5 Spending Traps Draining Your Bank Account, According To Codie Sanchez
Everyone knows inflation has made it harder to save money, but entrepreneur and investor Codie Sanchez argues that many people are also losing money in ways they barely notice.
In a recent YouTube video, the CEO of Contrarian Thinking and author of financial advice books broke down five common costs that are slowly eating away at your paycheck.
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Here are her biggest takeaways from the spending traps you should beware.
1. Focusing on the Monthly Payment Instead of the Total Price
One of Sanchez's biggest warnings is to stop focusing on just the monthly payment and start asking what the total price is.
As she said, financing can make almost anything seem affordable. Even a $35,000 car can seem pretty cheap if you’re just paying a couple hundred bucks a month. But focusing on the monthly payment instead of the purchase price can make it easy to overlook thousands of dollars in interest.
"And that’s why these payments are a trap," she said, "because they make you feel smart for affording a slice while the seller quietly sells you the whole pie."
Before you take out any type of loan, make sure to calculate the total cost of ownership. For example, if you’re thinking about getting a new car, you’ll want to add interest, insurance, maintenance, fuel and depreciation, and not just focus on the monthly loan payment.
2. Paying for Convenience Without Realizing It
Ordering delivery after a long day or grabbing coffee from Starbucks isn’t a problem if you’re only doing it occasionally. But when ease becomes a habit, that’s when you have to be careful. Sanchez said that convenience tends to be most expensive when we're tired, stressed or overwhelmed.
"Don't let your weakest moment design your budget, so make the cheap choice the easy choice before the expensive one becomes the only one you can stomach,” she said.
So how do you make the cheap choice the easy choice? Well, one way is to create systems so you can set yourself up for success ahead of time. That means meal prepping, scheduling grocery pickups or planning errands.
3. Falling Victim to Lifestyle Creep
Sanchez said many people immediately upgrade apartments, cars or restaurants as their income rises, which leaves them no better off financially than before. If you want to avoid falling victim to lifestyle creep, her advice is simple: “Capture the raise before your lifestyle does."
She recommended splitting your raises between investing, paying off debt, and enjoying a smaller lifestyle upgrade.
To make this habit easier, automate your contributions whenever you receive a raise. If the money is invested before it reaches your checking account, you’re much more likely to reach your financial goals.
4. Using Shopping To Feel Better
According to Sanchez, emotional spending is one of the hardest habits to recognize because people often aren't buying the product. They're buying relief.
"The product is actually not what you really wanted," she said. "You wanted relief."
So instead of buying what you want immediately, she recommends identifying what emotion you're trying to fix first.
And before you swipe your card, give yourself a 24-hour cooling period to think about whether you actually need it.
5. Forgetting About Invisible Spending
According to a C-plusR Research study, the average American estimates that they spend $86 per month on subscription services, but they actually spend $219 per month. That's because many recurring charges become so automatic that we stop noticing them. These invisible expenses are some of the easiest ways to drain your bank account.
"The company wins when you don't notice," Sanchez said.
She recommends reviewing every recurring charge monthly and asking yourself if you still actually need it. If you don’t, cancel it.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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