Frugal Living 

Find and Plug Your Money Leaks

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Financial Leaks = Leaky FaucetsHow many times have you run into this scenario at work: you start a task that seems ridiculously inefficient or outdated, bring it up to your supervisor only to hear them say “that’s how we’ve always done it.” Sadly, it happens all too often and it’s the product of the “if it ain’t broke, don’t fix it” mentality that permeates almost every aspect of life. When was the last time you took a hard look at how you did things? Your commute to work every day, how you pay your bills, and how you set your thermostat? Probably not much, especially with all the other, more important, things you have to worry about right?

I totally get it because everyone does the same thing. There are a lot of things in our lives that we probably do the exact same way because “that’s the way we’ve always done it.” It’s familiar. It’s comfortable. It has worked… but it could be better. And, just like at work, we’ve done it that way because while it may not be the best way, it worked and you have a million other things competing for your time and energy.

However, today I want to work with you to try to find some ways we may be leaking money. It’s hard to know where you might be losing your hard earned cash bit by bit because it’s hard to know what you don’t know, right? So, to help get our mindgrapes flowing, I listed a few common money leaks in the hopes that you could kick in a few leaks you may have found recently.

Not Using Billpayment Services

It’s the year 2010 and if you’re still putting a stamp on an envelope to pay your bills, you’re wasting your money. The stamp is going to cost you 44 cents and the envelope will run you a penny or two, making each bill cost you about forty five cents each. Pay five bills a month, twelve months a year, and you have $27 you could spend on a case of good beer (or something else you enjoy). That doesn’t consider how much you’d pay in fees if the payment gets lost in the mail, which happens infrequently but is more likely to happen with the mail than with the photos of the Internet. Finally, think about all the time you’re wasting on making out the check, writing the address of the company on the envelope, and walking to your mailbox. With a few clicks, online billpay takes seconds.

Don’t Review Your Fixed Monthly Expenses

You don’t go to the gym as often as you think you do. You don’t use Netflix as often as you think you do. You don’t watch as much TV as you think you do. If you think I’m wrong, that’s fine, there’s a pretty good chance that even if you do use one of those things often enough to justify the monthly cost, you don’t do all of them enough to justify each of their monthly fees.

Keep a log of how often you use certain services and calculate how much you’re paying per use. Pay $90 a month for a gym membership? Even if you go every single day, that’s $3 a day. Once you do the math, you might be better off paying per visit if they offer it. This applies to almost everything and you’ll be surprised how much you don’t use your monthly memberships.

Don’t Optimize Your Savings

How much money do you have in your checking account? How much do you actually need in that account? This is one leak I know we are currently suffering from and it’s such an easy fix, if we take the time to do it. Money in our checking account earns nothing, whereas money we transfer into our high yield savings account has the opportunity to earn at least a percent or two. We keep a bit of a buffer in our checking account but everything else goes into a savings account where we get a little something while we’re waiting.

Drive Fast, Brake Hard

If your morning commute is 20 miles, it’ll take you about 21 minutes and 49 seconds if you go 55 miles per hour. If you drive 65 miles per hour, you get there in 18 minutes and 28 seconds – or three and a half minutes faster. The difference? You can get pulled over for speeding if you are going 65 in a 55 and while it will probably not happen, it will suck really bad the one time it does. Plan your trips better and stop speeding. You avoid tickets, you improve gas mileage and tire lifespan, and you don’t sacrifice much. (if you drive 80 MPH, you still takes 15 minutes to get there…)

While you’re at it, use Google Maps and map out your daily commute. You can drag your path around to see if you’re really minimizing your total mileage or the number of red lights you hit.

Don’t Review Your Insurance Coverages

When was the last time you took a look at your insurance needs and adjusted your coverage? Here’s a scenario that probably happens all too often – you increase your deductible to lower your premiums (great move) but over the years your car has gone down in value and now it’s worth less than your deductible. It sounds obvious right but do you know the blue book value of your car? Ask your insurer what they think the value of the car is (chances are it’s less than blue book)… you’ll be surprised. Anyway, it’s not an intelligence test, sometimes we just keep doing what we’ve been doing because it made sense once and I’m telling you that you should review them. If things have changed in your life and you need less coverage or a different type of coverage, tell your insurer and get your policies adjusted to fit your current needs.

Don’t Find Ways to Trim Electricity

Finding ways to conserve electricity around your home is a nice way to plug a leak because you often only need to do something once and you reap the savings for months. I personally like CFLs, despite their up front costs, but there are plenty of ways to trim your electricity bill without much up front cost. For winter savings ideas, here a post on ten quick tips to winterizing your home. If you do a quick search on Google on how to conservation, you’re sure to find a lot of tips you can implement to start saving on electricity.

Don’t Review Your Mutual Funds

How has your mutual fund been performing? Are you happy with it? How much are you paying? Do you own the world’s most expensive index fund? (it’s the Rydex S&P 500 and it charges a 2.28% expense ratio!)

My point is that you should review your investments, especially your mutual funds, to see if your investments make sense. Index funds are easy to review because it’s as close to an apples to apples comparison as you’ll ever get and it really makes little sense to pay more for one fund over another (there are some differences, mostly dealing with the speed at which they match index changes, but they’re fairly nominal). You wouldn’t pay $20 for a gallon of milk, right?

I tried to run the gamut from leaks in your home to hard money leaks, like overpaying for an index fund, but I don’t know what I don’t know so I need your help. What money leaks do you see every day that most people don’t seem to catch? What about a leak you may have plugged lately?

On Friday, I’ll pick the top three money leaks and award each those entrants 50 BB you can use in the Bargaineering Bucks store. You must be a registered user to earn Bargaineering Bucks.

(Photo: johnx62)

{ 58 comments, please add your thoughts now! }

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58 Responses to “Find and Plug Your Money Leaks”

  1. eric says:

    For me and my friends, money leaks are usually related to food or eating out. I like to optimize by pre-planning grocery trips and weekly meals. I don’t go crazy with the details but knowing generally what I should buy and cook saves me from last minute eating out and laziness. Not only that, but when we do go out, we appreciate it that much more.

    • Chris says:

      I do the same by planning a weekly meal plan. Go shopping for groceries once a week and if I feel like changing the menu for the night, I just swap days and I know I’ll have what I need.

  2. Soccer9040 says:

    This is one place where the “Automate your finances – Set it and forget it” mentality can bite you. If you are never challenged to look at your bills, things can creep in. Atleast by using online bill pay you are forced to look at the bill and enter the amount due into your bill pay.

    • daenyll says:

      I agree with the online bill pay, rather than full automation unless there is an additional benefit from the automatic payments. This way you are more likely to catch anything suspicious by at least looking at the bill and can be sure to keep in mind all the payments you make during a month in case you wish to reduce any nonessential expendatures.

  3. Great list Jim. The one I hate the most is: “Drive Fast, Brake Hard”. Not only does speeding cost more in terms of gas, but I hate it when people speed up to a light just to brake really hard. Little things like this don’t have a huge impact, but when added up they can make a big difference.

    The point about mutual funds is so important. Many people just leave their money sit their and don’t check it on a fairly regular basis to make sure the expenses on the funds have not changed or management has changed things with the fund. I have switched to having many index funds because of the low cost and good performance.

    • Jim says:

      It’s also dangerous. Get into one accident and your costs completely balloon, sort of the reverse of winning the lottery. 🙂

    • jsbrendog says:

      if you drive fast break hard just get a prius 😛

      breaking is what generates the power to refill the electric battery.

      we just had one as a rental on our vaca and filled it up 1 and a half times in 4 days after driving probably average 150-200+ miles a day. amazing. such a great car

      • Soccer9040 says:

        I didnt know you could rent them. I would love to rent one for a weekend just to try it out. That would be awesome. Did you get it from a normal rental place like an Avis or Hertz?

    • Wilma says:

      People need to look at their driving habits. I love the people who pass me and I catch up to them at the next light. The ones who go through a red light following several others who run it seconds after it changes. Then there’s the driver who makes a right turn on red but never stops and looks at you in the rearview like YOUR the jerk.

      Next time you look at your car insurance bill, think about how you drive and then how that contributes to what you pay. Your bill and every one else bill could be so much cheaper if it weren’t a race to get to your destination. A ticket is expensive and now insurance companies are looking up their customers records more often.

      A friend of mine thought he skated through his DUI undetected by his insurance company. They got him 2 years after the fact and he not only has to pay higher premiums for his personal car but he has his own business. He was told to get a driver to take him to his service calls or be dropped.

      Another friend with a business was found out 3 years after his lead foot took him into take his written test over again to keep his license. He was told his premiums would be double or get a driver.

    • Steven says:

      That’s due to poor timing (or lack of planning at all on newer streets) on the lights when it goes red as cars approach.

      Most cities never spend the money to time their lights properly when speed limits change or new lights are added.

      Not trying to justify myself speeding, but in my daily route to/from work, you have to speed to make it past the light, otherwise you end up in stop and go the entire time. Or you could go 20 below the speed limit, I actually tested that out.

      • That is so true Steven. I used to live in the city and it was a mess. The lights would be so out of sync that by the time I would get through one light, the next one would already be red. People used to race to each of the lights just to make it to through in time. I never bothered just because it was so dangerous.

        • Shirley says:

          From experience here, I can honestly say that if you slow down when the light turns yellow and wait for the next green light, chances are that you will breeze right through the next several lights (on the straight-away) with all being green.

        • Soccer9040 says:

          It would be nice if all cities spent the money to optimize their traffic signals. Too often everyone talks about adding more lanes. If the signals flowed together you would be constantly moving at the speed limit. Another good idea is traffic circles. So many people don’t like them, but I think they are great. You never really have to stop. Plus they are very safe. There is always the occasional idiot who stops before entering the circle or who stops in the circle, but its always good for a laugh.

  4. The lower level of our house has a door to the garage. It was apparent that warm air was both:

    A) Rising to the upper level, as warm airs tends to do

    B) Escaping into the garage

    This made it almost impossible to keep the lower level warm in the winter – it would often dip into the upper 50s, despite have downstairs vents wide open and upstairs ones closed in an effort to equalize the temperatures.

    We installed an interior door to shut off the downstairs. It’s much warm downstairs now. Sometimes it’s even warmer than upstairs (which is fine, since my blogging base of operations is downstairs, and I like it much warmer than my wife does.)

    • Jim says:

      Our basement is the same way, we spend a lot of time there in the summer when it’s cool and are hardly down there in the winter. It’s impossible to keep warm so we don’t even bother trying.

  5. I can’t say this for sure yet, but I am pretty sure my wife and I are losing lots of money in inefficiencies in our home insulation / heating / cooling. I called the electric company, and am getting a free energy audit this week. From there, they will tell me ways that I can make things more efficient, and significantly cut my electric bill.

  6. Another place that I would say most people “throw away” money is in small home repair / maintenance / upgrades. I can’t even count how many times I have had to fix something around my home, and going into it had no idea what I was doing. With the help of a few quick Internet searches and the advice of the hardware store employees, I have always been able to figure it out. Sure, there are many jobs that are too much for the average home owner, but most end up being very simple. If you can convince yourself to try something new, you could easily save $100 or more.

    • Jim says:

      It’s also a lot of fun and you get a great sense of accomplishment. This past weekend we replace the kitchen faucet, courtesy of a faucet we received from our friends at One Project Closer. It wasn’t a tough job, just ran into your typical hiccups with any project, and we had a strong sense of accomplishment afterwards.

  7. jsbrendog says:

    it is hard, probably impossible to plug every leak but if you remain vigilant you can get most of them. I’ve been able to stay on top of things and not have any problems but eventually somehting will happen. it is inevitable.

  8. echidnina says:

    My biggest money leaks, and the biggest ones I see among people I know, come with eating out. Of course, it’s almost always cheaper to fix something at home than order at a restaurant in the first place. But dining out is a fun experience, give you a chance to spend time with your friends/SO, etc., so I don’t cut restaurant meals entirely out of my budget.

    In order to reduce the blow of an evening out, I’ll always order water as my drink, and either try to split something with someone or ask for a lunch portion. Restaurants always serve us such huge plates of food, chances are you’re not going to be able to eat it all anyway!

    …and as an added bonus, these money tips also happen to be weight-loss tips 😉 Sugary sodas and large portions are two of the reasons that restaurant meals are diet-wreckers.

  9. Our biggest leak right now is probably ordering food. We’ve had a lot going on and our schedule is really up in the air and sometimes it’s just easier to order some Chinese food or a pizza. We really need to clamp down on this kind of spending.

  10. At our financial planning firm, we catch this money leak frequently: Many clients have towing and roadside assistance as part of their regular auto insurance policy in addition to being AAA members. This is redundant coverage, and we advise clients to call their main insurance to cancel the towing/roadside assistance coverage, which is often a savings of around $10 a month. Sometimes clients resist canceling by saying that it’s only an $10. We tell them to start paying us $10 a month for no reason, if it’s all the same, and then they usually get the point.

    • Frugal says:

      I have cut my AAA membership & have used road side assistance coverage from auto insurance once. After clearing some misunderstanding, I am reimbursed.

      I wanted to compare the coverages line by line but never got the details. For example, Auto ins coverage provides reimbursement up to $50 only for each incident (this is spelled out in the policy), not sure about AAA. Doing this comparison will give better idea, but haven’t done it yet.

      In NJ, as long as you have comprehensive coverage, you have roadside assistance. It is mandated by the law. I do not know about other states.

  11. ziglet19 says:

    Not taking a list grocery shopping tends to me a money leak for me. If I make a list before I leave home and continue to focus on the list, I don’t end up with impulse purchases that we obviously don’t need.

    • echidnina says:

      Oh man, me too! I’m so bad with grocery shopping. It’s funny, because I’ve been cutting back on impulse buys in other areas (clothes, movies, books, etc), and the last time I went grocery shopping I could definitely feel those urges expressing themselves. Gotta stick to the list, or else I end up seeing a flavor of Ben & Jerry’s I haven’t tried or some cool new snack food that I “have to have”…

      • ziglet19 says:

        Even when I have a list, I try not to wander down any rows that don’t have products on my list, so I don’t get sucked into picking up anything else.

    • Shirley says:

      My money leak in grocery shopping is taking my husband along… impulse buying seems to be his specialty!

  12. coconuts81 says:

    My biggest money leak = buying too much food, and having it expire or turn rotten before I get a chance to eat it, or wasting time/gas by making extra grocery runs to pick up items that were out of stock when I was previously there. Fix = becoming friendly with the staff at my local Trader Joe’s (the market where I do all my food shopping), and finding out the days when fresh produce, eggs & dairy, meat, and bread are delivered, and planning my food shopping accordingly.

    • echidnina says:

      Buying too much food for me to eat is a problem for me too, since I’m a college student away from home. I get half-gallons of milk and half-loaves of bread (whoever decided to start selling those was a genius!).

      I also try to think ahead to preserve things before the go bad – if I have a bunch of bananas that are turning brown and I know I can’t eat them all, I’ll either pop them in the freezer or bake banana bread. Yummy! I wouldn’t have the heart to waste those bananas just because I can’t eat ’em quick enough.

  13. hoht says:

    Major Money Leak: FOOD FOOD FOOD

    College students are notorious for eating out and eating lots of junk. Recently, instead of french fries before class everyday, which equates to about $ 30. I started growing potatoes in my room.I saved a grand total of $3 last month (I yielded only 3 potatoes). But still, microwaved potatoes are more tasty than french fries.

    • echidnina says:

      Microwaved ‘baked’ potatoes are delicious! I don’t grow my own, but I do buy a 10-lb bag of them whenever I go to the grocery store. Tasty, filling, and cheap!

      • Soccer9040 says:

        How do you microwave a regular potato? I’ve bought the kind that come wrapped in plastic and those are great. I also tried wrapping my own in seran wrap but it didnt cook as well as I thought it would.

  14. aua868s says:

    buying items near the counter could make u lose valuable buckks for no-so-valuable items

  15. Jenn says:

    We menu plan, shop with a list, take advantage of the sales and coupons where possible and rarely eat out. But no matter how careful you are about cutting grocery expenses, it’s all for nothing if you let food go bad in your fridge, either because you ignored it until it rots, or you don’t have a concrete plan to use up leftovers.

    To save time and money we intentionally cook extra most days. At the very least the extras will be taken for lunches the next day. To take the idea further we usually plan our meals so there’s a domino effect and one night’s extras become the starting point for the next night.

    Day 1 – roast a whole chicken and cook a double batch of rice rice.
    Day 2 – left over chicken becomes enchiladas or pot pie.
    Day 3 – left over rice becomes fried rice (much better made with “old” rice). Add in any chicken bits still left after the enchiladas.

    Anytime we need to cook ground beef for dinner we cook double or triple and freeze the extra for other nights. Not only does it save a step on busy nights but it saves electricity by cooking all the beef at once. Same for extra pasta and rice. It’s rare that every item for dinner was cooked fresh that day.

    Last night it was pasta and meat sauce. All the sauce was used up in lunches today, but we cooked plenty of extra pasta so that tonight we’ll be having pasta salad with the steaks we’re grilling outside. No need to even turn on the stove tonight. The leftover steak will become beef fajitas for tomorrow night….and so on, and so on…

  16. Ro says:

    A not so obvious leak is giving away gently used childrens items that your kids have outgrown. Although a kind move there is money to be redeemed through selling clothes, furniture, toys, equipment, etc through sources like Just Between Friends Sales, consignment shops, Craigslist for bigger items, etc. Doesn’t hurt to shop these sources as well but do your homework before purchasing an item. Sometimes people try to resell items for close to what they can be purchased new. So know what you are looking for and how much it retails new. When selling, price your items fairly. Garage sales work well for the rest of the households used items. Several hundred dollars can be made in just a few hours. We set the profits aside in savings to go towards future kid expewnses.

  17. Chris says:

    I hate throwing away leftovers….its not a leak its a tip of the bucket.

  18. Steve says:

    Going 20 miles @ 60 mph takes 20 minutes.

  19. daenyll says:

    I know I lost money to heating this winter, my windows appear to be the same single pane aluminum windows that were put in when this place was built back in the 80s, but the best I could do was put plastic up to help with the drafts and keep my curtains drawn and the thermostat turned down, since I don’t have the option of anything else living in an apartment. And then there was the heavy use of baked goods in my meal plans so I could be making dinner and heating the house with the same appliance and energy use.

  20. aua868s says:

    try to stay healthy be eating healthy and working out well….financial trouble is just 1 illness away for some people.

  21. javi says:

    My biggest money leak is eating out and buying lunch instead of bring lunch to work. I have everything to bring lunch, yet I never do it.

    • aua868s says:

      sme people clain that eating out with people serves them better in the long run since it is a very valuable networking opportunity….just a thought!

    • ziglet19 says:

      Sometimes I even bring mine, and still go out. Sometimes you gust want to get out!

      • Chris says:

        Amazing how 1/2 a day at the office can convince you to do such terrible things….like blow your budget and your diet.

    • Soccer9040 says:

      My back of the napkin calculation estimates that costs you about $2,000 a year. Wow thats a lot.

      $7.50 * 5 days * 52 Weeks = $1,950

      If you do that every day for your entire working life rather then put it in a roth, CD or whatever your favorite investment is, you could be loosing out on some serious cash!

  22. I think it is important to review you outgoing cash flow every few months.

    One of the best ways is to keep track of every receipt for a month or two. Then sit down and go through each receipt and put it in a category. You might be surprised where some of your cash is going.

  23. Great list of conventional and unconventional money leaks. After studying some celebrities with crappy behavioral habits, there are some other unconventional money leaks as well:

    – Getting in a marriage where one partner is doing it for money, and the other is doing it to have arm candy (most likely will end in a costly divorce);
    – Having unwanted, unplanned children (looking at 18 years of child support payments);

    While this doesn’t happen to everyone, these are extremely costly. Just some crazy things we’ve noticed that should be thought about more.

  24. ChristineWithRegence says:

    How about health care cost leaks? It’s difficult, because the costs of health care procedures and treatments are so mysterious. Check out this short video:

  25. TootleDeetootleDum says:

    I personally had to plug a few leaks, since a store closure, lost me my sales job. I have always been conservative, but now on unemployment I had to re-vamp! I no longer have satellite TV, hooked up to an antennae. I do not have any medical insurance and I really try not to think about that. I am going to cancel a $79 a month cancer insurance policy that I have paid on for about 6 years. I will be growing alot of vegetables in my garden this summer, as I tried to do last summer. I turn off my electrical appliances and lights when not in use and have minimal useage. What to do next?

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