Quick! Do you know where your money is?
Too many of us get to the end of the month, look at our dwindling bank account balances and wonder where all the money went. If you were to go back and really look at where all that money is going, you might be surprised.
Where does the money go?
So, where is your money going? Most Americans waste money on the following items:
- Credit card interest: A recent report from Nerd Wallet indicates that the average credit card debt for indebted households is $15,607. That’s a lot of interest paid on credit card balances. If you’re carrying a credit card balance, that might be one of your biggest money wasters.
- Overdraft bank fees: The Consumer Financial Protection Bureau reports that about 27% of accounts experience at least one overdraft a year, and in 2013 banks raked in $31.9 billion in overdraft fees. Pay attention to your finances and avoid overdrawing your account.
- Dining out and entertainment: Using data from 2013, the Bureau of Labor Statistics discovered that the average annual expenditure on dining out for a household is $2,625, and the annual average expenditure for entertainment is $2,482. According to the Census Bureau, median household income for 2013 was $52,250. It’s not unreasonable to say that the average American household spends 9.77% of its income on dining out and entertainment alone.
- Throwing away food: The National Resources Defense Council estimates that Americans waste $165 billion a year (about $529 per person) to throw out food.
- Gym membership: The International Health, Racquet, & Sportsclub Association reports that gyms expect that only 18 percent of people will use memberships on a consistent basis. When you consider in 2012 the global industry revenues were $75.7 billion, it seems clear that many consumers are wasting a good chunk on gym memberships.
- Energy: Energy Star reports that the average family spends $2,100 on energy bills each year, almost half of which goes toward heating and cooling. By following Energy Star recommendations for cutting costs, you could save one-third of that, according to government data.
Once you consider where your money is going, estimates that you are probably wasting between 10% and 15% of your income each month don’t seem so far-fetched.
Recover your wasted income
Chances are, you could be putting your money to better use. If you want to recover your wasted income and then use it to improve your long-term financial situation, here’s what to do:
Evaluate what you really use: From the expensive cable package to the gym membership, be honest about what you are using. Cancel magazine subscriptions, stop paying for the unused gym membership and consider replacing your cable with low-cost streaming services like Hulu and Netflix.
Plan ahead: One of the best ways to stop wasting money is to plan ahead. Meal planning can be a great way to stop spending so much on dining out, as well as reduce what you throw away. Create a meal plan each week, using coupons and sales as a guide. Then, shop according to your list. You’ll spend less time “just grabbing something” on the way home and you’ll throw away less food when you buy with a purpose.
Planning ahead works in other areas as well. From planning out your energy usage to making travel plans in advance, it’s possible for you to find ways to save money when you are prepared for what’s next.
Pay down debt: Finally, if you want to stop wasting money on interest charges, you need to pay down debt. You can even negotiate lower interest rates with many credit card issuers so that more of your monthly payment goes toward debt reduction.
Related to paying down debt is generally paying attention to your finances. Track your spending so that you don’t incur overdraft fees, which can cost anywhere between $25 and $45, depending on the bank.
Stop spending on the things you don’t need, and pay attention to what’s happening with your money. Once you start planning your finances around what really matters to you, a lot less of your money will go to waste.