You are not buying anything lavish. You don’t have the latest gadgets. Eating at upscale restaurants is not even your thing. You don’t even drive a fancy car. So, where does your money go?
The truth of the matter is that even though you are not extravagant, ‘money leaks‘ crop out every now and then and slowly drain your wallet. Before you know it; it is not yet the end of the month but you have already overspent your monthly budget.
What is a Money Leak?
Money leaks are small but regular unplanned spending on non-necessities on your budget. For example, instead of drinking instant coffee, many people would opt to buy coffee at premium coffee shops like Starbucks despite the huge price difference. Add up all that daily little expenses and it all sum up to a big amount. Problem is towards the end of the month, you don’t even remember where you spent all that money.
Everyone has different sources of leaks. Money leaks differ from one person to the other. Common budget leaks include:
- Fees like bank transaction fees, ATM withdrawal fees, late payment fees
- Little purchase or impulse buys
- Take-outs, fast-food and other convenience food
- Coupons and other sale items
- Expensive brands
The bottom line is, it all comes down to choices. After all, these are all discretionary expenses. Discretionary expenses are costs for non-essential items. Simply put, these are your “wants” and not your “needs”.
It is not wrong to indulge yourself with wants. What is wrong is spending more than you can afford. It is easy to be complacent with your finances especially if the money leaks are just little drops on the budget. However, sum them all up together and you may end up with an overwhelming credit card debt.
Too much money leaks can be disastrous to your financial state.
How to Get Rid of Money Leaks?
In order for you to get rid of money leaks, it is important to identify where the leak is coming from. First, you need to track down all of your expenses. Keep all receipts and write them down. You can also use any of the financial or budget applications available out there. You need to do this for a month. It is difficult to gain control of your expenses if you do not know where your money is going.
Once you have come up with your summary of expenses, compare this with your monthly budget. The highest discrepancy is where your leak is.
After identifying your money leak, it is now easier to avoid it. For example, if the main leak is shopping, avoid going to malls especially when they are on sale. If the money leaks come from activities, look for alternative activities that are not as expensive. If your leak comes from late payment charges, then make a timetable and set reminders on when you are supposed to pay your bills on time.
In a nutshell, money leaks, even small ones can lead to financial worries. Don’t let it happen. Take control of your finances now. Track your expenses and stick to your budget. You will be surprised on how much money you can actually save by simply avoiding all your money leaks.
First published in Pinoy Smart Living on 10.17.2018