Budget bugs that are eating away at your money
October 5, 2018 / Freelancing / Greg Atkinson
Have you ever had one of those months when you feel flush, only to realise with dismay one day that your bank account isn’t quite as healthy as you thought? We’ve all been there. And one of the reasons is we overlook small wastages, especially when we’re feeling comfortable. In this blog, we look at some of these hidden budget bugs eating away at our funds without our realising.
1) Subscriptions to things you don’t need or use
When you signed up for the gym, they wowed you with their special offer of 20% off countrywide membership. And as you pictured yourself conscientiously working out between meetings all over the city, and at the coast on vacation, the package seemed to make perfect sense. But after a year of hardly stepping into your local gym, let alone a branch anywhere further, you should probably re-evaluate whether you need that upgraded package at all.
Gym contracts, cable tv subscriptions, magazine subscriptions, and even medical aid packages are notorious for their up-selling. Many of these companies use fear (‘You’re missing out’, ‘Think what could happen if you aren’t covered’) to reel us in. But half the time, we don’t use half the benefits we’re paying for.
So, next time you have a free afternoon, make a list of all the subscriptions and memberships you’re paying for. Now, do your due diligence and look up exactly what you’re supposed to be getting in each package. Next, do an honest assessment of yourself and your lifestyle, and figure out how many of those benefits you actually use. Chances are, if you haven’t been regularly using them by now, you never will. Now downgrade, or outright cancel, the packages you don’t need. Trust us, you won’t even miss them.
2) Repeat purchases
These are small, regular purchases that we make, often without thinking about it. Coffee, phone data, gum, and the like. Now, some of these might be essential (phone data), while others are simply nice to have, but either way, they’re adding up.
Instead of prescribing abstinence (after all, what fun is life if you’re not going to enjoy it), we suggest buying in bulk instead. Single or small units always cost more than large wholesale purchases. So, instead of topping up data every couple of days, investigate the contract options on offer. You might not want to be ‘tied down’ and you might not want the monthly debit, but let’s admit, when was the last time you actually swopped cellular providers? And have you calculated how much you’re actually spending on top-ups? It’s probably way more than a yearly contract would cost you.
The same goes for gum and other small purchases. Maybe you think ‘I don’t actually go through that many’, or it’s more convenient to buy something on-the-go at your nearest corner shop, but if you consciously add a bulk purchase to your weekly grocery list, you could end up saving quite a bundle.
3) Impulse purchases
These are slightly different from repeat purchases, since they may be isolated events, but they’re still eating away at your budget. Walking past a store and deciding you must have that shirt, dress, pair of shoes etc. falls in this category. As is aimlessly browsing Amazon and suddenly becoming the proud owner of a dolphin-shaped toilet brush.
Again, we’re not going to cramp your style by telling you not to buy things. Instead, we’re going to suggest 2 small tweaks to your spending. The first is the Sleep On It principle. And the second is the One In One Out rule (which we’ve discussed in-depth here). The Sleep On It principle is exactly that. Give yourself 24 hours to decide whether you actually want or need the thing. Impulse purchases are often made when we’re emotionally compromised (sad, angry, bored), hungry, or tired. But in the morning, after some shuteye, we’ll be much more level-headed, and able to assess things objectively. If you still think your guests and family will be charmed by Mr Dolphin – go for it. But if in the light of day, you suddenly realise that he clashes with everything else in your house, give him a pass.
The One In, One Out rule is also great for combatting impulse purchases and keeping clutter at bay. As its name suggests, you only get a new something to replace an old something. This means you won’t wind up with repeat things, especially ones that’ll never win you over from that ol’ faithful you’ve been using for years.
4) Hidden penalty charges
These are the ‘small print’ conditions that many of us ignore or don’t bother to properly question when we sign contracts. For example, perhaps your bank charges more for withdrawing cash than for swiping your card. Every time you withdraw, you’re paying a small penalty charge that gets lumped into your overall bank fees. Or maybe your insurance company penalizes you for lodging claims after-hours. These hidden charges are small, so we don’t immediately question them. And because of this, we never change our behaviour, and we never learn to avoid them.
To combat these, have a good look at any bills that fluctuate month by month. The changes may be subtle, but maybe you’re being whacked with a bunch of cumulative, avoidable penalties. Make a point of asking about any small charges that you don’t fully understand.
5) Buying cheap instead of good
This is a mistake many of us make when we’re shopping for medium to big purchases, like electrical appliances, cars, or even property. When faced with 2 things of a similar nature (note: not of similar quality), our instinct is to go for the one with the lower price tag. Unfortunately, we really do get what we pay for in this case.
The cheaper microwave might be glitchy and need repairs every few months, while the more expensive one would have been problem-free for 20 years. Ditto for the car that keeps rattling and leaking oil. Or the house that needs new wiring and plumbing. Or the service provider that doesn’t really know what they’re doing, but whose hourly rate is half the other guy’s. Often, the reason things cost more, is that more thought, effort, and skill went into it. So, you’re not ‘just paying for the name’, you’re paying for the quality that made the name.
Popular fantasy author Terry Pratchett once summed up the folly of buying cheap instead of good through the character of Vimes, a working police officer who’d married a wealthy heiress. Vimes had ruefully concluded that because his boots cost a fraction of the price of his wife’s relatives’ boots, he ended up having to replace them, while his relatives’ once off investment lasted forever. More vexingly, not only was he spending more in the long run, he was also wearing inferior boots every single day! Which just went to show that if he’d spent more initially, he’d be saving a lot more in the long run (and been more comfortable too).
Next time you’re making a medium to large purchase, take the time to understand why A is significantly cheaper than B. And why B might be worth the higher price tag. Even if you have to wait and save up for B, your bank account will be healthier in the long run.
You work hard for your money, and there’s no reason it should be lining other people’s pockets without good reason. So, take a look at your current spending habits (and check out our blog on common money mistakes to avoid), and if need be, make a few small changes, and beat those budget bugs for good.