What are the biggest money sinks that people can cut out of their lives to save more?
Many people don’t even realize that they have a money sink, much less what their money sinks are. We are so heavily marketed to and conditioned to spend in America. Using a debit or credit card feels so removed from real money that it doesn’t even feel like spending. It’s easy to spend without paying attention.
If you want to find the leak in your budget, take these steps. You might be surprised at what you find.
Step 1: Take an Inventory of Your Spending
Go to your checking account and pull up 30 days’ worth of spending. It doesn’t matter what 30 days, just as long as they are consecutive. Every time money came out of your account during that time frame, categorize it by writing it down in a category. Some common categories are food, entertainment, gas, and rent or house payment. Feel free to make any category that fits your spending habits.
Next, add up all the categories. Is there one that made you say “WOW! I had no idea I spend that much on (fill in the blank)!” That is the money sink or leak in your wallet.
Step 2: Reflect on Your Goals
Ask yourself, “Does this spending move me towards my financial goals?” If not, you have just discovered the money sink that you should cut out or reduce in order to save more. Now is the time to decide to do something about it. Sometimes, it’s easier than you think. If you stop every morning for coffee, you could be spending over $1,000 a year just for that one item. By simply preparing a cup of coffee at home, putting it in a travel mug, and taking it with you, you have stopped that leak. Now you have money to put towards your emergency fund or financial goals. You also still have the caffeine you need to get your day started.
Step 3: Remember to Enjoy Life
It’s important to note that if it’s something you really want, it’s okay to have it! Make sure you are purchasing it in a manner that is reasonable and doesn’t damage your long-term goals.