Is Your Money Mysteriously Disappearing?

Hi Reader,

Welcome to The Money Series and if you are new here, thank you for signing up. Personal Finance can feel ambiguous and overwhelming, but I am here to help simplify the journey.

Do you ever feel like some of your money vanishes? As though it slips out of your wallet unnoticed.

Have you ever heard the term ‘money leaks’? These are the sneaky and often unnoticed ways your hard-earned money slips away. Like a leak in a bathtub, these financial drips can accumulate over time and create a significant dent in finances. It is easier to dismiss these amounts as minimal, thinking that increasing your income will minimize the effect on your finances However, these amounts can add up to substantial amounts over time. Let’s explore how to identify and seal those money leaks.

Identifying the Leaks:

Unused subscriptions

A common culprit is gym membership which most people sign up for at the beginning of the year and gradually stop using. This also includes streaming services - Netflix, Amazon Prime Video, Hulu, Max, Disney, etc. Don’t get me wrong, if you use these services, then please continue. However, having multiple streaming services that you rarely use drains your wallet. Subscription services have become mainstream and a big part of our lives and companies are making it easy for consumers to sign up for these services and sometimes difficult to unsubscribe. This also includes subscriptions to online magazines and newspapers such as FT, The Economist, Bloomberg, etc.

Billing Errors/Duplicate Billing

Always check through your receipts and bank statements. First, know that people make honest mistakes sometimes and you don’t want to be the victim of that overcharging or duplicate billing. Also, some utility companies might be billing you above the minimum or even billing you twice for a service, maybe because of a system error. I recently discovered that I was being charged for Amazon prime for two different countries because I shipped some package from another country. Check through your bank transactions for unfamiliar charges and follow up on them.

Extended Warranty

When you buy electrical appliances, you may be offered an extended warranty (beyond the warranty provided by the manufacturer) for a fee. Often, the warranties are not worth the cost. That washing machine will most likely not stop working within the 3 or 5 years of the extended warranty and the warranty will be a waste of funds. Additionally, the warranty most likely won’t cover faults stemming from common issues such as accidents or fire.

Frequent Eating out

Yes, our parents were probably right and there’s actually rice (cheaper and probably healthier) at home. Dining out at restaurants or bars is more expensive than home-cooked food. Am I saying No to dining out occasionally and with friends and families? Absolutely No. However, a consistent habit of eating out multiple times a week may not be sustainable.

Brand loyalty

Sticking to a brand you’ve used for years may not always be the best choice. Ensure you’re getting the best value for your money in terms of quality, innovation, and cost. Are you buying the product or the brand? Someone shared last month how she was offered a branded medication that costs multiple times the price of a generic one. She was offered the cheaper, generic one after she asked. Of course, this should only be done with a doctor’s prescription.

‘Spaving’

Yes, a literal mashup of the words ‘Spending’ and ‘Savings’. ‘Spaving’ is defined as spending more to save more and this is reflected in the typical ‘Buy one get one free’ or ‘Buy products worth $50 to get free delivery’ promotions. The problem with spaving is that it can trick you into spending more to receive a certain savings benefit in return. The other trap with ‘spaving is that you may end up purchasing through sales that "often come with limited or non-existent return policies.

Sealing/Repairing the Leaks:

Actively track your spending. Two ways I advise for doing this - set up a notification for your main bank account to track this in real-time or set a time to regularly (weekly, monthly) review your outflows. This way, you can easily detect if an outflow is unclear. Look out for recurring charges that you do not recognize – this could be a sign of unused subscriptions.

Audit your memberships and subscriptions. are you using the service enough to justify the regular payments? Do you order as frequently as possible from Amazon to justify a Prime membership? Do you use that cable TV subscription that you get charged monthly for? Can you get this service on a pay-as-you-use basis? Unsubscribe from services that you no longer use.

Contact your service providers. Phone and internet service companies, insurance agents, etc can help you switch to a cheaper service. In the case of an unused or underutilized insurance policy, you can either call your provider to opt for a plan that suits your lifestyle or even switch to a pay-per-mile/pay-as-you-drive policy that allows your insurance premium payments to track your actual driving.

Negotiate. Don’t leave money on the ‘table’. Always negotiate your bills and expenses and you might be surprised how much savings you can achieve. I did this during the renewal of my rental contract recently, and the differential is surprising.

Identifying money leaks is not rocket science but like a detective, it requires a keen eye for details. As the saying goes, the devil is in the details. Plugging these leaks is not a one-time thing, but an ongoing process that involves continuous monitoring and adjustment of your spending habits.   

Bonus: if you get a gift card, please use it. Use it judiciously or not but please use it. In the United States, there is about $23 billion ($187 per person) in unused gift cards, and is essentially enriching companies who already made a margin on the sale of the gift cards in the first place.

Please send me a response with what resonates with you the most and if you find a leak that can be plugged, let me know as well.

Act Now:

· List out the number of subscriptions you are currently paying for.

Reflect on This:

· Which of the above subscriptions have you maximized its benefits?

Till next week, I am rooting for you, money-ly!

Dee

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Disclaimer: This does not constitute financial advice. Please conduct your research or consult your financial advisor for important financial advice.