In addition to exploring new ways of generating income, it’s important to review the outgoings losing you money. By fixing the items draining your monthly budget you can significantly improve your overall wealth.
This post looks at eight of the most common ways of losing money. Hopefully some of them will help you review your own budget and improve your amount of disposable income.
1. Upgrading your Smartphone at the end of each contract
Upgrading to the latest smartphone every 12-24 months is one of the easiest money traps to fall into. Every upgrade usually results in a more expensive contract, plus a one of payment for the new device.
If instead of upgrading, you can save hundreds of pounds each year by moving to a Sim-only deal and keeping your same handset.
My contract used to cost me £50 a month, but now I pay £15 for a Sim-only deal (plus I get more data). This is a saving of £420 a year.
In recent years the latest smartphones don’t have many new features when compared to the previous model. This makes it easier to resist the lure of a new phone.
2. Getting a new car on finance
It’s never been easier to get a car on finance, with a whole host of options available. However, this does not mean buying a car on finance is a good deal.
Cars depreciate in value quickly and the amount you pay of finance can be high, especially when you include the downpayment.
The good news is, because car prices drop so quickly you can pick up a four year old car for a lot less than a new one. Even if they are the same spec and model.
So instead of buying a new car on finance, the better option is to pick up an older car and pay for it outright. This also means you won’t have hundreds of pounds coming out of your account each month to pay for it.
3. Not planning your meals
Eating lunch out every day and cooking one-off meals in the evening are a huge expense over the course of a month.
Instead, it is better to plan your meals and do a bulk shop and batch cook. This means you are spending less on ingredients and getting more meals out of each purchase. It’s also a good way to learn new recipes and skills.
I started doing this a couple of years ago, and within one month I had already saved an extra couple of hundred from my monthly salary. This is not that surprising when looking at the price of Sandwiches in shops such as Pret.
4. Pay subscriptions monthly instead of yearly
When given the option of paying little amounts each month, or pay one-off larger sum – many of us go for the first option. This because we are thinking short term, and it is less painful to pay off a little bit at a time.
However, this can be a big mistake as many companies charge more when you pay of monthly. This means that by the end of the year you have spent a lot more when you total everything up.
Some examples of where you can save are on subscriptions like Amazon prime, PS Plus, and Xbox Live. Also on utility bills like TV licence. The same rule also applies for expensive items which you can pay off monthly (like a new watch). However, I would avoid getting finance on such an unnecessary item as it’s not worth the debt.
5. Not investing is losing you money
If you are not investing your money, then you are losing money.
Currently there are no savings account offering competitive rates of interest, so if you leave money in the bank it’s not going to be working for you. Instead it will sit there and gain interest at a rate so close to inflation that it’s barely worth mentioning.
Instead you should be putting a large part of your savings into investments. The level of risk you are happy with is completely up to you, but any investment is going to be more competitive than the bank.
For those who haven’t invested before, Mutual Funds are a good place to start and you can read our guide here:
In the first six months of 2018, my Mutual fund has grown over 11% collectively. If this money was in a savings account, it would take around 11 years to grow the same amount!
6. Not Investing in you personal development
It’s important to invest in yourself and your own personal development. If you never spend money learning new skills and acquiring new knowledge then you won’t be able to significantly grow your earning ability.
Learning shouldn’t stop when you leave school or university, and having a wide range of additional skills greatly improves your employability.
What you learn is completely up to you, but it’s worth looking at our post on side hustles, as there may be some you like the look of. You could then explore the idea of doing training related to that side hustle. Whether it be a course in photography, business, or even carpentry!
7. Buying Branded Products
Purchasing branded products is one of the easiest ways to waste money, especially when it comes to groceries and clothing.
Countless studies have been done that show that in a blind taste test it’s incredibly difficult to differentiate between supermarket own-brand food vs branded products. So it’s crazy to carry on purchasing branded products in your weekly shop. For example Asda own brand Cornflakes are £1 a box, whereas their Kellogg’s counterpart is around £2.69 – that’s 169% more expensive! If you add up these differences over a year you would be losing hundreds, maybe even thousands!
The same goes for branded clothing products, which carry a massive premium as soon as they have a logo on. However as many documentaries have shown, many of the cheaper un-branded products are even made in the same factory as branded items. And in terms of quality there is literally no difference.
So next time you out shopping think twice before going for the brand.
Not started investing yet? Check out our article 4 Reasons to start investing now