A financial author, David Back, calls the small amount spent here and there, the Latte Factor. It basically aims to teach that had we not spent so often on small things, we would have ended up making money quicker than usual.
We often hear ourselves thinking about where the money is actually disappearing to. A plain and simple way to keep a check on your finances is to make sure you track each of your transactions, no matter how small of a purchase you make.
Also, this method of keeping a track is not only for the people making grands, but rather an individual belonging to any socio-economic background can benefit from this.
Here are some common ways that we overspend money:
1- Amazon purchases
While Mr.Back was introducing the idea of Latte Factor with a friend, it turned out that he had spent around $11,000 in the past 4 years on purchases from Amazon. The conversation led to more consideration when it was noticed that the only big purchase he had made was of a $1,000 laptop. But most of the other purchases were of items in the range of $10-$20.
Such small purchases don’t mean that significant at the moment, but when looked upon the history of purchases over months, it tends to make a bigger difference.
If you’re wondering when to track your spending then try doing it after a month. However, it is recommended to do so after 3 months to get a better idea. This way you will be able to find out what you spend the most on.
2- Eating out
The most common way of overspending is dining out. However, dining out is not the only form of eating out found in the daily lives of people. The quick stops at the vending machines, daily lunches at the cafes, those formal lunches with the colleagues, even those take-outs from your favourite pizza shops on the way home adds to the habit of overspending.
3- Unused utility services
There must be some services that you’re paying for but you hardly ever use them. Take some time out to check if you really need all of those TV channels. Filter them out. Then take a look at your monthly bills to check the number of utility bills you’re paying for. See if you can save some money by cutting off the ones that are least productive. You may just get surprised at how much you can save up by doing this.
4- Books and magazines
Being a bibliophile has its own expenses. A regular book reader develops a habit of buying lots of books. Sometimes they hoard up books just to add into their collection. It works like an addiction of collecting books but if you get a chance to track the amount of money being spent here, you may want to cut down on the habit a little and start saving.
Coffee is like an alarm clock for waking up that drowsy brain, but in doing so, it becomes a daily ritual. No matter how cheap your daily dose of caffeine may be, once you add it up, it ends up creating a big amount. Cut down the habit by focusing on how you can invest the money on something rather productive, like a student loan maybe?
6- Extra banking fees
When we neglect the need to check our bank statements monthly, we tend to end up paying for something that is quite easily avoidable.
If you ponder a little, you are paying around $20 or more every month for the wrong kind of banking plan or the times you were too lethargic to walk to the other street to withdraw money. Make it a habit to check your monthly bank statements to get more insight about your spending.
7- Online purchases
Quit connecting your credit card to your phone. It prevents us from thinking twice about whether or not we actually need to buy the boosters to level up on that game, or basically to shop online.
Do you know that smartphone users are known to spend around $25 billion on online applications?
8- Lottery tickets
The word ‘Lottery’ is tempting enough for anyone looking to make quick cash. It makes us forget the chances of losing the money if we don’t win. All we care about is spending the expected amount. It is better to stay away from such things. You can’t make a living with some ticket worth $5. A healthy lifestyle needs hard work and consistent efforts.
Consider quitting these 8 areas of overspending money and see how much you end up saving each month.