Editor’s Note: This story originally appeared in Living on the Cheap.
Are you wasting your money?
Too many of us come to the end of the month, looking at our dwindling bank account balances and wondering where all the money went. If you go back and really look at where all that money went, you may find that you wasted it instead of using it wisely.
If you want to make your money work harder for you, you have to know where it’s going so you can redirect it. So where is your money gone? Most Americans waste money on the following items…
1. Credit card interest
A 2021 report from Experian shows that the average credit card debt in a US household is $5,525. That’s a lot of interest paid on credit card balances. If you carry a credit card balance, it’s probably one of your biggest money wasters.
2. Bank overdraft fees
The average overdraft fee in the US is $33.58 in 2021, according to researchers at Statista.com. (Banks charge overdraft fees when you don’t have enough money in your account to cover a transaction.) Watch your finances and avoid overdrawing your account, or you’ll end up wasting money on unnecessary fees.
3. Eat out
According to the US Department of Agriculture, the average American spent nearly 28% of every food dollar in 2020 on eating out—and that was during the first year of the pandemic when restaurant spending really took off! You may not think of eating out as a waste of money, but if you’re looking to cut costs or save money, there are definitely ways you can have fun and still eat less.
4. Throw food away
The National Resources Defense Council estimates that Americans spend $165 billion annually (about $529 per person) wasting food. And you know how often you leave lettuce to rot in your fridge, or buy a bunch of parsley just to use up a few stalks. Not to mention the special oils, sauces or special foods you need for one recipe and never use again.
5. Gym membership
According to a survey conducted by Finder.com, 7.4% of people who pay for a gym membership use it less than once a month. Think about how much you pay for your gym membership and how many days a week (or month!) you actually go to, and you’ll realize that you probably spend a lot of money each year on memberships you don’t really use. .
You can think the same about any other subscription you have. Do you read The New York Times online every day, or do you use paid meditation apps? Are the magazines piling up and gathering dust, and did your going to the zoo or science museum enough to justify your membership? Otherwise, these are places where you are wasting your money.
Energy Star reports that the average family spends more than $2,000 on energy bills each year, nearly half of which goes to heating and cooling. By following Energy Star’s recommendations for cutting costs, you can save a third, according to government data.
3 tips to stop wasting your money
Once you consider where your money is going, the estimate is that you are probably wasting between 10% and 15% of your income each month. Ouch!
You can definitely put your money to a better use. If you want to recover lost income and then use it to improve your long-term financial situation, here are the top three things you can do.
1. Evaluate what you actually use
From expensive cable packages to gym memberships, be honest about what you use. Cancel magazine subscriptions, stop paying for unused gym memberships, and consider changing your cable to low-cost streaming services like Hulu and Netflix.
2. 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 money on eating out, as well as reduce what you’re wasting. Create a meal plan each week, using coupons and discounts as a guide. Then, shop according to your list. You’ll spend less time “just picking something up” on your way home and you’ll waste less food when you buy with a purpose.
When you do feel like eating out, plan to visit a restaurant on “kids eat free” days, or take advantage of the daily specials to cut down on expenses.
Planning ahead works in other areas as well. From planning your energy use to making travel plans well in advance, you can find ways to save money when you’re ready for what comes next.
3. Pay off debts
If you want to stop wasting money on interest expenses, you have 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 reducing debt.
Related to paying off debt in general is paying attention to your finances. Track your spending so you don’t get charged overdraft fees, which can cost between $25 and $45, depending on the bank.
Stop shopping for things you don’t need, and watch what happens to your money. Once you start planning your finances around what really matters to you, less of your money will go to waste.