Everyday Bills That Are Draining $100s From Young Professionals the Fastest
A lot of Americans worry that a storm is coming, but very few are wearing a raincoat.
According to a new Empower study, 21% of Americans have no emergency savings or money set aside for unexpected financial events such as job loss and medical bills. And 37% couldn’t afford an emergency expense over $400. This means they'd be woefully exposed if fears of a recession prove true.
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If you’re a young professional who’s also struggling to save money, your monthly bills may be part of the problem.
Housing
Rent is typically most people’s largest monthly bill. And though rental prices have cooled in some markets, they're still significantly higher than they were just a few years ago.
The general rule of thumb is to spend no more than 30% of your gross income on housing, but if you live in a major city like New York or Los Angeles, it’s much harder to adhere to this rule. This means you’ll have less room in your budget for savings and other financial goals.
Plus, housing doesn’t just include rent itself. You’ll have to take into account utilities, renters insurance and parking fees.
Transportation
When you factor the up-front costs for insurance, gas and maintenance, the average cost of owning a car is $12,297 a year or about $1,025 a month, according to AAA. That’s a lot of money, especially if you’re just starting your career and not at the peak of your earning potential yet.
If you don’t drive your car enough to justify the cost, it might be worth switching to taking public transportation, biking, walking or ride-sharing services to save money.
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Subscriptions
A single subscription might only cost you $10 to $20 per month. But if you have five, six or over 10 subscriptions, they can easily total more than $100 every month or over $1,200 per year.
And since most subscription charges are automated, if you’re not careful, you might continue paying for services you rarely use. So, make sure to review your bank statements every few months to confirm you’re still using the service.
Food Delivery
Convenience comes at a price. Ordering through food delivery apps often means paying menu markups, delivery fees, service fees and tips on top of the meal itself. So even though your food might only cost $10, you could end up paying well over $20 in total just to get the food delivered to your home.
That doesn’t mean you have to give up food delivery altogether. But just don’t make it a habit to order food every day. Ordering directly from the restaurant can save you double-digit percentages on price hikes, while going to get it as takeout yourself might spare delivery fees and tips. You really can have your cake and it eat, too, provided you're willing to pick it up.
Lifestyle Inflation
Lifestyle inflation is the phenomenon where your spending goes up as your income rises. For example, you might get a raise at work, but instead of saving or investing the extra money, you upgrade your apartment, buy a more expensive car or start dining out more often. As a result, your paycheck grows, but your bank account doesn't. None of these expenses are necessarily bad. The problem occurs when your spending increases faster than your income.
One way to avoid lifestyle inflation is to pay yourself first. Set up automatic transfers to your savings or investment accounts each payday before you have a chance to spend the extra money.
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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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