We are a nation of consumers. If we have money, we spend it. Unfortunately, many of us have a habit of spending money on things we don’t need. The problem is, we do need clothing, insurance, food, and housing. And because we need these things, it’s easy to overspend. The trick is to pay for what we need without going overboard.
Here are five things Americans tend to waste money on and some spots you might be able to trim your budget.
1. Fashion
According to a recent survey from the U.S. Bureau of Labor Statistics, women and girls spend an average of $545 on clothing annually. Men and boys spend around $326. However, those are averages, which means some people spend less and others spend more. And those who spend much more often chase the latest fashions.
If you’re someone who jumps on the latest fashion trend, you may be throwing money away. That’s because truly hot trends don’t last for long, and just about the time something goes out of style, you find yourself purchasing the latest trend.
A better bet for most of us is to buy classic pieces that aren’t going to look “so 2022” in 2023.
2. Insurance
Insurance is essential to our financial health. Whether it’s home, life, or auto insurance, a good policy may be all that’s standing in the way of financial ruin. Still, it’s possible to overdo it. Here are some examples where policyholders might be able to cut back.
Mortgage life insurance
It’s less popular than it once was, but some people purchase a policy that promises to pay their mortgage off if they die. It’s almost always a waste of money. Let’s say you buy a home with a balance of $300,000. The cost of a mortgage life policy worth $300,000 is typically far higher than the cost of a term life policy with the same death benefit.
Collision insurance
If you’re driving an old car with a low Blue Book value, paying for collision coverage may not make sense. While drivers always need liability coverage (to pay for any damage they may cause), you can ask your insurance agent how much you’re likely to receive if your car is totaled. If the amount is tied to the vehicle’s value, you may find that paying for collision coverage isn’t worth it.
Rental car coverage
It could pay to review your auto insurance before buying rental car coverage. Often, auto insurance on personal vehicles also covers rentals.
Identity theft coverage
Check your credit cards to see if any offer free identity theft coverage. If so, you may not need a separate policy. The same is true if you’re tempted to purchase travel insurance. Many credit cards cover issues like lost luggage and trip cancellation. Before paying extra, make sure you don’t already have the coverage you need.
3. Groceries
It’s easy to overestimate how much food we need to buy. According to Feeding America, nearly 40% of all food in the U.S. is wasted as Americans toss out an estimated $408 billion worth. Consider this: Even if you’re “only” throwing out $10 worth of groceries each week, that’s $520 per year. Buying just the food you believe you will eat could leave you with an extra $520 to save or invest.
4. Memberships and subscriptions
It’s easy to tell ourselves that we’ll one day return to the gym, need the wine club membership we signed up for in Napa Valley, or can’t live without every streaming channel available. To see if you can eke out some savings, make a list of all your current memberships and subscriptions. Then, go through them one by one to determine if they’re still of value to you and cancel the ones you can live without.
5. Homes
As the home-buying frenzy of the past two years illustrates, some people are willing to exceed their housing budgets to get into a home. While it’s tempting to buy a larger house than we need, it’s easy to get in over our heads. In addition to a mortgage, taxes, and homeowners insurance, buying too much house means paying more for things like utilities and repairs. It may also mean higher property taxes and homeowners association fees.
Think carefully about how you plan to use a house and how much space you need to be comfortable. For example, if you share 3,500 square feet with a partner, but the two of you typically hang out in the same room, you may have more house than you need.
American author Robert Collier once wrote something to the effect of “Success is the sum of a lot of small things done correctly.” And one of the small things we can all do to manage our personal finances is to waste less.