Do you hoard money instead of invest? Do you grocery shop based on the emptiness of your cupboards? (Guilty.) Do you splurge, buy cheap, or shop for things you don't need? (Yep.)
If yes, you might be wasting money where you could be saving money!
I've discovered some habits that lead to wasted money (even though they seem like good habits). Sometimes, "good money habits" aren't necessarily better for your wallet...
1. Saving Money
Don't take this the wrong way, saving money is a great habit. You should stick to a solid savings plan; experts recommend at least 10% of your net monthly income.
The problem is, if you're only saving money, i.e. hoarding it, you're not investing money. Investing is critical if you want to maintain your standard of living in retirement. You can start with a simple investing plan, like a 401(k) or Roth IRA.
If you're wondering if you should bother contributing to a 401(k) plan, the answer is yes, you should. Especially if your employer offers contributions. They often offer up to 3% if you contribute 6%, and if you don't contribute to your retirement plan, you would be missing out on an extra 3% salary. Not to mention, you'd miss out on the benefits of compound interest when you reach retirement. The earlier you start investing, the brighter your retirement future will look.
2. Grocery Shopping
Food is a major source of wasted funds in American households. In 2011, Americans spent an average of $4,229 on food per capita, according to Economic Research Service calculations, with 51% of that on food consumed at home and 49% on dining out.
There is no doubt that the price of groceries has increased. Look back to 1943, when an average of $15 per week was spent on food.
Now, Americans spend an average of $151 per week on groceries.
And our system of waiting until the cupboards run dry before hitting the store might not be the best approach to grocery shopping.
When our cabinets are empty, what typically happens is we make a list, then go shop for what we need. With this approach, we have no idea what prices will be.
Instead, we could look at grocery shopping in a whole new way, and save significantly. By shopping for sale items, we could be taking home much more of what we need, for far less cost.
Of course, this won't work with everything...like perishable items...but you can use it on other long-lasting shelf items. Shop the sales!
With fresh food, keep in mind what you're buying and how much. You can even get creative in your food-preserving techniques to keep food longer.
- Bread can be put in the freezer, and bought for low prices at a local bread store.
- Buy frozen fruits and vegetables instead of fresh.
- Learn how to safely can food if you have an excess of vegetables.
Furniture can be a waste of money if you're buying something that might not be essential. Before buying any new piece of furniture, ask yourself if you need it. Is it going to serve a purpose? Or is it for decor?
If you're buying expensive furniture, you may need a loan, or you might consider rent-to-own. My advice is to steer clear of rent-to-own. Interest rates are often really high, which means you will pay way more than you need to for a piece of furniture.
If you can find second-hand furniture from a friend or family member, those are usually the best deals! Also, look around at garage and moving sales. Sometimes, people who are moving are eager to get rid of their furniture. We once bought like-new couch set for $50!
4. Electronics & Appliances
Invest in quality, especially when it comes to electronics. Items that are cheaper tend to break down sooner. That means you'll be spending more money in the long run. If you buy a trusted brand, you won't be searching for a replacement as soon.
Clothing is a major money-waster because it can be so easy to get carried away. How many times have you bought a new dress, only to wear it once and then never again?
This has happened to me more times than I can count.
The most important thing to keep in mind is buy it only if you are 100% sure you'll be able to wear it more than once, on multiple occasions.
If you just got hired and are starting a new job, make sure you find out what the wardrobe requirements are before going out and spending tons of money on new work attire. You might be disappointed to find out that your co-workers dress casually, and you just restocked your suit closet.
Now, I'd love to hear from you!
Where do you feel money is being wasted in your life? Do you spend a lot of money on one thing? Share your thoughts and tips on how you found ways to use your money wiser!