Where Has All the Money Gone?

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Where Has All the Money Gone?

Money mistakes we all make and how to avoid them.

Where do we spend money?
○ Average Annual Expenditure of a U.S. Consumer: $49,638
■ Housing
● $16,920
■ Transportation
● $8,758
■ Food
● $6,133
■ Tobacco and Alcohol
● $780
■ Entertainment
● $2,698
■ Healthcare
● $2,853

Where is money being wasted?
○ Utilities:
■ Do an energy audit to find leaks
■ Use smartmeters to save money on heating and cooling
○ Food:
■ Eat out less
● Don’t buy appetizers when you do
■ Buy in bulk
■ Compare unit prices
○ Unused gym memberships
■ If you don’t go, don’t pay
■ Running is free
○ Taxes
■ Claim every deduction you can
○ Entertainment
■ Ditch cable television, you only watch 3 of your 5000 channels anyways

Money mistakes and how to avoid them

Not having a budget
■ ⅔ of American’s do not budget
■ Figure out where you can cut back
■ Use applications like Mint

What to do:
○ Monthly income – regular monthly expenses (housing, transportation and utilities) – 20% to 30% to savings, retirement and/or debt
○ The rest covers your living expenses
○ Limit yourself to a set amount in cash

Not having an emergency fund
■ Without emergency fund, emergencies end up on your credit card

What to do:
○ Set aside $100 a paycheck
○ Until you have a minimum of $1000
○ Eventually build a 3-6 month cushion of living expenses

Not taking advantage of your full 401(k) match
■ As long as you you contribute a certain amount, some companies will “match” your contribution
■ 401(k) matches are free money

What to do:
○ Talk to your HR department about how to receive a match

Not contributing to retirement
■ Social security is spending money, not income

What to do:
○ Put enough money toward your 401(k) to get your company match
○ Put away money in your Roth IRA up to the limit
■ $5,500 for 2013
○ Contribute any extra money you have for retirement toward your 401(k) up to the limits
■ $17,500 for 2013.

Not letting your savings earn interest
■ .01% doesn’t count

What to do:
○ Shop around FDIC Insured savings accounts
○ Look for:
■ 1% interest
■ No fees
■ Easy electronic transfer

Not paying attention to credit card interest
■ Average credit card charges around 16 percent in interest

What to do:
○ Many cards offer promotional interest rates as low as 0%
○ Using them to get rid of high-interest cards
○ Can help you pay your debt down faster
● And last but not least: Never get a payday loan

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Sources:
http://www.gallup.com/poll/162872/one-three-americans-prepare-detailed-household-budget.aspx
http://lifehacker.com/the-most-common-ways-you-waste-money-and-how-to-save-i-1183447200
http://www.forbes.com/sites/laurashin/2013/11/26/13-money-mistakes-to-stop-making-by-years-end/
http://www.dailyfinance.com/2014/01/03/14-money-mistakes-avoid-2014/#!slide=2129255
http://www.daveramsey.com/blog/10-things-americans-waste-money-on