these spending habits are bad for your financial life, changing them would be easier. Start by creating a strategy, and instead of depriving yourself completely, work towards gradually lowering your spending on these habits.
Let us know the strategies you plan to implement!