We’re all guilty of spending too much from time to time, but in some cases, we might be spending more without even knowing it. These are the habits I like to call “money suckers,” things, people and events that are draining your bank account. Want to stop and save more, here are some of the most common ones I see and how to fix them.
Not paying yourself first
When you get your paycheque, the first thing to do with your money is to pay yourself. What that means is putting money away into your retirement savings, parking some aside for an emergency and looking ahead to any major expenses and saving for that too. What often happens when we get paid is we pay all our bills, then go out and spend on ourselves and then whatever is left over we save. Turn that idea around. Pay yourself, pay all your bills and spend the rest.
Lifestyle inflation and living above your means
One of the biggest money mistakes we make is constantly upgrading our lives, bigger house, better car, nicer clothes. As we make more money, rather than taking advantage and saving more, we just start spending more. This is called lifestyle inflation and one of the most common money mistakes. I often hear people say, I’m making more this year but I don’t feel like I am saving more. That’s because you have taken that extra earnings and spent it. Avoid lifestyle inflation, by always bumping your saving when you get a bump in pay.
One of the most financially savvy ways to get out of debt is to consolidate your high-interest debt into a lower interest loan. For example, paying your credit card balance using a line of credit. This is smart the first time, but if you find you have consolidated your debt several times, all you’re doing is kicking your financial responsibilities down the road. The debt it still there, it’s just not costing you as much and feels more manageable. Pay the loan you used for consolidating first before you start charging on your credit card again.
Owning too many cars and not taking transit
A car is a luxury that costs almost $10,000 a year. According to figures provided by the Canadian Automobile Association in 2013, four in five Canadians under-estimate the cost of owning and operating a vehicle. The CAA says yearly ownership costs for an average compact car are about $9,500. If you have access to public transit, getting rid of your car will save you thousands of dollars a year. If you don’t live close to transit but your work is accessible by bus or train. Consider moving so you can take transit.
Weekly trips to the mall
Research shows that every single time you step into the mall you spend more than $100. It’s called the Mall Phenomena, and was coined by the American marketing firm JCDecaux Group. They conducted a survey that showed on average we visit the mall three times a month and spend $105 each time. Malls are also the most likely place a shopper will make an impulse purchase. Avoid the extra spending by limiting your trips to the mall, therefore avoiding the temptation to spend. When visiting, shop with a plan so you don’t get distracted.
Hanging with big spenders
This is one of the easiest ways you can keep yourself in debt. That is hanging with people who like to spend freely and not worry about debt. We are the sum of the five people we spend the most time with. So chose friends who are money savers. Choose to be around people who value money and how hard it can be to make it. No one is suggesting we hang out with cheapskates, but staying closer to people who know how important their financial health is, will keep your budget on track too.
These are common money mistakes we are all guilty of. The key is recognizing when we are making them and changing our behaviour. Finding the money to save isn’t hard, once you can identify where you’re spending too much.