20somethings love to treat themselves, perhaps a little too often.
While some studies portray millennials as savers and financially savvy people, there are more often reports condemning millennials for wasting their money at a catastrophic rate. Spending money loosely early on can cement poor financial habits that continue into later years, where raises and promotions yield only marginal net gains.
I’m going to show you a financial breakdown of exactly how “treating yoself” is so damn expensive, and when you’re done freaking out, I’ll explain to you how small, incremental changes to your spending habits can save you some serious cash.
Let’s take this scenario: You are a millennial who purchases coffee twice a week, takes an Uber two times a week, buys lunch outside two to three times a week out, pays for a gym membership, forgets to pay the occasional bill on time, allows interest to accumulate on payments due, pays for an online dating app, goes out for drinks twice a week, and buys two outfits at least twice a month.
*Keep in mind these numbers are conservative. Additionally, the constants of rent, insurance, cell service, etc., are not included.
Seems like a typical millennial budget, right? But what is this really costing you?
Coffee: $5 a cup x 2 = $10 a week $40 a month, $480 a year
Uber: $10 a ride x 2 = $20 a week $80 a month, $960 a year
Lunch: $6 a day x 2 = $12 a week $48 a month, $576 a year
Gym: $1 a day x 7 = $7.50 a week $30 a month, $360 a year
Late fees: $25 a month, $300 a year
Interest: $2 a day x 7 = $14 a week $56 a month, $672 a year
Dating app: $20 a month, $240 a year
Drinks: $30 a day X 2 = $60 a week $240 a month, $2880 a year
Outfits: $100 a month, $1200 a year
Your total cost at the end of the year = $7,668!
Think about the fact that you work from January to May just to pay taxes, which equate to an average of $5,000 per year. You are spending almost $13,000 a year in taxes and indulgences. Now, understanding an entry-level paycheck, that is probably a little less than your yearly salary…for bullshit. It’s money that is working you, not working for you.
Now what is the solution?
Stop buying coffee from coffee houses:
You’ve heard this time and time again. Yes, it is a nice treat, but not every week. Multiply the annual expense over five years, a decade, two decades…We’re talking serious money. Imagine if that money was earning interest for you and not handed over to the money making machine that is Starbucks? Catch my drift?
Buy a coffee machine and get up just a little earlier to make yourself a cup, or set it to brew the night before. You can buy a simple coffee machine, or a fancy espresso machine for just $39 and coffee pods for just $6 which equates to about 40 cups of coffee. Find the Starbucks recipes for frappes and make them at home. This will save you $400 a year.
Don’t Uber everywhere you go:
If you already have a monthly metro card or car, spending the extra money on quick transportation needs (such as Uber or Lyft) is convenient but ultimately, a waste. Minimizing delays as in being late and hopping on the subway, bus, bike, or hoofing it can save you almost $1,000 a year. Even if you cut it down to one ride a week, you will save $500 per year.
Pack a lunchbox:
Food prep will save you so much money with the added benefit of keeping healthy. You might be saying, “I don’t have time, I can’t cook, and I don’t even own a pot.” Well, time to grow up. You can’t depend on a person or a food chain to prepare your every meal. Go grocery shopping, spend $30 a week, invest in pots and pans, and make simple, easy recipes.
Actually use your gym membership if you get one:
If the gym is something you cannot live without, you do you. But if you are the type of person that’s not really sure what they’re doing with the weights, there are tons of educational and free resources available while you figure it out. Download the Nike training app--it includes hundreds of hours of workouts and it pushes out new updates regularly so you won’t get bored. This can save you $360 a year.
Avoid late fees:
They’re frustrating. Set your bills on auto pay or set up a calendar reminder on your email, phone, basically anywhere you can think of to remind you to pay. Also, you can sometimes get a percentage reduction on your bill per month if you set up auto pay. This simple tip can save you $300 or more a year.
Pay your bills on time to keep your interest rate low:
The same goes for interest. If you pay your bills on time, interest will not accumulate. Simple. Keep your hard earned money in your own account!
Stop paying for subscriptions you don’t use:
Take the time to evaluate if you need to pay for an app to meet people and also take a look at your monthly statements to spot any subscriptions you have been paying that you no longer need. Sometimes life gets hectic and it’s not until you look back at previous statements when you realize iTunes has been sponging $12/month the last four months for something you don’t even use! This can save you at least $300 a year!
Choose your drinks wisely:
Now this is a tough one. We all enjoy a few drinks every now and then. But consider the fact that happy hours are everywhere. Take the time to go out to places in your city that offer deals regularly throughout the week. Additionally, typical drink prices can be up to $15 (depending on what city you’re in). Skip the mixed concoction and drink something simple: gin and tonic, whiskey ginger, or a Moscow mule.
Also, think about the different calibers of alcohol. Liquor is the cheapest kind of alcohol. If you don’t mind the potential hangover, go with this option. But you can also select “call” alcohol. This are your Skyys, Jim Beams, and Jose Cuervos. Not exactly top shelf, but good stuff nonetheless. These tips can save you $2 to $3 per drink and up to $1,400 a year.
Shop the sale aisle (in moderation):
Finally–buying clothes. This is the most profitable game in the consumer industry. Clothing is extremely cheap to make, even with the “higher quality” fabrics. The margins and markup are going from your pocket to the brand. Why spend the cost when you can find reasonably priced items? This research can save you $600 per year… or more if you’re a fashionista supreme.
The most important takeaway here is that you can be in control of your finances. Every indulgence has an alternative and less expensive option. It will take time to adjust, but at the end of the year it will make a big difference. Slowly but surely your bank account will reflect these simple money saving changes. Take some time to inform yourself and enter the remainder of your twenties as an empowered and financially savvy 20something.