Debt vs Dollars: Spotting Wasteful Spending

No one is immune to spending too much. We’re all human, which means we want things. That immediate want often wins out over delayed gratification. But a lot of times, it’s hard to even see the ways you’re spending money in the wrong way. Little things like buying name brand products, or just being generally disorganized, can cost you big time in the long run. These are some things to keep in mind if you want to identify and reduce your wasteful spending.

Understand Good Debt Versus Bad Debt

Wasteful spending can happen in a lot of ways. But some people make the mistake of thinking that spending any money at all is wasteful. This is not the case for a few reasons. First, you need to spend money in order to survive. Food, housing, and all material goods cost money. Furthermore, there are some kinds of spending that can save you money—or even make it for you.

Let’s look at the first point. You can’t consider buying food for yourself, or renting an apartment, to be inherently wasteful. You need to have food and shelter, after all. The way you do these things, however, determines whether it’s a sound financial decision. For instance, you’ve probably heard that you should eat out less when trying to save money. But do you know that, on average, eating at a restaurant is over 300 percent more expensive than eating at home? Eating out all the time can certainly be considered wasteful spending when there’s a much less expensive alternative.

How can spending money, or taking on debt, be beneficial for you? It all depends on the terms of the loan and what you’re getting for it. A low interest rate home mortgage, for instance, is generally a great form of debt because it’s something you need (housing) and an asset that typically grows in value. Student loans are generally good debt because education can help you get a much higher salary, while also not having an excessive interest rate.

Buying things you don’t need that lose most or all of their value over time, on the other hand, is a form of wasteful spending. For example: going to a bar and buying drinks to excess. One of the best marks of wasteful spending is when the thing you buy leaves nothing behind. Entertainment generally falls into this category, as you get nothing besides the memory. This is, of course, okay in moderation. But doing this too much can put you in serious financial trouble. 

When Should You Seek Help with Your Debt and Spending?

Not everyone’s going to be able to work through their wasteful spending issues without some help from a professional. Fortunately, there are options out there for consumers who need help. Credit counseling is typically one of the best places to start looking for answers if you’re feeling boxed in by your debt and spending habits. These services are generally provided free of charge, and can either get you on the right track or direct you toward another agency that can work with your individual situation.

Many people will find working with a debt relief agency is their best bet for overcoming their financial woes. There are a lot of options out there—some much better than others. It’s essential you do a bit of research to see what agencies are legit versus scam-like. Freedom Debt Relief is generally considered to be one of the most reliable players in this industry. They’ve helped countless people get out of debt through their settlement and consolidation programs. You can find plenty of Freedom Debt Relief reviews online to back up their practices.

Create a Budget and Use Apps

It’s easy to let wasteful spending slip through the cracks when you’re not keeping track of your spending—even if you’ve already gotten out of debt. Therefore, you need to stay on top of things—by creating and sticking to a budget, using financial planning apps, or both. Here are the essentials to creating an effective budget:

• Get all your financial statements in one place. This should include anything that denotes a source of income or expenditure—bank or investment statements, bills, credit card balances, paystubs—anything. Leaving things out here will render your budget incomplete.

• Total up your income and expenses each month. You’ll then be able to see exactly how much of a surplus or deficit you have based on your current spending.

• Divide your expenses between essential and non-essential costs. Essentials are going to be things like rent, insurance, and utilities. These things are also generally going to run around the same total each month. Non-essentials are things that you spend on but don’t necessarily need, such as subscriptions, eating out, or entertainment.

• Cut out wasteful spending as needed. This is going to be different for everyone relative to income and debt levels. Start with the non-essentials. Most people spend too much in this category but often don’t even realize it. It’s also possible you’re throwing money away in the essential category as well. Consider ways to reduce your living costs, too.

There are a lot of apps out there that can help you out with the budgeting process. These will make it more likely you can stay organized and accountable to your saving and spending goals. While everyone’s looking for something different in a budgeting app, these ones are generally considered to be some of the best budgeting apps:

• Mint: This app tracks your income and spending, sends alerts when you have bills due, and even tells you when you’re spending too much money.

• Acorns: The average person is often intimidated by the idea of investing their money. Acorns basically automates this process by rounding your regular transactions up to the nearest dollar and putting that money into an investment account.

• Clarity Money: This is sort of a Swiss Army Knife of budgeting apps. It’s easy to use and has all the features you need to put your finances into perspective.

These apps are either free or come with a very reasonable cost relative to the service they provide you. There’s really no reason to not use one of these, regardless of your spending situation.

Wasteful spending is hard to get under control. Humans are creatures of habit. Once we get used to something, we’re more likely to continue with it than to change our actions. But this doesn’t mean you’re going to be stuck in a wasteful spending cycle forever. There are ways to recognize and correct these spending habits, and get your financial life back on track.