3 ways to keep your everyday expenses from piling up
That pack of gum at the grocery store and 40-ounce soda from the gas station may not feel like they cost a lot, but the little expenses add up.
To help ease the burden of budgeting for the little things, we asked University of Utah personal finance professor Catherine Zick and long-time financial journalist Miranda Marquit what they thought the best strategies were for dealing with small expenses.
1. Ditch the credit cards
If you are the type of consumer that carries a balance on your credit card, family economist Zick suggests using cash or a debit card for the small purchases.
“(If) you’re buying your groceries … your gas and everything else on your credit card, and you’re not paying it off each month, then that can add up and cost you just as much as the big purchases that you’re buying on credit,” Zick said.
Of course, it is possible to be a smart credit card consumer. “(But) with credit cards, sometimes you’re paying very high interest rates — higher interest rates than you would be paying with a home mortgage,” said Zick. “They add up to a lot.”
That might be one of the reasons why debit cards have grown in popularity so much in the last decade. While just about eight billion U.S. debit card transactions took place in 2000, there were 47 billion in 2012, according to the Federal Reserve System.
2. Ditch the coupons
“People only have a limited amount of time that they can spend searching for the best prices,” Zick said. “And so, … given that you only have so much time to be able to spend on such activities, spend it on what is going to count the most.”
Like when you have to buy a new car or refrigerator.
“We know that there’s price variation in the housing market, in the automobile market and in the durable goods market,” said Zick. “Those are the places where you could potentially — by spending a bit of time doing some searching and uncovering what your options are — make huge gains.
“The coupon to get 25 cents off at the grocery store … pales in comparison,” said Zick.
Of course, understanding how the housing or automobile markets work can take a lot of time. But that’s why Zick advises consumers to not sweat the small stuff (e.g. coupons): “Understanding what your options are can pay huge dividends,” she said.
If you have extra time to coupon clip, however, said Zick, it doesn’t hurt.
3. Ditch the “American Dream”
Marquit, a freelance business and finance journalist, has written about financial topics for the last decade and her work has been featured on Forbes and The Huffington Post, but she says it took her until a few years ago to really take control of her finances.
“I was looking around and realized that I had a house full of junk that I didn’t even care about,” Marquit said.
So she started to really think about what she wanted to spend her money on.
“I think a lot of the problem that many people have is that they don’t stop and think about what’s really important to them,” she said. “So they end up just spending their money on a lot of stuff.”
Marquit said that once she focused on what really mattered to her and truly fit her lifestyle, she was able to consciously buy some frivolous items and leave others on the shelf.
Marquit said that she and her husband were about to upgrade their 32-inch TV a few years ago, but realized there were so many other things they’d rather spend their money on. Now they’re the only ones of their friends and family to have such a “small” TV.
Just because all of your neighbors have a 56-inch TV, an expensive cable bill and two cars in the driveway doesn’t mean you should, Marquit said.
“(Don’t) live somebody else’s life,” she said. “A generation ago, (these things) would have been considered luxuries.”