- When it comes to saving money, it’s the small expenses that add up the most.
- Make it a habit to watch your spending habits to see where you are spending the most.
- Here at five of the most common expenses that most people have that can be easily cut out or minimized.
You just got paid, and you’ve already blown through half your paycheck. By the end of the weekend, your paycheck has vanished. However, even with no money in your bank account, you continue swiping your credit card. Racking up credit card debt, spending more money than you earn.
This frustrating cycle is what we like to call frivolous spending. Frivolous spending is defined as irresponsibly spending your money with no regard for future financial implications. And according to research, many American’s are doing this. A survey by CareerBuilder found that 78% of U.S. workers live paycheck to paycheck to make ends meet.
What’s even more alarming is that living paycheck to paycheck typically has no correlation with making more or less money. According to that same study, nearly 1 in 10 American’s earning $100,000 or more are still living paycheck to paycheck.
What does that tell you? It should tell you that your current financial situation has everything to do with your money habits. Even if you aren’t making a lot of money, you can still create the right habits to set yourself up for financial success.
Today, you will learn how you can quickly stop spending more than you earn by reducing your spending in five key areas. By not spending money on these five things, you’ll be able to save more of your money and invest it for your future self. Let’s begin.
1. Brand new electronics
The first thing I never spend money on is brand new electronics. I personally find that by skipping brand new electronics and opting for used or refurbished alternatives, I can save tens of thousands of dollars over the years.
For example, a brand new MacBook Pro purchased directly from Apple will cost you as much as $4,500 depending on the specs you choose. I avoid this price tag altogether by purchasing that same laptop with identical specs used or refurbished on eBay for around $2,500.
The same is true for any other type of electronic—cameras, phones, computers, audio gear, etc. Most people are skeptical about buying used or refurbished electronics on eBay, and rightfully so.
What if someone sells you a broken product? Won’t you get scammed? The answer is no. Because of eBay’s buyer protection program, you are protected under the rare circumstance that someone tries to rip you off.
So save yourself the money and stop buying your electronics brand new. You’ll thank me later when you are swimming in dough.
2. Product warranties
Selling product warranties is a $40 billion industry. In other words, retailers love these things.
When you buy a product warranty, not only is the retailer making money from the product you are buying, they are also able to make additional profit by upselling you an extended warranty.
I like to compare product warranties to air. When a company talks you into buying a product warranty, it’s like they are selling you air. Air is free. And a product shouldn’t need a warranty if it is actually built well in the first place.
Additionally, many products already come with manufacturer warranties. Tacking on an extended warranty from the retailer isn’t going to make much of a difference in terms of the amount of coverage you have with that product.
There are other places you can get free product warranties as well. For example, many credit cards will give you some type of insurance or warranty if you purchase a product with their card.
You can even find certain types of insurance being offered at some banks. For instance, many banks have begun offering cell phone insurance. If you drop your phone and break it, they will replace it for you. This means you don’t have to pay a premium each month for your carrier’s cell phone insurance plan.
3. Name brand clothes
I once had a friend who would pay as much as $400 for t-shirts. His t-shirts looked like plain old t-shirts. However, the difference was that his t-shirt’s had a logo on them.
That single logo was responsible for inflating the price of the t-shirt by as much as 4,000%, or from $10 up to $200, $300, and even $400.
To avoid wasting money, I avoid name brand clothing, especially when it’s expensive for the sake of being expensive. I would rather buy reasonably priced clothing and put all the money I save to use by investing it.
4. New cars
You’ve likely heard this before, but the moment you drive a brand new new car off the dealer’s lot, it loses about 10% of it’s value.
A study by Carfax found that every year after the initial purchase, the car depreciates in value by as much as 20% per year. This depreciation cycle happens for about three to five years, or until the car has lost as much as 80% of its value.
For example, a brand new car that costs you $40,000 would be worth only $16,000 after about five years.
Why would you intentionally sabotage your wallet by purchasing a new car knowing that within the first five years, it will lose 80% of it’s value? I’m not sure. And yet, millions of Americans do it every year.
The best thing to do would be to buy used—if you have to buy a car at all.
By purchasing a used car, you bypass a majority of the depreciation period, which means you are getting a significantly better deal.
5. Eating out
Fast food is quick, easy, and addictive. No wonder so many American’s are obsessed with it.
According to studies, the average American spends about $1,200 per year on fast food. However, for many American’s, this is on the low end of the spectrum.
Cutting fast food from your regular spending could significantly increase the amount of money you have at the end of each month, as well as improve your health.
Instead of indulging on fast food all the time, try sticking with store-bought food. Food from the store tends to be healthier, less expensive, and will often taste better.
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