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Challenge Yourself To Avoid These 10 Frivolous Expenses For One Month

Challenge Yourself To Avoid These 10 Frivolous Expenses For One Month

Did you know that simply by having one Starbucks coffee per day, five days per week, that you are spending over $1,000 per year? Just think about what else you could be doing with that money. We all spend money unnecessarily. After all, we think nothing of spending a couple of dollars here and there. But, every penny adds up, and we spend thousands of dollars each year on things that we really don’t need. Here are 10 avoidable expenses that most of us are guilty of wasting money on.

1. Daily Lunches

As a busy person, you may not have time to make lunches to take to work, so you spend money to eat out every day. No matter where you go, you are going to spend at least $5 per day. That adds up to over $1,000 each year. Make your lunches at home the night before to save time and money. Here are great healthy lunch recipes all clock in at $3 or less per serving.

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2. Weekly Pizza Night

If you get a pizza for your family once a week, you are spending at least $20 to $30 each week. That adds up to $1,000 or more each year. Sure, we all need to treat ourselves now and again, and who doesn’t like pizza? But, why not cut back to one pizza night a month. You will be saving $60 to $90 per month, or more. Also, there are always great tasting grocery store pizza that could cost you only $5-$6.

3. Travel

You may love to travel, but it gets pretty expensive after a while. You can’t get a decent motel room for less than $100 per night, and then you have to pay for meals, and have spending money. You also have to spend a lot on airfares. Instead of giving up on travel, find ways to have budget vacations. For instance, you can get great deals on airfares at Kayak and Airfares Flights. Find a bidding site to bid for less expensive hotel rooms and find local eating deals through that city’s online coupons and meal deals.

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4. Books

The cost of books gets higher and higher all the time. A cheap paperback novel now costs upwards of $10. Reading shouldn’t have to be a luxury. But, instead of spending a lot of money on books, why not get them from your local library for free? Book getting can be accomplished with a Kindle Unlimited membership for just $9.99 a month as well.

5. Clothing

You don’t need to have three closets full of clothing, or hundreds of pairs of shoes. All a person really needs are a few main pieces, a few accent pieces, three to four pairs of shoes, and some accessories. You can save money by cutting back on clothes shopping. You can make money if you clean out your closets and sell all those clothes you aren’t even wearing. Neighborhood swapping party to get new sizes that the kids or you need also is a great way to save money on your clothes.

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6. Weekly Movie Nights

It’s nice to have date night with your significant other, but for two people to go to the movies, it costs upwards of $50 if you get popcorn and pop. You can save money by cutting back to one date night a month. Buying tickets at the Box Office will save you $1-2 that you’d pay for online booking. Find a late-run theater and watch movies later. You can still enjoy each other’s company by renting a movie or streaming on online. There are tremendous savings to be had with streaming movie options, investigate if one is a good fit for your household.

7. Beer

Beer, or any other alcoholic beverage, is expensive. It is even more costly when you choose to drink at a bar with friends instead of at home. By cutting back on the amount of alcohol you consume, you will be saving a lot of money. You may even lose weight and feel healthier. If you must socialize with a cocktail, choose Happy Hour times, some places even have late night reverse Happy Hour!

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8. Lottery Tickets

Do you really need to spend money on those lottery tickets every week? Sure, winning is fun, but take a good look at what you spend compared to what you win, and you will realize just how much you have lost over the years. Perhaps making it an indulgence instead of a habit is a better fit. Maybe establish a ‘couch fund’- money found in the couch, for treats like this.

9. Treats for the Kids

Do you bring home treats for your kids every time you go shopping? This can get pretty expensive after a while. It also will cause your kids to not appreciate real treats. Cut back on the treats for the kids, save money, and as a bonus, this may help them to grow into adults who appreciate all that they do have.

10. Cigarettes

If you are a smoker, you are likely spending at least $10 per day on cigarettes, depending on how much you smoke. Quitting is hard, but it is well worth the effort. You will be saving over $3,000 per year, and improving your health. If you can start by weaning yourself down on the nicotine aspect with patches and the oral aspect with suckers, eventually you will thank yourself and feel better as well.

Featured photo credit: pshegubj via flickr.com

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Jane Hurst

Writer, editor

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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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