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I Can’t Believe How Much These Small Purchases Are Costing Me Every Year

I Can’t Believe How Much These Small Purchases Are Costing Me Every Year

Have you ever stopped to add up all of the tiny, seemingly inconsequential expenses that we accumulate daily, weekly, or monthly? A few dollars here, a few dollars there add up to big bucks at the end of the year. You will be shocked at how much those unnecessary expenditures are leaching out of your wallet.

1. Make mine a grande.

Your Starbucks habit may be costing you big time. I paid $4.59 for my last Grande latte (Cinnamon Dolce is my favorite). At that price, five days a week, you’d be spending nearly $100 per month, or $1193.40 per year at Starbucks. And that’s just the coffee; throw in a muffin a few times per week and you’re looking at $1500 per year.

What this could buy: With that amount of money, you could buy a new laptop or some living room furniture or maybe a cruise for two.

2. Roll that money up and smoke it.

If you’re still one of the smokers among us, you might as well just roll your money up and smoke it. Though the cost of your cigarette habit will vary by location, from around $5 in Kentucky to $14 in New York, any way you look at it, it quickly adds up. With the average smoker in the US consuming just under a pack a day, you’re spending around $50 per week—that’s $2600 per year. Want to kick the habit? Here are some great tips.

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What you could buy: That would pay for a family vacation. Disney anyone? Or maybe you’re more of a big screen with surround sound and gaming type. You could outfit a family room nicely—every year.

3. The salon habit.

Love that straight, smooth look? If you go to your salon for weekly blow out, at an average of $25 a pop, you’re spending $1300 a year. If you’re a Brazilian blow out consumer, those will set you back another $800 a year. Is smooth hair worth that much to you? Maybe. Maybe not.

What you could buy: You could spend that money on a massage every other week instead or some really fabulous outfits or a bunch of great shoes.

4. Watch those pesky bank fees.

Are you still paying a monthly maintenance fee? Better check your statement. There are so many free checking accounts without fees; it’s foolish to pay that $12 per month when you don’t have to. Also, did you know that most banks now charge a “statement fee” to mail your monthly statements? It’s usually only $2 or so, but that adds up. Get it via email and it’s free. How often do you hit the ATM? According to recent statistics, the average ATM user will hit an ATM 8 times a month. If that ATM is not at your personal bank or if you get cash back at the grocery store, you’ll pay an average of $3 per transaction.

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Some banks charge $5–7 for replacement card and shockingly a few banks are now starting to charge for a “human teller” service. Seriously, $8 to deal with a live person. Even without counting the ridiculous human teller fee, you could be paying more than $500 a year in completely avoidable fees.

What you could buy: With that $500, I could buy a gym membership or maybe better a few stocks and a session with a financial planner.

5. Take another look at that cell phone plan.

According to some recent studies, as many as 80% of cell phone users are overpaying on their plans, especially smart phone users. That’s crazy. Check your usage over a few months. You may be able to downgrade your voice minutes, or you may be paying for voice or data overages. Either way, you’ll save money by “right-sizing” your plan.

You may be surprised by how much you can save by getting an unlimited minute plan or by switching carriers. Smartphone users are overpaying an average of $10–20 per month according to the studies, and if you have several smartphones in your household, it’s even more. That’s $200–500 a year.

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What you could buy: That extra $200 could buy a nice shiny new device or something really cool, like an activity tracker or GPS watch.

6. Keep your hands off the merchandise.

According to a Harris Interactive Poll, the average American spends $200 a month on impulse buys, the biggest offenders being clothes and shoes, toys, technology and checkout counter items. These frivolous purchases are most often triggered by sales, discounts, pacifying children’s wants and convenient placement by retailers. If it’s on sale, but you didn’t need it, then did it really save you anything?

Shopping online can help avoid checkout line temptation, but the instant gratification can cost you even more. The lesson? Stick to your list, wait until the next trip, or impose a 24–hour waiting period. Ask yourself if the $2400 a year is truly worth the payoff.

What you could buy: Instead of shoes you don’t need, another cute sweater, yet another device to add to your collection, more toys to clean around or junk food that adds pounds, perhaps you’d rather buy a comfy new mattress, a new kitchen table, or a terrific stereo. Or you could pay off the credit card bill for last year’s impulse buys.

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7. A dollar and a dream.

We are lottery-hungry here in America, more so than any other country in the world. And while the average American spends about $200 a year on lottery tickets, $4 per week, the poorest Americans spend nearly $12 a week, totaling more than $600 yearly. Since your odds of winning the lottery are somewhere between 175,000,000 and 200,000,000 to 1, it really is a terrible waste of money. In fact, your odds of being struck by lightning, having identical quadruplets, or being killed by a flesh eating bacteria are more likely.

What you could buy: While $200 doesn’t buy much, it does buy some dinners out, a designer bag, a new suit, or a great dress.

8. Brown bag it.

A recent survey cited that 70% of American workers go out to lunch at least twice a week and spend an average of $10 a pop, coming in at around $1000 a year. And for those who go out every day, that number comes in at $2600 each year. I don’t know about you, but I’ll be brown bagging it.

What you could buy: With the money you’ll save by packing your lunch, you could buy a brand new refrigerator full of food. You could use the extra money to buy organic or if you prefer to invest it in yourself, take a professional development course or college course.

However your money is leaking out of your wallet each month, you might want to consider how else you could be spending it. At least be conscious of where your money is going. And something else to consider: if you reclaimed even $100 per month and invested it, even conservatively, you would accumulate nearly $40,000 over the next 20 years and that number would double each decade.

Featured photo credit: Money – Savings via flickr.com

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Royale Scuderi

A creative strategist, consultant and writer who specializes in cultivating human potential for happiness, health and fulfillment.

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Last Updated on September 2, 2020

How to Set Financial Goals and Actually Meet Them

How to Set Financial Goals and Actually Meet Them

Personal finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. That’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

In this article, we will explore ways to set financial goals and actually meet them with ease.

4 Steps to Setting Financial Goals

Though setting financial goals might seem to be a daunting task, if one has the will and clarity of thought, it is rather easy. Try using these steps to get you started.

1. Be Clear About the Objectives

Any goal without a clear objective is nothing more than a pipe dream, and this couldn’t be more true for financial matters.

It is often said that savings is nothing but deferred consumption. Therefore, if you are saving today, then you should be crystal clear about what it’s for. It could be anything, including your child’s education, retirement, marriage, that dream vacation, fancy car, etc.

Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives that you foresee in the future and put a value to each.

2. Keep Goals Realistic

It’s good to be an optimistic person but being a Pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going beyond what you can realistically achieve will definitely hurt your chances of making meaningful progress.

It’s important that you keep your goals realistic, as it will help you stay the course and keep you motivated throughout the journey.

3. Account for Inflation

Ronald Reagan once said: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman.” This quote sums up what inflation could do your financial goals.

Therefore, account for inflation[1] whenever you are putting a monetary value to a financial objective that is far into the future.

For example, if one of your financial goal is your son’s college education, which is 15 years from now, then inflation would increase the monetary burden by more than 50% if inflation is a mere 3%. Always account for this to avoid falling short of your goals.

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4. Short Term Vs Long Term

Just like every calorie is not the same, the approach to achieving every financial goal will not be the same. It’s important to bifurcate goals into short-term and long-term.

As a rule of thumb, any financial goal that is due in next 3 years should be termed as a short-term goal. Any longer duration goals are to be classified as long-term goals. This bifurcation of goals into short-term vs long-term will help in choosing the right investment instrument to achieve them.

By now, you should be ready with your list of financial goals. Now, it’s time to go all out and achieve them.

How to Achieve Your Financial Goals

Whenever we talk about chasing any financial goal, it is usually a two-step process:

  • Ensuring healthy savings
  • Making smart investments

You will need to save enough and invest those savings wisely so that they grow over a period of time to help you achieve goals.

Ensuring Healthy Savings

Self-realization is the best form of realization, and unless you decide what your current financial position is, you aren’t heading anywhere.

This is the focal point from where you start your journey of achieving financial goals.

1. Track Expenses

The first and the foremost thing to be done is to track your spending. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you will be surprised by how small expenses add up to a sizable amount.

Also categorize those expenses into different buckets so that you know which bucket is eating most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pumping up your savings rate.

If you’re not sure where to start when tracking expenses, this article may be able to help.

2. Pay Yourself First

Generally, savings come after all the expenses have been taken care of. This is a classic mistake when setting financial goals. We pay ourselves last!

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Ideally, this should be planned upside down. We should be paying ourselves first and then to the world, i.e. we should be taking out the planned saving amount first and manage all the expenses from the rest.

The best way to actually implement this is to put the savings on automatic mode, i.e. money flowing automatically into different financial instruments (mutual funds, retirement accounts, etc) every month.

Taking the automatic route will help release some control and compel us to manage what’s left, increasing the savings rate.

3. Make a Plan and Vow to Stick With It

Learning to create a budget is the best way to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be organized

Nowadays, several money management apps can help you do this automatically.

At first, you may not be able to stick to your plans completely, but don’t let that become a reason why you stop budgeting entirely.

Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options, and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

4. Make Savings a Habit and Not a Goal

In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that, in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

Make savings a habit rather than a goal. While it might seem to be counterintuitive to many, there are some deft ways of doing it. For example:

  • Always eat out (if at all) during weekdays rather than weekends. Weekends are more expensive.
  • If you are a travel buff, try to travel during off-season. You’ll spend significantly less.
  • If you go shopping, always look out for coupons and see where can you get the best deal.

The key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice, which will be harder to sustain over a period of time.

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5. Talk About It

Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission.

Therefore, in order to stay the course, surround yourself with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

6. Maintain a Journal

For some people, writing helps a great deal in making sure that they achieve what they plan.

If you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

When you have a written commitment on paper, you are going to feel more energized to follow the plan and stick to it. Moreover, it is going to be a lot easier for you to track your progress.

Making Smart Investments

Savings by themselves don’t take anyone too far. However, savings, when invested wisely, can do wonders.

1. Consult a Financial Advisor

Investment doesn’t come naturally to most of us, so it’s wise to consult a financial advisor.

Talk to him/her about your financial goals and savings, and then seek advice for the best investment instruments to achieve your goals.

2. Choose Your Investment Instrument Wisely

Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about the common ones, like a savings account, Roth IRA, and others.

Just like “no one is born a criminal,” no investment instrument is bad or good. It is the application of that instrument that makes all the difference[2].

As a general rule, for all your short-term financial goals, choose an investment instrument that has debt nature, for example fixed deposits, debt mutual funds, etc. The reason for going for debt instruments is that chances of capital loss is less compared to equity instruments.

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3. Compounding Is the Eighth Wonder

Einstein once remarked about compounding:

“Compound interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.”

Use compound interest when setting financial goals

    Make friends with this wonder kid. The sooner you become friends with it, the quicker you will reach closer to your financial goals.

    Start saving early so that time is on your side to help you bear the fruits of compounding.

    4. Measure, Measure, Measure

    All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments and taking stock of how our investments are doing.

    If we don’t measure progress at the right times, we are shooting in the dark. We won’t know if our saving rate is appropriate or not, whether the financial advisor is doing a decent job, or whether we are moving closer to our target.

    Measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

    The Bottom Line

    Managing your extra money to achieve your short and long-term financial goals

    and live a debt-free life is doable for anyone who is willing to put in the time and effort. Use the tips above to get you started on your path to setting financial goals.

    More Tips on Financial Goals

    Featured photo credit: Micheile Henderson via unsplash.com

    Reference

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