Even if you don’t like to
think of yourself as ‘poor’, it’s important to look at your finances and where
your money goes.
You may be living pay
check-to-pay check because you’re overspending. Call it wasting, overspending,
or indulging – however you look at it, you’re throwing money out the window
just for instant gratification.
What if instead, you
focused on the future? At first, cutting out the 7 things in our list will feel
like a sacrifice.
You may hate it and be
angry about it at first, but over time, it gets easier, especially when you see
your bank account adding up, and your future looking brighter and brighter.
So, what do poor people
waste money on?
Let’s dive into the list now.
CREDIT
CARD DEBTS
Credit cards are a loan. You
use the money you don’t have to buy things today. If you make only the minimum
required payment, you increased the cost of that item within the first month.
If you let the bill sit
unpaid (only making the minimum payment), the cost continually increases.
It’s called interest and
it’s something you shouldn’t pay if you can help it. Unless your credit card
purchase is for a life-threatening emergency – don’t use it.
The only exception is if
you know you have the cash to pay it off in full. A credit card can be useful
for large purchases because you get extra protection (extended warranty,
protection if you don’t receive the product, etc.).
If you don’t pay the bill
in full, though you pay interest on your interest. The outstanding balance
compounds interest daily.
That’s a lot of interest
just for a purchase that you may not even care about in a month or two. Unfortunately,
credit card usage is addictive.
Once you start, you can’t
stop until you’ve maxed out your credit card and are faced with an unaffordable
bill and thousands of dollars in interest.
Best practice:
Don’t use credit cards. Lock them up or give them to someone you trust. If you
have a life-threatening emergency and can’t help it, consider it then. Otherwise,
don’t touch them.
IMPULSE
SHOPPING
Shopping is a necessity
sometimes, but it’s easy to fall into the trap of impulse buying. Those
purchases that look so necessary at the time are quickly forgotten about after the
‘shopper’s high’ wears off.
When you shop, it’s
important to differentiate between needs and wants. It’s a fine line and it
will take some soul searching, but once you get the hang of it, you’ll find it
easier to do.
Needs are something you need
to survive. Shelter, food, and transportation are examples of needs. Clothing
is another good example, but this is where the ‘grey area’ starts.
You need clothes, but do
you need brand name clothes or more clothes than is necessary to get through a
standard week? It’s easy to blur the lines and overspend fast.
Best practice:
Make a list of needs and wants. Focus on the needs and make a list when you go
shopping. Don’t stray from the list.
If you do, put it back
and give yourself a cooling off period. Wait at least 48 hours, but the longer
you wait the better.
If the item is still on
your mind after that time, figure out how to pay for it in cash– don’t use a
credit card, and don’t ruin your budget.
When you have to save for
items, you’re less likely to go over budget or buy unnecessary things.
TECHNOLOGY
Technology changes at a
pace faster than most people can afford. It’s easy to get caught up in the
flashiness of new features and products, but why?
Sure, new iPhones come
out all the time as do bigger and better TVs, computers, and tablets. Do you
need them, though?
Ask yourself is your
current technology working fine? If so, why spend money you don’t need to
spend?
If you charge it or lease
your phone (which is common), you’re adding to your monthly bills and possibly
costing yourself interest.
Best practice:
Use your technology until it no longer works. Ignore the latest releases, stop
following pages that promote the technology and focus on your budget, not what
‘bigger and better’ things new technology can do.
In less than a year that
technology will be outdated too.
BANKING
FEES
When’s the last time you
looked at your bank fees? Most people don’t even realize they pay them because
the bank withdraws the fees right from your account. You shouldn’t pay banking
fees.
There are plenty of banks
with free bank accounts. Some you have to meet certain account balances or have
a specific number of transactions a month, so pay attention to the fine print.
If you aren’t sure if you
pay fees, pull your bank statements from the last few months. If you see bank
fees on there, it’s time to change.
Best practice:
Shop around for a bank account. Look specifically at monthly maintenance fees,
ATM fees, and teller fees.
Even a $2 - $3 fee can
add up. For example, if your ATM charges $3 per transaction and you use the ATM
10 times a month, that’s $30 wasted a month or $360 per year.
KEEPING UP WITH THE LUXURY PREMIUM PRODUCTS
We’re all guilty of it. We
see our neighbours with a new fancy car, amazing furniture, or designer
clothing and we think ‘I need to do that too.
Don’t worry about trying
to fit in because of status or class. Instead, focus on fitting in because of
who you are and not how much money you have.
You don’t know how your neighbours,
friends, or even family members bought the items you’re now thinking you need
to buy.
They could be head over
heels in credit card debt – not somewhere you want to be.
There’s no way to know if they paid cash and can truly
afford the items, but you know what you can and can’t afford.
Best practice:
Focus on yourself and what you need/want. Don’t think you have to buy what
everyone else does to fit in.
The world would be an
awfully boring place if we all looked the same and had the same things. Put
your horse blinders on and focus on yourself and not anyone else.
BUYING
COFFEE FROM COFFEE SHOPS
Buying coffee from coffee
shops Coffee shops are all the rage right now. Every time you watch TV, browse
the internet, or go on social media, you’re bombarded with new drinks or people
hanging out at coffee shops.
If you’ve started this
habit, you’re throwing money out the window. Let’s look at the cost.
If you buy a fancy coffee
drink at $5 each and you go once a day for 5 days, that’s $25 a week, $100 a
month, and $1,200 a year in coffee.
Now compare that to
buying coffee and making it yourself at home. You’ll save hundreds of dollars
that could be spent or saved for something much better.
Best practice:
Skip the coffeehouse, or save it for a rare treat, not a regular habit. If you
love ‘fancy’ coffee drinks, head over to Pinterest or Google your favourites drink
and chances, are you’ll find a much cheaper DIY version you can make at home as
much as you want.
GYM
MEMBERSHIPS
Gym memberships – we love
to hate them, right? You want to get fit and think the only way is to join the
best gym in the area.
It’s not and it’s
actually a waste of money, especially if it’s more of a novelty to say you
joined the gym but don’t actually use it.
Best practice: Find ways to work out at home. YouTube is a
great resource. You can get some of the best workouts for free.
If you need something
more structured, invest in weights or join a virtual gym membership for a
fraction of the cost.
BOTTOM
LINE
Wasting money, no matter
how much you have is never a good idea. If you live pay check-to-pay check or
don’t have any money saved for the future, it’s time to stop wasting money.
Take an honest look at
your spending.
Pull your bank statements from the last 12 months and
look closely at where you spend.
Most people find many
areas they can cut back and/or make changes. Even small changes add up.
Don’t look at it on a
monthly basis, but rather how much you can save over a year or more.
Then think about the
compound earnings. Every dollar you save today will be worth more tomorrow –
keep that in mind as you cut back and stop throwing money out the window.
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