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The idea behind this article is not to tell you, or advise, how to spend your hard earned money. The goal is to expose some pointless money drainers to enable you block the leak and spend the savings on worthwhile ventures. It’s not important whether you are very prudent or a novice to budgeting; most of us have drainers that leak money quietly unnoticed. Tiny drops make an ocean, with this adage in mind, once you identify the areas of wasteful spending remove them and you’ll soon be able to save, invest or break the circle of anxiously waiting for your pay that comes at the end of the month.
These are 15 common ways people waste money, but by no means exhaustive. See if any of these sound familiar, and then look for ways to block the drainers.
1. Buy used instead of new. Gone are those days when people must buy things new. The taboo or shame tag on fairly used or second hand products are no longer there. Take the example of cars which lose sizable value in the first few years thus spiralling millions of Naira or thousands of dollars down the drain. Set aside the need to show off your brand new minty car to your family and friends that you ‘have arrived’, an unnecessary need most times triggered by societal pressure. The question is whether you really need that new car, or better with a recent used model which enables you put the saved cash on something useful. Recent used models less than five year old can be a good deal because then you get a car that’s running fine for a fraction of a new car price. In addition you'll pay less car insurance and taxes. This advice doesn't rule out the merit of a new car if it's affordable, but if you're watching your spending then the used car might be considered as an option.
Other useful second hand or used buys are exercise equipment, freezers, cookers, fridges, furniture, laptops, cameras, toys, books, clothing, shoes, and loads of others. In fact you can buy most things in used form these days. Just go online and search. But do your homework well.
2. Pay off your credit card in full. If you have a N350, 000 ($1,000) balance on a card charging let’s say 15%, you blow N52, 500 ($150) every year on interest. That's money you could certainly put to better use elsewhere. Get in the habit of paying off your balance in full each month.
3. Don’t do impulsive shopping. When you buy before you think, you don't give yourself time to shop around for the best price. Resist the desire to make an impulse purchase by giving enough time to reflect on that really hot iPhone that grabbed your attention. Allow yourself a cool off period to do a proper pro and con analysis. If you still want to make the purchase a day or so later, compare prices with other stores, check your budget and go get it.
4. Be conscious about ATM use. Some tens of Naira, or cents, here and there may not seem like a big deal. But if you're frequenting ATMs outside your bank's network, the surcharges can add up quickly. Put that money back in your pocket by using ATMs in a surcharge-free network.
5. Reduce dining out. A habit of spending N3500 ($10), N5000 ($15), N7000 ($30) per person for dinner can put a big hole in your pocket. Add a N1750 ($5) for lunch, and another N1750 ($5) for breakfast, and you've got quite a leak. Learn to cook, pack your lunch and brew your coffee at home and you could save a lot of money each month.
6. Let your money work for you: If you are stashing your savings in your checking account or a traditional bank account, you are wasting money. You could put it in a high-interest online savings account and get paid to save. You can also put your money in a high net worth company that will yield mouthwatering return on your investment.
7. Buy standard instead of brand name. Sometime ago, I wanted to buy Aspirin from a Pharmacy. My favourite brand was not available, so the pharmacist offered me an unknown but much cheaper alternative – about one-third the price of the known brand. ‘What’s the difference I asked the Pharmacist?’ ‘Nothing except the price’, he replied. From groceries to clothing to medication, you could save money by choosing the unknown brand over the appealing label. And in many cases, you won't sacrifice much in quality. Then again it’s a matter of individual choice.
8. Save on electricity. Of the overall electricity used to run home electronics, 40% is consumed when appliances are switched off. Appliances with a clock or one that is remotely controlled are typical culprits. The obvious way to save electricity is to pull the plug on your electricity drainers. So don’t only switch off, pull off the plug as well.
9. Be alert to bank charges. I got a shock one time when charged £25 for overdrawing my account for the month, so it pays to keep checks on your balance. Plus, are you still paying for a cheque account? Free deals are everywhere, but ensure they’re truly free. For instance, will the bank charge a fee if your balance drops below a certain level or if you download their software appliance? That's not free.
10. Only buy things you need. This sounds obvious, but how many times have you seen something on sale and thought you couldn't pass it up? Even if something is 50% or 75% off, you're wasting money if you aren’t going to use it. I know some ladies who have their wardrobes filled with ‘sales’ clothes, shoes bags – untouched for months, or even years. In the end bagged for the charity shops. Another culprit is coupons; though admit it can be a fantastic way to save on grocery bills. But if you purchase things you wouldn't have in the first place just to use the coupon, you're wasting your money. The same goes for buying in bulk. A bargain is not what it is if it remains unused on your shelf and eventually chucked out.
11. Do you really need ‘extra’ cars? Okay, so a car is a necessity for most people. But face it -- cars are a huge drain, from their loan payments to insurance fees to gas and maintenance costs. Own more than one car and you'll double or triple those expenses. Ask yourself if that second or third car is really necessary. Are you holding on to an old car for sentimental reasons? Can you or your spouse take public transportation to work? I have seen five or six cars in some families' garage and wonder if they've now opened a car sales shop.
12. Shop in open market stores. Shopping at an open market store can be a hit and error, but not all is rubbish. If you know what to buy, you can find some real bargains on clothes. For instance, a shop in an open market may charge N3500 ($10) for a pair of branded jeans versus the N15, 000 ($40+) at a chain store. You can also get good bargain on food, groceries, fruits, confectioneries, toiletries, fruit drinks, and some household cleaning stuff.
13. Keep away from unhealthy habits. Smoking is an expensive hobby and also damages your health. For instance if you take a pack of cigarettes a day, this translates to a huge amount of money at the end of the year, which could have been spent on a gym membership. Junk food and regular alcohol consumption habit is also a big money drainer; not forgetting the hospital bills you’ll incur to reverse any illnesses or diseases in the long run.
14. Don’t be content about insurance. You pay your insurance bills promptly without thinking twice. You haven’t shopped round to see if you’ve actually got the best deal there is. There are big variations in rates between insurers year to year. Perhaps it will be wise to reevaluate the insurance on your car, home, and rentals to ascertain if you’re on the best insurance deal. It's also useful to evaluate your insurance requirements, for instance you can reflect on using the same insurer for your home and car insurance and get some sizable discounts off for a multiple line policy.
15. Don’t incur cost on needless services. How many cable channels can a person watch? The cable TV in one of my friend’s house has over 100 channels and more. I can’t remember her watching more than ten channels in a week. There are so many channels she doesn’t even know exist, yet pays an exorbitant monthly charge. Again do you really need all those extra features for your cell phone? Are you getting your money's worth out of that gym membership? Are you taking full advantage of your magazine subscriptions? Take a look at what you're paying for and what your family is actually using and trim accordingly.
Photo Credit: Creative Commons.