Have you ever felt strapped down by money? Are you stressed you can’t seem to save money? Perhaps you’re stuck in a bad job that doesn’t pay well? Don’t worry, we’ve all been there, and we know that you want to be free from financial burdens.
In this post, I will be addressing the top 11 money mistakes young adults are making and how they’re costing them thousands of dollars. We will use Janice, a 22-year-old college graduate, as our case study subject. Then, we’ll review her big money mistakes, how it’s affecting her savings, and how to find provide effective solutions.
These are steps that you can implement today so that you can see immediate progress in your bank account. Read until the end to see how much money Janice can be saved by implementing our solutions. Let’s find the money mistakes that are costing you thousands of dollars.
1. Eating out
Case: Janice eats out at least three times a week. On top of that, she gets a coffee at Starbucks every day.
Each meal averages around $15-30 dollars. If she spends around $22.50 for each meal (on average) and $3.00 for coffee every day, she will spend $6,240 a year. ($3,240 for eating out and $720 for coffee). That is a lot she can cut down on and put into her savings.
Solution: A better alternative is to cook more of your own meals and pack your own lunch. If doing this every day is too time-consuming, dedicate a day to meal prep for a whole week. Doing this can save you thousands of dollars.
Also, try making your own coffee every day, or use the coffee machine at work. You can prepare your cold-brew for the week, brew a fresh cup every day, or invest in a Keurig/Coffee machine.
You don’t have to give up eating out completely. If you want to go out, some good ways to cut down costs are to opt for appetizers (instead of entrees), share a meal with somebody else, and opt for lower-priced meals/restaurants. Just try not to make it a daily thing.
2. Not Treating your Belongings with Care
Case: It’s tempting to throw your phone on your bed, slam your laptop shut, or ignore the strange sounds in your car. Janice recently shattered her phone screen by dropping it. She paid $329 in repair fees. Additionally, she spilled liquids onto her laptop and had to replace her Macbook pro. ($1,799)
In total, she spent $2128 on repairs and replacement.
Solution: Invest in preventative measures. In Janice’s case, she should invest in a protective phone case and a screen protector.
Personally, I use Otterbox for my phone case, but there are many other viable options available. With a screen protector, I never shattered the screen of my phone.
All in all, using a protective phone case and a screen protector will decrease the likelihood of damage to your expensive electronics.
Investing a little bit more upfront will save you hundreds, if not thousands, of dollars in repairs and replacements. Buying a protective phone case or screen protectors is much cheaper than getting your phone repaired.
This also applies to other things, such as your clothes, car, appliances, and more.
3. Cable Television
Case: Janice has been watching television ever since she was a child and uses it to relax. On average, it costs $107 in the U.S., totaling to $1284 a year.
Solution: To be frank, Cable TV is outdated and expensive. If you have access to the internet, there are hundreds of better and cheaper options for entertainment and news. These other choices also come with fewer advertisements and immediate access to content. Plus, you can take them on the go.
4. Drinking at the Bar
Case: Going out for drinks is a universal experience. Janice goes out with friends every weekend and easily spends up to $50+ a night. This is because of the costs of drinks, food, and transportation. Shots are pricey, beers are overpriced, and the food is expensive.
If you spend at least $50 on a night out every weekend (on drinks and bar food), you’re looking at around $2,400 in yearly bills.
Solution: You don’t have to give up on this experience. A way to save money is to pregame/drink at home before going out. Doing this will save you money by not buying the drinks at the bar. Just make sure you have a dedicated, trustworthy, and sober driver.
Alternatively, you can host a party (if possible) at home and buy your own alcoholic drinks/do a BYOB event. A case of beer costs around $15. You’ll be paying around $5 for one drink at the bar.
5. Paying for Services you Don’t Need
Case: Janice enjoys getting her nails painted and pampering herself. If Janice gets a manicure for $27.50 once a month and a pedicure for $47.50, she is looking at $900 in annual costs.
Solution: Again, you don’t have to sacrifice this experience. Nail polish costs only a few dollars at the store and will last you a long time. If you don’t want to do it yourself, simply limit the number of times you get a manicure/pedicure.
That being said, paying for services you don’t need or can do yourself is a big money drain. There are resources online that will essentially teach you how to do anything.
6. Buying Only Name Brand Food and Items
Case: We know about popular brands due to constant marketing and exposure. Janice buys name brand items because there are preconceived notions of them being superior products.
On average, people spend around $244 a month on groceries, totaling to $3000 a year. If Janice spends that much a year on top of the expenses from eating out/coffee, the total is a shocking $6,240.
Solution: Name brand items are more expensive than store brand ones, despite being almost identical. A study from Consumer Report found that store brand items go for “prices usually 15 to 30 percent lower”1. Remember that this isn’t limited to food. Check the active ingredients in over-the-counter medicine. You’ll come to find that they’re the same product with two different names.
To demonstrate how much you can save by buying generic brands, I used two examples of products people might buy name brand and put in this calculator to give perspective.
Sprite Soda:
Buys 5x a month
Name brand: $1.89
Store brand: $0.62 (Walmart)
–
Savings: $1.27
Savings per month: $6.35
Savings per year: $76.20
Saving between her age (22) and her retirement (67): $1,752.60
Apple sauce:
Buys 4x a month
Name brand: 3.42
Store brand: 1.98
–
Savings: $1.44
Monthly: $5.76
Yearly: $69.12
Between now and retirement: $1,589.76
These are just calculations for two items. Imagine how much money you can save if you switched over to store-brand items.
7. Not Turning off Appliances
Case: Because Janice is so tired, she sometimes forgets to turn off her lights. She also doesn’t unplug electronics she isn’t using and keeps her portable heater on (not heating system) when she’s not home.
According to the US Department of Energy, the excess electricity waste makes up 10 percent or more of your electricity bill2.
Solution: Shut off lights, appliances, and other electronics that you aren’t using. For reassurance, you may also opt to unplug or turn off any power cords. Electronics don’t shut off completely, even if they are turned “off.”
Doing this can drop your electric bill from $140 to $126 (save $14/mo, or 10%). You end up saving $168 a year.
8. Impulsive Shopping
Case: Making impulsive purchases has never been easier with online shopping. Janice is an avid shopper. She always feels the need to buy something whenever there is a sale. She spends around $1,000 a year (excluding food and going out). On average, Americans spend $5,400 on impulse purchases3.
In reality, most of the items you buy impulsively usually end up collecting dust after a few uses.
Solution: Only buy things you truly need. Spending money isn’t saving money, even if you’re getting a better deal by buying in bulk. Try not to fall for sales tactics and marketing. Don’t go out of your way to buy something you don’t need just because it’s on sale.
In addition, do not save your credit card information on websites. This makes it easier for you to make mindless purchases.
9. Not Paying off and Prioritizing your Loans and Bills
Case: Janice graduated with about 40k in student debt. She decided to take her time paying it off. She reasons that she will have the rest of her life to pay off these loans.
However, loans come with interest. The longer she doesn’t pay off her loans, the more interest they will compound.
Let’s say she has $40k in private loans at 5% APR (annual percentage rate). Janice decides to pay a minimum of $50/month ($600/year). By the end of the year, she has reduced her student loans to $39400. However, since the interest (5%) is compounded monthly, the bank charges her a total of $1900 by the end of the year. Her total student loans rise to $41300. If she continues, the amount she has to pay will increase to a point where she will never pay off her loans.
Solution: If Janice starts over at $40k student debt and pays $350/month ($4200/year), she reduces her loans to $35,800 by the end of the year. With interest, the bank charges her a total of $1790 by the end of the year. Her total student loans drop to $37590. She will eventually pay off her loans.
Make a plan to pay off your loans, reduce your spending and adopt a frugal/minimalist approach to money, and be sure to be prompt with your payments. Do not take on any more loans, and do not start saving (1% interest) until you have all of your loans (5-15% interest) paid off.
Just as importantly, you also want to be sure to pay your bills (electric, credit, taxes, etc) on time, as you’re penalized for not doing so.
10. Buying things that you only use once
Case: Janice enjoys reading. She buys a new book or two every month. However, she only reads these books once or twice before setting it aside.
Books brand new are about $14 – 30. Even if you only buy one book every month, you spend around $240 ($20 a book) a year. This can vary depending on different factors, but the costs still add up quickly.
Solution: Rather than buying things brand new, consider borrowing items. In Janice’s case, she can utilize her local library to borrow books. If she wants to reread them, she can always make another visit and check out the book again.
Consider buying something used or refurbished if you use it habitually.
The same goes for clothes, electronics, etc. Don’t buy something you’ll only wear once. Assess your purchases. Ask yourself how many times will you use an item and the value you can get out of it.
11. Neglecting your Health
Case: When you’re super busy, it’s easy to put your health on the back burner. Janice has a 2-hour commute to work. Once she gets to work, she proceeds to sit for another 8 hours. With her busy schedule, she finds it hard to squeeze in time for exercise.
Because of the stress from both work and bills, she finds comfort in food and alcohol. Unfortunately, these habits are bound to harm your health.
Health conditions are associated with more visits to the doctor and expensive medical fees.
Solution: Although some things aren’t foreseeable or preventable, taking care of your health can potentially save you on costs in the future. (Disclaimer: Please note that I am not a health professional and am only speaking out of the experiences of my own and people I know).
Our health greatly impacts our quality of life and our ability to certain tasks, which will then impact our productivity. To read more about nutrition, refer to our guide to weight loss/gain/maintenance for healthy habits and tips.
Janice’s Spendings (Thus far) from this post:
Eating out: $3,960
Repairs: $2,128
Cable TV: $1,284
Drinking at Bar: $2,400
Paying for extra service: $900
Not paying off loans: $600 (a year for the rest of your life)
Buying things you only use once: $240
Electricity Bill: $1,820
Grocery: $3,000
Additional Impulsive buys: $1,000
Total: $17,332
(Costs not included: Healthcare, additional utility bills, Rent, Gas/transport, etc.)
To put this into perspective, if Janice makes 40k a year, she’ll have $30,932 left with tax deductions (using New York’s rates). If we subtract her spending thus far, she will have $14,753 left.
Furthermore, If her rent is $1000 a month ($12000 a year), it brings her down further to $4179 left to spend of transportation, additional utility bills, healthcare, phone plans, and savings.
Although these cases might sound extreme and may not all apply to you, I hope this gives you a better idea of how and where we are draining our money.
Even if your case isn’t as extreme as Janice’s, the reality is that most people are living paycheck to paycheck. Studies show that 78% of Americans live paycheck to paycheck. 1 in 10 people making $100k+ are living paycheck to paycheck, and 1 in 4 people do NOT set money aside in their savings.4
Although there are factors that are hard to change, there are always a few things you can do to give you a greater sense of financial security and safety.
Conclusion
To wrap this up, here are the main takeaways:
- Reduce how much you eat out — Consider meal prepping and making your own coffee.
- Treat all your items with care. Be careful and take preventative measures.
- Cut cable TV. Look into cheaper alternatives, such as Netflix, Hulu, etc.
- Pre-game or host parties at home to save on alcohol/travel costs.
- If you can do something yourself for much cheaper, do it.
- Buy generic / store brands when possible.
- Unplug appliances that you aren’t using.
- Be mindful when shopping. Continuously ask yourself if you need something or not. Only buy what you need.
- Prioritize your debts. Make a plan so you can pay them off as quickly as possible.
- Borrow things you only use once.
- Take ownership of your health. Move your body, eat well, sleep, and make stress management a priority.
So there you have it: 11 Big mistakes young people are making. Maybe only some of these cases apply to you, but seeing the consequences of these mistakes will make you think twice the next time you spend.
If you have any additional useful money-saving/budgeting tips, please let us know in the comments! If you also found this post to be useful, please consider sharing with other people you know!
