When you’re trying to become financially stable, you need to look out for money pits. These are the things that look like a good idea in the moment, but a series of manageable transactions accumulate and produce bigger expenses. When you’re young, companies want to exploit your lack of financial knowledge and take your money. Plus, you’re getting your first paychecks. This sudden influx can lead to some costly impulse buys.
Of course, when you’re young you want to have fun. Everyone makes mistakes during this time and spends money on temporary luxuries. No one is expects you to forgo the joys of your youth, but there are a lot of people trying to take advantage of your early paychecks. These money pits can take away from your savings, or even worse, lead to debt.
As you take strides toward financial independence, be aware of the ways your savings can get sucked away. Often, it’s items and companies who compromise your freedom: not other people.
1. Your Car
Every time you’re at the gas station filling up the tank, you’ll see cars are a literal money suck. Of course, if you have a job, you need to get there. It can be temping to lease a new car, but if you want to save money you should always go for used. Cars depreciate in value very quickly, and if you buy used you’re reaping some benefits of depreciation.
Of course, this is oversimplifying the process. You need to ensure the used car has a good history and the model is reliable. A car with good milage from a reputable brand can save you a lot. A common car, like the Honda Civic for example, might be a worthwhile investment. If you ever do need a car repair, the parts are easy to obtain and you can get back on the road quickly.
This won’t make you stand out, but it will get you from point A to point B. Perhaps it’s better to be known as the person who’s reliable than it is to be known for your expensive car. Years down the road, you’ll be glad you had the savings and not the outdated, flashy car.
We all know drinking can be expensive. I’m not going to tell anyone not to drink or go out to clubs (unless there’s a global pandemic). When you’re young you want to have fun and meet people, but there are ways to be a responsible spender and drinker. You just need to be really honest with yourself and know what your behaviors look like after a few drinks.
Firstly, drinking at home is always less expensive than drinking at a bar. Pace yourself, but it’s not a bad idea to start at home before you head out. If you’re worried about spending too much, you might want to stick to cash. Bring $30, aim to spend only $20, but make it really hard to get more money. Of course, you want to have a back up plan because things always go awry when alcohol is involved.
If you tend to eat after you drink, buy food beforehand. Two frozen pizzas from the grocery store will cost less than Domino’s, and you probably won’t notice a huge difference. Get in the habit of having a plan before you go out for the night. Start with the transportation and the bed you’ll sleep in. Then worry about money. In this case: safety first, savings second.
3. Eating Out
Again, I don’t expect anyone to fully cut back on eating out. Cooking takes a lot of time, and when your social group is going out you’ll probably want to join. The goal is to know where you can easily make some swaps so you spend less overall.
If you get lunch at work, bring a drink from home. A soda at Chipotle can cost you over $2.00 while you can easily bring a can from home that costs $0.50. Then, consider brining sides from home. Perhaps you can’t forgo the chips and guac at Chipotle, no one blames you there. If you’re going to Subway, skip their chips and bring something from your cupboard. Bringing a side and drink from home can save nearly $100 in a month if you pay for both at a restaurant.
Ideally, you want to save less on food by eating out less. I can’t ignore the convenience factor associated with eating out and the fact that it provides variety. So if you’re not willing to omit restaurants from your daily life, try to cut corners. Packing your own drinks and sides take seconds and saves you quite a bit.
4. Expired Food
Let’s be honest, grocery shopping sucks. So when you go, you tend to stock up. Two weeks later, you throw out pounds of food you never ate.
A recent study found the average American household wastes $1,866 per year in uneaten food. That’s a lot of avocados, bread, and chicken being fed to the landfills. So it’s time to be really honest with yourself and cut out things you won’t eat. Don’t pretend you’re going to be eating healthy this week. If you really are starting a diet, don’t supplement your new foods with the same junk you bought last month. If you do that, something’s going to see the trashcan.
Making a grocery list shouldn’t just be about the items you need. It should be the foods you need and the days you’ll eat them. Then, learn to store food properly. Lots of foods can be frozen, but people never send them to the freezer. Instead, they rot in the fridge. Next time you find yourself throwing out uneaten food, don’t view it as a loaf of bread in the trash. Pretend you’re throwing away the $3 that bread cost.
5. Unused Subscriptions
Remember that time you signed up for a free trial of Hulu? Or the class that needed Photoshop? Did you ever cancel those subscriptions? If not, you’ve been sucked into a classic money pit.
Young adults live in a time where many services are not tangible. Inherently, this is fine, but it makes it very easy for these services to go unused and the subscriber doesn’t notice. The more subscriptions you collect, the more difficult tracking them can be.
Every time you enter credit card info, you should be taking notes of your transaction. If you get a 14-day free trial, put a reminder in your phone to cancel after 13 days. Services want you to forget, because there’s lots of money to be earned when people automatically make a payment each month.
6. Going Out (When You Don’t Want To)
Young people go out, enjoy life, and try new things. All of this is great, and I wouldn’t encourage anyone to be a hermit. We also tend to have friends who want to do everything under the sun: ax throwing, hookah, wine & paint nights, the list goes on. Often, people agree to these events when they don’t really want to go.
Be social, but don’t spend money just because you feel obligated to attend an event. I see many people begrudgingly attend events after work where they have no interest. Not only does this waste your time, it sucks away your money.
Save your dollars for outings you want to attend. In my experience, I spend less with the people I want to see. As I get older, I understand my relationships won’t deteriorate by skipping events I do not want to attend. If I continuously spend money just to save face, I’m also going to lose time I’d rather spend elsewhere.
If you want to save money, you need to address issues before they escalate. The more you ignore problems, the harder they become to solve. These resolutions also increase in cost as time progresses.
“Later” is an expensive destination. If you pay your credit card balance later, you’ll accrue interest. If you ignore that noise in your car, you might need to replace your brakes. These costs could have been reduced by addressing issues in a timely fashion.
Settling your issues quickly will make them more manageable. It will also give you peace of mind knowing that you don’t have hundreds of obligations hanging over your head. Big problems aren’t just frustrating: they’re costly.
Dodging the Money Pits
Financial comfort is a valuable feeling. It’s better than many of the temporary luxuries we spend money on. If you are going to spend money, you might as well enjoy the rewards. When you get sucked into a money pit, you lose cash and pleasure.
People who are new to personal finance can easily overlook some of these expenses. Everyone is going to make some financial mistakes, but the fewer you make, they more you can save.
Managing you finances can feel like a full time job. There’s some merit to this, but knowing the areas where you overlook poor habits can prevent your savings from falling into a money pit. Focus on keeping your money in your own hands. Spend it how you want, save it when you can, and lose as little as possible.
Originally published at https://www.michaelbeausoleil.com on August 25, 2020.