Financial Poise
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Frugal Living is in Reach — Avoid These 6 Spending Mistakes to Save Money

Overlooked Budgeting Tips for Big Spenders

Do you ever wonder, “Where does all my money go?” Are you guilty of pointless convenience spending? Do you envy frugal living bloggers or coupon cutters?

We live in a society of conveniences that can provide the extra time that American families desperately crave. But, convenience always comes with cost, so I want to point out where the cost of a little convenience may be doing a lot of harm to your bottom line and offer budgeting tips to help you get back on track.

Hopefully, you will see room for adjustment and save a few bucks for something far better, like the vacation you think you can’t afford—or retirement.

Are You Making these Mistakes?

Here are six budgeting tips that can transform your wallet and save money.

1. Paying in Credit at the Gas Station

A big portion of your income goes to fuel your car. Trips to the gas station can eat up significant earnings. I am a huge believer in paying cash for gas. In New York, you will pay 6 to 10 cents more per gallon to swipe your card at the pump. That can add up to fees of $4 to $10 per month if you pay your credit card in full at the end of each period—plus added interest if you don’t. Does it take that much more energy to walk into the store to pay in cash?

If you never seem to have cash available, make a plan to save these few bucks. When you receive your next pay, immediately carve out the gas money you will need until the following pay period. Put that cash into an envelope marked “gas” and use the money only for gas.

When you pay, don’t unthinkingly purchase items at the counter. If you buy just one soda, one candy bar or a coffee, you spend any potential savings from paying in cash. Think about how much more your dollar would have bought had you made these purchases at the grocery store. The same is true for lottery tickets. Don’t.

Frugal living means every dollar counts. Spending $5 once or twice a week at the gas station for convenience items could cost you $40 at the end of the month. If instead you put $40 in an envelope marked “vacation” or “retirement,” think how much more meaningful it would be to you. When temptation hits, think, where would I rather put these precious dollars?

2. Paying Too Much in Fees at the ATM

You have to use the bank. Nevertheless, how much are you wasting for convenience? You may say, I never pay overdraft or late fees, and I hope that is the case, because those fees add up quickly.

But, what about the smaller convenience fees that you pay to access your own money? Do you always use your own bank for cash withdrawals? Not doing so can drain significant funds from your account. Using a domestic ATM outside your bank’s network will cost you, in some cases twice: a fee for the out-of-network ATM operator, which may range from $1 to $10; and a fee deducted by your own bank for withdrawing at a non-affiliated ATM, which may range from $1 to $5. Do you realize taking $20 out of your own bank account could cost you as much as $15? Throwing away money for this convenience is inexcusable.

If your bank is not located close to your home or office, change banks. While you are doing so, ask questions about these and other potentially hidden costs. Subject to deposit minimums, there are banks, online-only banks and brokerage firms that will reimburse ATM fees.

3. Buying Groceries Without a Plan

When I work with people who do not understand where their money goes, the first place to look is often at food costs. For many, food spending is disproportionate due to eating meals out and bringing in pre-prepared meals. While I am happy if you are purchasing food at the grocery store, you have to be mindful that the grocery store is a hotbed of temptation fueled by creative marketing strategies (see this helpful guide on product placement in grocery stores).

Go in armed. That means be prepared with a list. Take time to look at the weekly sales circular for your store, see what is on sale, and preplan the week’s meals accordingly. To the extent possible, avoid the convenience of purchasing pre-packed meals, which while better than eating out and buying fast food, still come with a high price tag, both per meal and health-wise (take a look at the sodium content and preservatives). Also, set a spending limit that you intend to honor, adhering to your frugal living principles. Organize your list (by aisle, if possible) for only the items necessary, and stick to the list.

Once at the market, look at the “per item cost” of what you are buying. Don’t be too shy to whip out your calculator and check if the larger size is the better bargain. Likewise, don’t buy the bigger package just because it is a better deal, unless you are certain to use the product before its expiration. Having a lot of toilet paper may be fine, having a lot of fruit with a short shelf life is not.

Consider also the costs when buying foods such as pre-cut and pre-washed vegetables, chips and cookies. Does it make more sense to buy the larger size and a box of snack bags, or do you really need to buy individually sized servings? The product is the same. Similarly, is it necessary to buy individual, prepackaged coffee pods, or could you buy a reusable pod container and fill it with the same name-brand coffee daily? Either way is better than going to the coffee shop, but if your goal is to save money, be an educated consumer, not a marketing strategist’s dream.

4. Participating in Flash Clothing Sales

Have you ever determined which emails to open based on the subject of the message? Today these were just a few of the subject line invitations in my email box:

“We’ve Missed You!”

“A Special offer, just for you – 20% off your order”

“Exclusive! 50% Off at [store name]”

“From $19.99: new brand-name [product]”

“Final hours: 25% off + free shipping”

My client, Camilla, decided she had to get a hold of her spending on clothing. When we began to frame out a monthly budget earlier in the year, looking at her household expenses and debt, Camilla did not want to budget any money allocated to a clothing budget. She said she had a closet full of clothing and enough shoes.

That sounded a bit unrealistic to me, and after discussing that she was required to wear professional attire for work, and that clothing would become soiled and shoe heels would break, Camilla was inclined to actually budget a set amount for her clothing allowance. Together we decided 5% ($220/month) seemed like a good number, and if she was not going to shop in a given month, she would save the money in a separate account to allow it to accumulate.

Yet, when I met with Camilla again, she had not kept her budget and had actually spent $350 on clothing in June, largely in part because of an email message similar to the ones above, when there was a big sale at her favorite store. Camilla said her fear of missing out took over her otherwise budget-conscientious mind. Nevertheless, in July, Camilla spent an additional $390 when she realized that she did not have an appropriate bathing suit, cover up and sandals, along with a new dress, to attend a pool-side cocktail party where she wanted to impress.

How do you determine how much you spend on your wardrobe? Do you have a budget? Or do the vendors decide when you will shop and how much you will spend? I am all in favor of a sale, and I love 50% off, but I will not open an email making me any offers unless I had already planned to make a purchase from that vendor beforehand. Being skeptical of promising emails is also a good way to avoid scams.

5. Not Factoring All Living Costs When Taking on a Mortgage

Buying a home is not just about the cost of the mortgage. This is one the most substantial budgeting tips to save money and avoid debt.

It kills me when people learn a lender has pre-approved them for a mortgage based on a high percentage of their current gross income, and they innocently believe it. Once the would-be homeowner hears the number they can access, they have their housing budget, call a realtor to find their American dream home, with or without picket fence, and often blindly dive into their new role as homeowner.

Listen up: The bank does not know or care about your living expenses. The bank has made a calculated decision to lend you as much as possible to collect fees and to continue to collect interest on the money it is lending you. Are you planning to fill this new home with children? Do you know the costs associated with children? And if you have already calculated the costs of food and shelter for those children, have you also calculated the potential costs of reduced household income and/or daycare fees, medical/dental costs and educational expenses for those children?

Maybe children are not a consideration for you now. Have you thought of the other expenses that will come with this new home that may not be in your current budget? Will your transportation needs and costs change? Are you prepared to replace major appliances? Boilers break in the winter, air conditioners break in the summer. Refrigerators, stoves and working toilets are necessities. Dishwashers, washing machines and dryers are “wants,” but most homeowners have them, and they break down. And, usually not on the same day as your annual bonus comes in, if you’re lucky enough to get one.

Add in the monthly essentials of electric, internet, heating fuel, safety, lawn maintenance, pest control, and let’s not forget never-ending taxes and insurance, and your monthly nut may be a lot more than you understood it would be. Save money by factoring in the cost of living rather than just the cost of the house.

A Final Note on General Budgeting Tips

Set a budget for every pay period of the exact amount you will use for the “necessary” and the “fun” things in life. Budget for exceptions and emergencies as well. Be realistic about what the “fun” things include … lattes, trendy clothing, live performances and dinners out. You can accomplish this by allocating funds. When your pay comes in, take that budgeted amount out and label it “fun $.” Use only that money for “fun.” When the money runs out, so do you!

Do not resort to your credit card for things you can’t afford. If you don’t have the money today, and your salary is not going to increase next week, you will not have that money next week. Do not spend your future money. You can accomplish this by avoiding debt: (1) no credit card spending unless you have the money now and intend to fully pay the bill with that money, and (2) no installment loans.

Follow these budgeting tips, and frugal living will become an attainable reality rather than a distant dream.

[Editor’s Note: To learn more about this and related topics, you may want to attend the following webinars: Basic Investment Principles 101 – From Asset Allocations to Zero Coupon Bonds and Goal Based Investing- Planning for Key Life Events.]

©All Rights Reserved. April, 2020. DailyDAC™, LLC d/b/a/ Financial Poise™

About Michelle Gershfeld

Michelle Gershfeld is a bankruptcy attorney, debt negotiator, and personal financial life coach who advises people in debt or building wealth, by identifying and overcoming obstacles that lie in their path to securing worry-free, financial wellness. Michelle’s private practice, Law Offices of Michelle Gershfeld, provides services to clients on financial distress, workshops with clients individually…

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