20 Things That Could Be Costing You Millions (No, Really)

I’ve been on holiday recently. Whilst away I had time to get seriously stuck into some books. One of them was David Bach’s ‘Start Late, Finish Rich’. An interesting book, should you be so inclined. In it, David refers to the ‘Latte Factor’. The basic principle is that there are several little things in most people’s lives that seem very insignificant in and of themselves, but when added up over the course of a lifetime, can add up to millions (when compound interest is taken into account).

For example, $10 a day in coffee and lunch over a forty year work life adds up to almost TWO MILLION DOLLARS when invested at 10%* with the interest reinvested.

So, with that in mind, here’s my list of the Top 20 things that will eat into your budget, mess things up, and generally cost you a fortune over time.

1. Takeaway coffee – (tea, hot chocolate, whatever) buy a coffee machine, buy your own beans, bring a thermos to work, do whatever it takes… just don’t make grabbing a drink from Starbucks (or other venue of choice) on your way to work a habit.
2. Buying your lunch – Bring it from home, whether leftovers or something you made specially. My boss (and keep in mind I work for a bank) used to love to tease me senselessly about bringing my lunch to work every day until I did some maths for him on his whiteboard and showed how owning a small negatively-geared investment property cost about as much as buying lunch every day. He still buys his lunch, mind you… I just don’t cop the grief.
3. Magazines – Borrow them from the library or get a digital subscription (I can recommend Zinio for e-subscriptions as little as $5 a year, and through the Read Green Initiative you can get one for free!
4. Lottery tickets / scratchies – Invest the money instead – significantly more likely to return on your investment!
5. Snacks – Buy them in bulk at the grocery store and bring them with you or stash them at work.
6. Drinks on the go – I still find this a bit surprising, but I never bought (or had bought for me) a drink when I was out until I got my first job. My mother brought them with us everywhere.
7. Manicures, pedicures, massages – I could write a list the length of my arm… failing medical requirements for the latter of the three named offenders (massages), none of these are necessary on a regular basis and in most cases you can perform these yourself (and with practice, better than a beautician!).
8. Pay (cable) TV – The commercials are a pot of crock. It is NOT “just good thinking”… you will NOT spend more time home as a family. You’ll just spend more time arguing about what to watch. I lived the first twelve years of my life without a TV, now whilst I’m not suggesting everyone do this, I AM telling you that you can cope just fine with regular TV. Nothing to watch? That’s what board games, books, walking the dog, chores and come to think of it – borrowing DVDs are for! If you need more convincing, consider my favourite adage – are you likely to wake up one day in your eighties and think ‘gosh, if only I’d spent more time watching television’
9. Breakfast – Boing hand in hand with takeaway coffee, muffins and toasted sandwiches and pastries are another money sapper. Eat it at home, or at the very least, buy a packet of fruit toast (or whatever your poison) and stick it in the fridge at work.
10. Cigarettes – I once read a case study where the gent said his parents never had any money to save or invest. He also indicated they’d both been smokers. The editor he wrote to calculated that if they’d just bought shares in the company of the cigarette brand they smoked instead of buying packets of cigarettes, they’d have left their kids with over $3 million… not to mention having potentially lived long enough to enjoy it. Smoking gives an extra kick to your hip pocket too though – the cost of cigarettes PLUS the cost of managing all the side effects of smoking, physical, medical and cosmetic.
11. Takeaway (takeout) food – Being a reformed takeaway junkie, I can tell you this is all about habit. I can highly recommend buying foods that are semi-prepared and making side dishes to go with them if you’re short on time. If it’s the style of food you’re after, making it as a family is a great experience. Having burger night, nacho night or taco night is both cost effective and more nutritious! Besides, your kids/partner/flatmate learns to cook SOMETHING.
12. Newspapers – You can read these online these days, haven’t you heard? I’ll readily admit I’m a sucker for Saturday papers though!
13. Fancy mobile (cell) phones – Being Gen Y, this one kills me… but really – you don’t actually need to be able to determine the name of a song at the drop of a hat, or check Facebook on the go, or watch TV on the train. You just don’t. Want, yes. Need, no.
14. Books - I somewhat recently found out that my local library is 1) open 7 days a week and 2) entirely online. I can order and reserve books, they text or email me when they come in, I go pick them up and return them sometime in the next 3 weeks. I can even renew them online. I love love love bookshops, but at about $25 a pop for your average book, it adds up damn quick given they’re often read just a few times.
15. Cars & Taxis – I lived without a car for four years. I now carpool to work a few days a week (public transport the others!) and I’m constantly surprised by the number of people in cars with just one person. They’re wonderfully convenient and everything else, as is the humble cab, but running late for work is not an excuse to drive or catch a taxi unless you’re a brain surgeon and someone might actually die if you get there late. Set your alarm 15 minutes earlier.
16. Gym memberships – Here’s a big secret, folks. Gyms do not make money when you go. They make money when you don’t. When you go, you require the place to have a certain number of staff, create wear and tear on the equipment and generally cost money… thus the whole ‘contract period’ of 12 months or so. With this in mind, if you’re not going – cancel it now. If you just do classes, consider changing your membership to something more appropriate. If you’re just using one sort of equipment, well welcome to the great outdoors.
17. Food - Recent research has found that over 25% of food bought by Australians ends up in landfill (In the UK, this is 30 – 40% and in the US about 30%) In case you’re reading this on a Monday morning, % of food thrown out = % of the money you wasted on it. These % are both in the form of food past its expiry and in plate scrapings. It gets worse. If it’s expired food because you couldn’t be bothered / didn’t have the time to cook, it’s a double whammy – not only did you waste the money by throwing out the food, you compounded it by buying takeaway. Left meat in the fridge that went bad? Now you’ve not only wasted a bunch of money but you’ve contributed to an animal being slaughtered for no good reason.
18. Drycleaning – In many instances, fabrics don’t actually have to be drycleaned and will in fact last longer and be better for the environment if they’re handwashed. Obviously this doesn’t apply to things like leather jackets and wedding dresses, but it’s not particularly necessary to get your shirts drycleaned every week.
19. Home phones – With the pricing of mobile phone plans these days, there’s now little reason to have a home phone. If you have high-speed internet access, you can make phone calls online for a fraction of the cost. Better yet, you’re really unlikely to get sales calls during dinner on your mobile. Don’t be fooled, even if you use your home phone rarely, you still have to pay line rental and installation costs.
20. Brand name products – Trash TV has covered this one hundreds of times, but I’ll say it again. With the exception of highly specialised products (organic buckwheat flour, etc.) most basic kitchen items are much of a muchness. Flour is flour, sugar is sugar and rice is rice. You’re honestly not getting anything different except slightly more ornate packaging. (There is a huge exception to this rule: toothpaste. Take it from your Aunty Sam, DO NOT buy home brand toothpaste).

Even if you think there’s absolutely no chance you can find any money to save/invest/pay off debt and that you “run a tight budget”, you’ll probably find that you have a Latte Factor somewhere. Most of these things, are “stuff” we take for granted, have convinced ourselves we need or are reasonable to purchase.

I’m not even considering saying that you should never spend your money on these things… but I am going to say that you don’t need them frequently.

Feel free to email me if you have additions to the list!

*Technically this is the average rate of return of the share (stock) market over time. However, this refers to ‘the market’ which is a variety of companies across different industries. It does NOT mean that if you buy shares in a company you will get 10% pa. It will vary year to year. Keep in mind though, that when investing in this sense, you’re investing for the long term, and you’re not plonking it in a savings account with an advertised interest rate.

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