If you’ve ever been afraid to check your bank balance, you’re not alone. There’s even a name for that phobia: the Ostrich effect. In England, over 30 percent of young Britons prefer to “stick their heads in the sand” rather than face the facts of their financial life.
But in order to start saving money, we must first know where the money is being spent. More importantly, we have to identify where the money is getting wasted.
While one person’s wasteful spending may be another’s wise investment, there are a few clear categories driving financial drain in America and around the world.
Here are the five most common money wasters to avoid:
1. Eating Out
During the pandemic, American households saved a lot of money. In fact, they added over $13.5 trillion to their total wealth while in lockdown.
Though there are multiple factors responsible for this growth (including stimulus checks), many people were able to save money simply because they had fewer places to spend it. And what was the number one magnet for discretionary income pre-pandemic? Restaurants.
The Bureau of Labor Statistics reported that American households typically spend over $3,000 a year on restaurants. It’s no wonder that nearly 70 percent of Americans claimed that eating out was their primary source of wasted money. This statistic is consistent across generations, from Baby Boomers to Millennials.
And if you’re curious what Americans spent on delivery during the pandemic, here’s a statistic that might make you lose your appetite. In 2020, Americans spent a whopping $14 billion on pizza delivery alone.
Don’t shoot the messenger! We’re only here to report the facts, and according to recent statistics, many Americans spend a small fortune on alcohol every year.
As aggregated by Alcohol.org, the following statistics combine the average number of weekly drinks consumed in major cities per week along with the average cost per beverage.
Here’s a snapshot of what the average urbanite spends on alcohol:
- New York City: $2,029/year
- Miami: $1,996.80/year
- Houston: $1,219/year
- San Jose: $1,680/year
- Los Angeles: $1,909/year
Imagine the savings if drinking habits were reduced by as little as 25 percent per year.
Besides, cutting back on alcohol would save money in other areas. In 2020 alone, 21 percent of Americans admitted to “shopping while drunk,” spending an average of $423.72 on boozy purchases.
3. Lottery Tickets
The lottery may seem harmless enough, but believe it or not, it’s responsible for over $71 billion in annual spending. In fact, Americans spend more on the Powerball and scratch-off tickets than on movies, video games, and live concerts combined.
On an individual level, the average annual lottery expense per individual is $219.54. Lottery enthusiasts in Massachusetts and Rhode Island spend an average of $737 and $502 per person, over 1 percent of their yearly income.
While the promise of riches is undeniably alluring, the lottery is wasteful spending personified. After all, the 2021 Mega Millions jackpot had mind-numbing odds of one in 302.5 million.
You’re more likely to make a hole-in-one in a shark-infested tornado.
4. Throwing Out Food
According to the United Nations, Americans waste an estimated 133 billion pounds of food every year.
That’s a loss of $161 billion, or over a dollar and twenty cents for every discarded pound of food. In total, approximately 40 percent of our food supply is wasted every year.
So what does that look like on an individual level, and why is the problem so severe? Studies show the average American wastes 219 pounds of food every year, often because they misinterpret expiration labels or don’t freeze their food in time. Others report that food often gets thrown away simply because it doesn’t look “perfect.”
Perhaps this explains why the average American family throws out $1,600 in produce every year.
While these statistics are sickening on an environmental and global scale, their financial implications are equally shocking. Baby Boomers, Generation X, and millennials all report “uneaten or expired food” as their second and third highest source of financial waste, yet many claim they have no intention of altering this habit.
Imagine how much could be saved simply by shopping smarter and monitoring the refrigerator a little more closely?
- Paying Credit Card Minimums
Sometimes, you have no option but to make a minimum credit card payment. That’s okay.
Over time, however, relying on the minimum payment option could wreak maximum havoc on your financial health.
It’s all because of interest. As of July 2021, the average credit card debt in America hovers around $6,270. For the sake of example, let’s say we have a balance of $5,000 on a card with a 20 percent interest rate and a minimum payment of 3 percent.
If you only covered the minimum payment of $150, it would take you 220 months to pay off the principal. Because of compounding interest, you would then spend 18 years of your life paying a total of $10,860, over double what you originally owed. Worse yet, this example assumes you never make another purchase on the card until it’s paid off.
Obviously, paying debts in full is ideal. But even paying double the minimum would drastically shorten the payment schedule and save you thousands of dollars.
Want to learn more? Use this credit card minimum payment calculator to explore your payment options.
There’s a larger tragedy behind these statistics: Americans simply aren’t saving for retirement or putting enough money aside for an emergency fund. In fact, an Acorns study found that 41 percent of millennials spend more money on coffee ($2,008 a year) than they invest in their retirement accounts.
Nobody’s perfect with their finances, but by identifying areas of wasteful spending, you can live confidently while preparing for your future.
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