The average American household spends $55,978 per year, according to data from the Bureau of Labor Statistics. Unfortunately, we’re not always spending our money wisely. Forty-four percent of people admit lifestyle purchases – like dining out, spa treatments, travel, and movie tickets – keep them from saving less than they should every month, a Wall Street Journal survey found. And we’re not just throwing money away on little luxuries, like that extra glass of wine at dinner or new pair of designer shoes. Many of us are also wasting precious dollars on essential purchases by failing to shop around for insurance, hitting the grocery store when we’re hungry, and making other simple spending mistakes.
Given our loose spending habits, is it any wonder Americans are financially stressed? Almost two-thirds of people (including 46% of those making more than $75,000 a year) don’t have enough money to cover a relatively small unexpected expense, like a $500 car repair, a survey by Bankrate found. Frivolous spending isn’t entirely to blame for our sad bank account balances. Stagnant wages and rising costs for health care, education, and housing are big reasons why many people can’t get ahead. But when you couple those big-picture economic challenges with the small-scale spending mistakes people make every day, it’s a recipe for financial disaster, especially when you realize that even relatively small amounts of saving – as little as $250 for low-income families – can be enough to prevent a money-related crisis.
“Saving isn’t pointless … These days, it’s essential. It’s what stands between you and the financial shocks that could send your life into a tailspin,” explained financial expert Liz Weston in an article for NerdWallet.
If you’re one of the many Americans who is wondering where all your hard-earned cash went, it’s time to take a close look at your spending. We’ve rounded up 10 ways you may be wasting $1,000 or more per year. By plugging just one of these stubborn budget leaks, you could be able to increase your savings and your financial security significantly.
1. Not cutting the cable cord
Potential savings: $99 per month, or $1,188 per year
It’s time to join the millions of Americans who have already cut the cable cord. Ditching Time Warner or Comcast could save you $1,188 per year, based on an average monthly cable bill of $99. Streaming services like Netflix or Hulu, which cost between $8 and $10 a month, can help you fill the TV void in your life, and you also can buy stand-alone episodes of your favorite shows from Amazon or iTunes.
Still not convinced you can live without cable? Here are all the reasons you really don’t need cable anymore.
2. Buying coffee at Starbucks
Potential savings: $21 per week, or $1,092 per year
Coffee seems like an affordable indulgence until you realize how much all those vanilla lattes and caramel macchiatos are costing you. The average American is spending $21 per week to get their caffeine jolt, a 2013 survey by Accounting Principals found. Start brewing your own coffee at home and you could save more than $1,000 per year. Even cutting your trips to Starbucks in half could save you $500.
3. Lunch at work
Potential savings: $36 per week, or $1,872 per year
Sandwiches at the deli downstairs and leisurely lunches with your co-workers suck the money right out of your wallet. Americans waste $36 on lunches during the work week. Brown bagging it could save you $1,800 annually. Need ideas for what to pack? These make-ahead freezer lunches are better than any frozen meal.
4. Not saving for retirement
Potential savings: As much as $1,815 per year
If you need a little motivation when it comes to saving for retirement, keep this in mind: Putting money in tax-deferred retirement accounts like an IRA or 401(k) saves you money today. A $5,500 annual contribution to an IRA saves you $1,375 on taxes if you’re in the 25% bracket and $1,815 if you’re in the 33% bracket. You will have to pay income tax on those contributions eventually, but the short-term savings are definitely a plus.
5. Carrying a balance on your credit cards
Potential savings: $2,000 or more per year
The average household has $15,310 in credit card debt, according to NerdWallet. You’ll pay more than $191 in monthly interest on a debt of that size (assuming you have a 15% APR) or more than $2,200 per year. If you only make the minimum payments, it will take you decades to rid yourself of the debt and the expensive interest charges. To avoid the debt trap, always pay off your credit card balances in full. If you already have debt, know that the faster you can pay it off, the more money you’ll save.
6. Gym memberships you don’t use
Potential savings: $696 per year or more
The average gym membership costs $58 a month, or $696 per year. You’ll pay much more at fancy gyms like Equinox, where some monthly packages cost upwards of $200, while unlimited barre or yoga classes can easily cost $100 or more per month. The cost may be worth it if you work out regularly, but most people don’t. Fewer than half of health club members visit the gym more than 100 times a year, or roughly twice a week, according to the International Health, Racquet, and Sportsclub Association. Either resolve to make better use of your membership or look for free ways to work out.
7. Wasting food
Potential savings: $1,350 to $2,275 for a family of four
We can’t live without food, but for many Americans, a trip to the grocery store is the same as throwing away money. The average family of four loses between $1,350 and $2,275 every year due to confusion over expiration dates, spoilage, and wasted leftovers, according to the National Resources Defense Council. Better meal planning, more awareness of food safety issues, and fewer impulse purchases can all help you save at the supermarket.
Potential savings: $2,292 per year
A pack-a-day habit will cost you more than $2,000 per year, based on an average price of $6.28 per pack, according to estimates from Smokefree.gov. (That’s not even accounting for the health costs of smoking, which the American Cancer Society estimates to be $35 per pack of cigarettes.) Even cutting your consumption by half will save you over $1,000, though the best move, both for your health and your wallet, is to quit entirely.
9. Impulse shopping
Potential savings: $1,000 a year or more
Five out of six Americans confess to making impulse purchases on occasion, a CreditCards.com survey found. These little treats can add up in a big way. Half of people surveyed said they’d spent $100 more on an unplanned purchase. If those impulse buys happen on a monthly basis, that’s $1,200 out the window every year. Some people succumbed to even bigger impulse buys – 20% said they’d dropped $1,000 or more on an unexpected purchase. Most impulse buys happened in store, not online, and younger people spent more freely than older adults. Leaving your credit cards at home or staying away from the mall can help you avoid overspending on stuff you don’t really need.
10. Paying high investment fees
Potential savings: Thousands of dollars per year, depending on the size of your portfolio
Paying 1% or 2% in investment fees every year may not sound like much, but it “has a massive corrosive impact” on savings, Laurie Rowley, co-founder and president of the National Association of Retirement Plan Participants, told Marketwatch. How much you’re losing every year depends on your balance and the fees you’re paying, but it could be thousands of dollars a year on a $500,000 portfolio according to Betterment, a robo-advisor which offers low-cost investment management services. Worse, those losses add up over time, potentially leaving you with hundreds of thousands dollars less in savings over the course of a lifetime, studies have found.
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