All too often we get fixated on ways we can create income in an effort to improve our finances. But you can also save money by reducing financial wastage. Guest writer, Nick Petrovic, talks us through four ways to stop leaking money and start saving.
Just like purposeful spending, wasting money can become a habit – an accumulation of small amounts that, over time, can mean the difference between a usable savings fund and forgotten intentions. When financial comparison website Mozo turned their attention to money wastage, they found that Australians are spending $25 billion per year on avoidable expenses. And the top four of their money-wasting list included:
- Credit card interest – $6.16 billion per year
- Tobacco – $5.52 billion per year
- Household food waste – $5.20 billion per year
- Gambling – $2.57 billion per year
Also featured in the top 10 were excess mobile phone charges, traffic fines and household energy waste. It’s clear that money can easily and quickly trickle away by way of common expenses. Luckily, however, the holes can be patched.
Buy what you need and use what you buy
It may seem obvious, but basing your one-off and ongoing purchases on necessity is vital. This means regularly inspecting your needs and adjusting accordingly. As soon as spending becomes habit, necessity is no longer the driving force, so aim to treat each purchase as a business decision and question whether the purchase is in your best financial interest. Ask yourself, do I really need this? Is the benefit greater than the cost? How likely am I to use this product?
Track your wastage
Let’s consider the example of food wastage. Perhaps the most prominent reason we willingly waste food (and in turn the money used to purchase it) is because it is a form of delayed waste. We would never think of purchasing an apple only to toss it in the bin. However, we are happy to do this after some time has elapsed. The best way to overcome this is to track your usage and wastage.
Remind yourself or even record the monetary value of the food (and other products and services) that are being disposed of. Rather than simply calculating your expenses at the end of the month, calculate the percentage of those expenses that were not utilised, and use this figure as a motivator to make better choices the following month.
Address avoidable fees
We can’t avoid all charges in life, but there are some fees we can steer clear of by simply adjusting our behaviour or understanding the terms and conditions of the services. Late fees, overdraft fees, interest rates and excess usage fees are just some examples of charges that can be avoided or at the least minimised by adjusting how you manage your spending.
Learn to negotiate
When we automatically accept prices as fixed, we are in essence paying more than we are required to. Shop around and always ask for what you want. We often feel shy or assume that there is no room for negotiation, yet many retailers and service providers are often willing to match a competitor’s price.
We typically avoid acknowledging our wastage – whether out of guilt, denial or even ignorance. In reality, however, when we are able to take an honest look at not only what we spend our money on but also the various ways we throw it away, it gives us yet another way of improving our financial situation. It’s always better to be informed, so next time you are considering how best to manage your money, ask yourself what financial holes are keeping you from reaching your goals?