If you’re trying to save, money leaks can be like tiny leaks in a pail that make the pail impossible to fill. When you’re spending money on lots of small things that aren’t providing you with much long-term value, it can be hard to put aside extra money.
We can all stand to take a look at our finances and cut back on unnecessary spending. By looking at everyday expenses, you can identify any possible money leaks in your budget.
And once that money leakage is identified, the goal is to try to find a way to put those dollars to work for you instead through saving and investing. That is what you'll learn in this article so let's get into it!
What are money leaks?
Money leaks happen when you have small expenses that add up to a lot of money over time. It can be simple things you don’t think about, like getting a coffee or a small subscription service you don’t use anymore.
While the money might not be a lot by itself, the combined amount can quickly add up and make a large dent in your bank account.
If you find yourself wondering where all of your money went at the end of the month, you might want to consider looking at all of the small expenses you are making and identifying any possible spending leaks.
That said, let's get into the top spending leaks and tips to avoid them.
Top 9 money leaks and how to avoid them
Spending leaks can happen to anyone. To avoid overspending, it’s a good idea to have a budget.
One of the beginning steps to creating a budget is to identify where you’re spending money. Here are some of the common money leaks where you can potentially save a bit each month.
1. Delivery service fees
While it’s convenient to get food or products delivered directly to your door, the small fee each time you order something can add up. Delivery service is one of the biggest money leaks.
In fact, Americans spend, on average, nearly $2,000 a year or $157 per month on delivery service fees. And it’s not just for eating out. Getting grocery delivery or buying things online can also incur delivery and postage fees.
If you've been spending a lot on delivery fees, try to do all of your buying in one go in person. You can also consider buying in bulk to save on food costs. And if you really need something that you can order online, see if you can get it at a nearby store instead.
2. Disposable products
Disposable products are another way that money leakage can happen. From buying paper plates to paper towels, the cost of these disposable products adds up.
Not to mention that many of these products are bad for the environment, leading to deforestation and filling up landfills.
Try to buy reusable products instead. Not only is it a better choice for the environment, but it’s also cheaper in the long run as you won’t have to buy these products over and over again.
Invest in good-quality cutlery that will last you years. You might even cut up an old shirt to use in place of paper towels. Finding creative ways to spend less on disposable products can really help your budget.
3. Food waste
There is quite a bit of food waste in the U.S., with about 30% to 40% of the food supply in the country being thrown away as waste. Food isn’t cheap and throwing away food is akin to throwing away money.
When you’re cooking, try to only make what you will eat and put away any extra in the freezer. You can also turn leftover food into soups or casseroles or incorporate them into other dishes.
4. Bank fees
If you want to avoid money leaks, then look at how much you are spending on bank fees each month. Bank fees have been going up over the years, especially for interest-bearing accounts.
You might not even be aware of potential fees. You should read the fine print to discover when and if you’ll get charged for a specific service.
Besides monthly maintenance fees, banks also charge ATM fees if you don’t use their branded ATMs. And if you accidentally make a large purchase that you can’t afford, you may also get an overdraft fee.
To avoid these fees, consider opening a bank that doesn’t charge monthly fees and has a large network of ATMs available in your area. And avoid overdraft fees by being careful about overspending.
You might also save cash by opting for emailed bank statements instead of having statements mailed to you each month.
5. Subscriptions for products and services
Subscriptions for products and services are one of the biggest spending leaks. While they can be cost-effective in some cases, they are often unused and unneeded.
As opposed to weekly or monthly product subscriptions, buying in bulk can be a much more effective and cost-efficient way to buy items like shaving products, cosmetics, and food items.
Online magazines and other subscriptions like streaming services can also add up. Before you buy a subscription service, think very carefully about how often you use the service and if it’s worth the price. If you only use something every few months, then it might not be worth buying it every month.
6. Name brand products
Money leakage can come from many areas, including buying name-brand products. While they might seem more trustworthy than other brands, that doesn’t always mean they are worth the price. Often generic or off-brand products have the same quality for a much cheaper price.
When you’re buying new items, such as cosmetics, clothes, or prescription drugs, look at generic items. To make sure you are getting similar products to the name brand, look at the listed ingredients and try to find a generic item that has similar or the same elements.
7. Coffee shops
Another one of the most common money leaks is buying coffees or pastries from coffee shops. Spending $5 a few times a week for your morning coffee might not seem like much, but if you get coffee even just three times a week, that adds up to $45 a month.
Instead of getting coffee on the way to work or as a mid-day pick-me-up, make your own coffee at home.
8. Gym memberships
Other spending leaks include gym memberships. How often have you made a goal to go to the gym, only to stop going after a few weeks?
Gym memberships usually require a yearly commitment, so if you stop going after a month, you’ll still need to pay for it.
Think about reducing those monthly costs by either buying home gym equipment or thinking of other ways to exercise. For example, you can start running, use heavy items at home, like books, as weights, or follow exercise classes on Youtube.
9. Unused insurance policies
Another unexpected money leakage is unused insurance policies. In other words, if you have insurance for something you aren’t using or aren’t using often, then it’s money that is a drain on your bank account.
For example, if you have a car but aren’t driving it often, you might not need full insurance coverage. You can ask your insurance company to figure out if you can get a pay-per-mile option.
It's important to ensure that even if you reduce your insurance cover you are still adequately covered based on your needs.
Tips to avoid money leaks
If you're trying to avoid money leaks, these are steps you can take to improve your finances. Besides identifying the leaks above, you can also avoid money leakage by sticking to a budget and being smart about how you spend money.
Think carefully about every non-essential purchase you make. If you have debt, try to make a plan to pay it off so you can use those funds for other things like savings or investing.
Identify any recurring expenses in your budget to identify any potential money leaks. Eliminate purchases that you don't use enough or look for cheaper alternatives.
If you find it difficult to save money each month, then try to curb your spending. Find a budget that works for you, or even try out a money challenge to save a bit of extra money each month.
Keep more of your money by fixing money leaks in your budget!
Money leaks are never ideal, especially if you are trying to save money. It’s always a great idea to take a look at your finances, especially smaller purchases to see if there are areas where you can limit your spending.