Frank over at Bad Money Advice recently took the Baltimore Sun to task about how money really gets wasted, and I agree with him. We’ve all heard about the various money drains: the latte drain, the gym drain, and the failing to use the library drain among others. But in the real world, these expenses are minimal at best. On a monthly basis, a few lattes, a $35 gym expense, and two or three books from Amazon would add up to less than $80. Nothing to sneeze at but there are some much more serious drains that really add up to a whole lot more money. Getting these under control would have a much bigger impact than giving up a latte or two.
And before you think I’m on top of things … I’ve made ALL these mistakes.
Too Much House Drain
Let’s be honest. How much house do you really need? “We like to entertain” is the fru-fru excuse you hear on HGTV, but gimme a break. How much real “entertaining” do you do? What, do you need a stage or something? Buying too much house is probably the top money drain of our modern society. I frequently look around at my home and marvel at the wasted space, the unused space.
Buying just $50,000 more house than you really need winds up costing you much more than just $50,000. There’s interest, taxes, maintenance, repairs, furniture, frequent “updating,” and cleaning, not to mention the wasted resources. Chances are you’ll only use three rooms 90 percent of the time you’re at home!
Too Much Car Drain
Buying too much car used to be the obvious fault of young professionals, but with the advent of home equity loans and some slick marketing, now buying too much car is as common as credit cards. Companies are constantly looking to twist and segment a market so they can exploit any unrecognized hunger. Lexus found that market by creating a luxury car that originally was the price of a lower end Cadillac or Lincoln, but much nicer than a Ford of Chevrolet. Add is a little marketing and BAM! a Lexus in the driveway at Christmas (with a big red bow of course) became the status symbol of choice.
Buying too much car hurts your budget over and over. Why? Because a car is a liability – it never produces income and constantly loses value. Solution: buy a good quality vehicle that gets you where you need to go and let your savings account balance be your personal status symbol.
Too Much Private School Drain
This is a touchy subject for me. I do have my children in private school but I’m constantly wondering if it truly is worth it. Our school isn’t that expensive when compared to many others. I recently looked at one school in the Dallas area that was $15,000 per year per student! I’m not paying quite that much, but the amount is enough that it makes me wonder if I’m getting my money’s worth. I wonder if I should put them in the local public school … it IS the top rated school in the entire state.
This is obviously a VERY personal decision but if you’re in a tight budgetary situation, this large expense could be one that breaks you free from money worries, allows you to build your emergency fund, and keeps you on budget.
Too Much Vacation Drain
If there’s a place where I have a weakness, it’s in taking vacations and travel, BUT I have started paying for them in cash rather than charging up the credit cards. I’ve also been able to use hotel points, airline miles, and other perks and benefits offered by various companies I do business with so my travel expenses are minimized.
One great thing about the Internet is that it allows anyone to research ways to save money and then take advantage of those finds. Don’t be afraid to research the best deal, then try to get a local travel agent to beat it!
Too Much Miscellaneous Drain
In reality, there is no such thing as miscellaneous. Everything has a category. Are you buying too much ____ (you fill in the blank). What is your weakness? Planning too big of a wedding? Buying too much new electronic equipment when it comes out? Dining out every meal? Buying too much in season tickets? Buying too much in an RV, boat, 4-wheeler, SeaDoo, or hunting club? Buying too much country club membership?
These are the REAL top money drains. Sure, the little things can add up, but rarely do 3 lattes per week compare to a $7,500 exotic vacation every two years. A $35/month gym membership that you only occasionally use doesn’t compare to spending $50,000 too much on a home, and a couple of books from Amazon each month will never compare to buying a new car every two or three years.
“Mind the pennies and the dollars will take care of themselves” is wrong
We have to mind the dollars AND the pennies! If you find yourself in a financial tight spot, look at where you can make the biggest impact first, then move down the list to the lattes and gym memberships. If you’re just getting started, think about how much of these items you really need and make the wise decision to give top priority to your retirement, your emergency fund, and your savings account.