Top 5 Biggest Money Wasters

Are you wasting your money? Here are some of the biggest wastes of money that you should be avoiding!

Don’t want to read? Click here to check out my YouTube video on this topic!

Everybody spends discretionary money, but there are a lot of people who may not realize just how much their discretionary spending adds up and how little benefit they actually get from some of these money wasters.

GOING OUT TO EAT 

Going out to restaurants can be a great experience to treat yourself or others to a nice meal and atmosphere, however, eating out can be extremely pricey.

Restaurant food prices are typically marked up around 300% from their wholesale costs, and this gets passed on right to you. 

Not to mention that this doesn’t even cover the expense of being waited on, so the additional 20% suggested tip is added on top of the already pricey food. And the genius of this is that it tricks us into thinking the price on the menu is the price we will be paying.

The average American spends $3,000 to $4,000 on restaurants every year and the prices only seem to be going up.  

It just makes more economical sense to save the money by cooking the meals yourself as the end price will be significantly cheaper, the time to cook your meal would likely be the same amount of time as going to a restaurant, and you can meal prep or have leftovers that would make other meals in the week much easier.

BUYING NEW CARS

Buying a car is typically the second most expensive item someone buys, right behind a house and the price of new cars keeps increasing. The average price of a new car in the US is about $37,000. 

What is alarming about this is that the average US individual income is about $40,000 so people are buying cars way out of their budget. Not only are these cars particularly expensive, but new cars see the most depreciation with a loss of about 60% of its value in the first 5 years.

It just doesn’t make sense to buy new especially since you’ll also likely finance the car and pay interest on your underwater asset. 

My recommendation is to buy a reliable used car as you will save tens of thousands of dollars in the long run.

ORDERING DRINKS

Drinks by far are the most marked-up item in any establishment, whether you are buying coffee, alcohol, or soda. Drinks are commonly marked up around 300% to 500%. 

Drinks prices can often sneak up on you since many drinks are not very filling and over time can add up to quite a lot of money.

If you’re going to drink anything other than water, it really makes the most sense to drink your other beverages at home – it is far cheaper.

TRYING TO IMPRESS OTHERS

Whether it’s a big house, fancy car, jewelry, designer clothes - whatever it is, if you’re spending money to impress others, you are wasting it.  

There is definitely a benefit to having nice things, particularly in a social setting, but if you’re living your life in debt or are struggling to pay bills in order to appear wealthy, this is not a healthy lifestyle choice.

My recommendation is to stick to a budget and try to find deals when you can. Otherwise, if you don’t need an expensive item, don’t buy it as most people don’t really care anyway.

CREDIT CARD DEBT

With the average credit card debt at around $6,000, this can be a major expense and a big waste of money.

Credit card interest rates on average are around 18% but it is very common that these interest rates creep up to 25% and even higher. Using 25% as our base, that is about $125 per month in interest. 

Paying off your credit cards and only spending within your budget will save you a lot of money in the long run, plus it will boost your credit score as an added bonus.

Those are my top 5 biggest money wasters – if you avoid these as much possible, you will be sure to save a lot of money!

---

7 Steps For Financial Freedom

Are you searching for ways to achieve complete financial freedom? Here are the steps you should take in your personal finance journey to set up your life to live financially free.

Don’t want to read? Click here to check out my YouTube video on this topic!

WHAT IS FINANCIAL FREEDOM?

Financial freedom is having 0 debt and enough money to live comfortably in retirement. This blog is going to cover the basic steps to do this in a traditional career path.

STEP 1: INVEST IN 401K UP TO COMPANY MATCH

First thing is first, you have to pay yourself first - this means investing for your retirement.

If your company offers a 401k match, you need to contribute up to that match because not only are you not investing in your retirement and losing out on years of compound interest, you are also not capitalizing on free money that your company would otherwise also contribute to you.

STEP 2: SAVE 1 MONTH EMERGENCY FUND

40% of Americans are not able to cover an unexpected $400 expense. You don’t want to be part of this statistic. 

Now more than ever it is apparent how critical having a savings account is and having 1 month of expenses saved up will help you if you have any sort of emergency, including broken appliances, medical expenses, layoffs, etc.

 I recommend putting this money in a “high-yield” savings account to keep this money liquid.

STEP 3: PAY OFF BAD DEBT

Bad debt really is anything with high-interest rates that does not contribute to your assets. Some of these include credit card debt, car loans, and yes, student loans.

You will want to pay these off as soon as possible, my recommendation is to pay the debt with the highest interest rate first, but some may prefer the “snowball method” of paying off the smallest amounts first. Either way, you want to get these financial burdens off of your plate.

STEP 4: SAVE 3-6 MONTH EMERGENCY FUND

Now that the bad debt is cleared up, we need to save for a bigger emergency as 1 month of expenses really limited if things go bad fast.

Depending on your career and risk tolerance, you will want to save 3-6 months of expense. You can mix these savings between high yield savings and bonds (maybe even index funds if you have a higher risk tolerance), but I recommend saving in low-risk investments or just putting it all in a high-yield savings account and calling it a day. This is your safety net and it should not be used as a high-risk fund.

STEP 5: INVEST 20% OF GROSS INCOME IN INDEX FUNDS

When you have your emergency fund set, we can now work on accumulating wealth. This means investing 20% of your gross income into index funds. You can do this in your 401k, IRA, brokerage accounts, etc.

Putting away 20% per year is all part of paying yourself first and with index funds averaging about 7% returns per year, the compounding effect will be substantial when you are of retirement age. 

No matter what the stock market does, keep investing. I recommend that you automate this so that you don’t get tempted to make unwise decisions based on fear or greed.

STEP 6: BUY PROPERTY

The investment that makes the most people become millionaires is real estate.

Your ideal property should have monthly expenses that are 30% of your gross monthly income. The expenses should include, the mortgage, interest, taxes, insurance, and HOA.

STEP 7: PAY OFF DEBTS OR MAKE INVESTMENTS         

The last step is to clean up your debts and make other investments with your excess cash. 

The largest expense in retirement is typically living expenses. By this time, you should pay off the rest of your mortgage to lessen your expenses.

After you have paid off your mortgage, I recommend using your excess funds to either save, invest in riskier assets, donate, really whatever you want!

Once you’ve completed all of these steps, you should be financially free and independent!

---