Save Money Challenge: Find the Holes, Plug the Leaks
Your hard-earned cash could be dripping from small holes in your wallet. Join the save money challenge, and we’ll help you find the leaks and plug the holes.
Is your wallet leaking money? Probably!
Your hard-earned cash could be drip, drip, dripping from small holes in your purse or back pocket. Over the course of weeks and months it can really add up. There’s no time like the present to find those pinholes and plug the leaks.
Have you heard about the $60,000 cup of coffee?
It starts with that $2 cup of joe you grab at Starbucks on the way to work. $2 is nothing? Right? Let’s do the math to see the real cost at the end of the year. Would you be surprised to find out that cup of coffee cost you $546? Throw in a $2.95 blueberry muffin and that number goes up to $1,313. What if you had used the money to pay down a credit card with 19.5% APR? You would have saved $256 on interest payments. When you add it all up that cup of coffee cost you $1,569 last year.
Here’s where life gets interesting. Bankers call it compounding interest. Which is a fancy way of saying you earn interest on your money during the first month it’s in a bank account, and you earn interest on the interest during the second month and every month going forward. Skip the coffee and muffin and put the money in an account that pays you 0.6% APY (annual percentage yield). It will turn into a whopping $60,000 over 30 years.
It takes discipline. You must deposit the money every month without fail. Otherwise, you lose the value of the compounding. And you can’t make it up with a bigger deposit next month.
Financial advisers love the coffee example, because it gets their clients to be more disciplined with their money. A few years ago, a financial author shared some interesting facts about rich people. Most did not inherit a trust fund, win the lottery, or make a killing on a start-up. They got rich because they are disciplined with cash, just like physically fit people are disciplined with diet and exercise. Wealthy people open a savings account and feed it their coffee money. You can too.
Would you give up Starbucks for $60,000? Then right now is a great time to locate all the holes in your wallet and plug the leaks.
Join the save money challenge for 30 days
Here’s how the save money challenge works. It’s just 2 easy steps.
Step one: track your spending for the next month. I know it sounds tedious, but 30 days goes by quickly when you keep it simple and make it a game. Download a free tracking app like Mint or PocketGuard. Or carry a small notebook and record the amount whenever you make a purchase or pay a bill.
Step two: look through your charges to see where there might be waste. Almost everyone finds at least a few small holes in their pockets. And that’s good news!
Where is money leaking out of your wallet? Start by looking at credit card bills and cable bills. You might find recurring payments for app subscriptions you rarely use. Or extra fees for premium cable channels you hardly ever watch and on-demand movies you could pick up at the library for free. Please don’t waste any time regretting what was lost in the past. You took the time and trouble to find the problem and fix it. Well done!
Here’s what I learned about myself, and it wasn’t pretty
My tracking report was a real eye opener. The grocery store makes me claustrophobic. I would rather clean gas station bathrooms than go food shopping. (I know that sounds extreme to someone who loves the grocery experience.) Several years ago, I started grabbing one or three or four food items at the drug store a few times a week. I knew I would get a better price at the big grocery store, but I convinced myself I was only wasting a few pennies here-and-there. Maybe a few dollars a week? Wrong!
I was throwing away $150 dollars a month. Almost $2,000 at the end of the year! Plus, I could have saved another $330 in interest payments by using that money to pay down credit cards bills. I was spending $2,330 a year to avoid a store. A personal shopper would have cost less. That realization got me past my grocery store phobia faster than an anti-anxiety medication.
Put your found cash to good use
The trick is to put the cash to good use. I strongly recommend using every penny to pay down credit card debt. You’ll save a bundle on interest charges. Plus, as the outstanding debt goes down the credit score goes up. This is due to the fact that credit card use makes up 30% of the credit bureau formula.
Remember those rich people? They’re all about discipline when it comes to their money. You can be too!
Don’t be tempted to buy a $60,000 cup of coffee. Use your found money to pay off debt, increase your credit score, and then open a high-yield savings account. Otherwise, the money slips away, a nickel here and a dime there, and you could find yourself right back where you started.