7 Things You Might Be Wasting Money on Every Day

How much money do you waste in the average year? If you're like most Americans, you might not have the slightest idea. But with that in mind, here are seven common ways people waste money, and some suggestions on how you could potentially cut back on your unnecessary spending.

1. Dining out

Groceries are an essential expense -- eating in restaurants is not. The average American household spends about $3,500 per year dining out, which equals roughly half of their food budget.

To be fair, there is absolutely nothing wrong with treating yourself to a meal at a restaurant or to takeout from time-to-time. But it's important to be conscious of how the cost can add up over the long run. You can absolutely budget some of your income for dining out, but make sure it's a reasonable amount.

2. Interest

Credit card interest rates have risen significantly over the past year and a half or so, as the Federal Reserve has aggressively raised benchmark rates in an attempt to cool inflation. And you might be surprised at what the average American pays in just credit card interest.

The average American's credit card debt in 2022 was $7,279 among people who carried a balance. At the current average credit card interest rate of about 24%, this translates to nearly $1,750 per year being paid to banks for the privilege of owing money.

If you are wasting money on credit card interest, consider transferring your balances to a new card with a 0% intro APR. You might also consider using a personal loan to consolidate them and potentially lower your interest rate.

3. Underused memberships and subscriptions

I'm guilty of this one. I got a family gym membership to the local YMCA before the COVID-19 pandemic, joined another gym (which I love) due to the YMCA's shutdowns, and am still paying for both.

Many Americans have a subscription service they could get rid of. Not just gym memberships -- there are newspapers (print and online), magazines, apps, software, streaming services, and more. For example, do you really need as many streaming services as you're paying for? And these are recurring expenses that might sound a lot less than they are. Canceling a $19 monthly subscription can save you well over $1,100 over a five-year period, so take some time and see if there are any you can live without.  

4. Lottery tickets

I get it -- the prospect of winning hundreds of millions of dollars in a lottery jackpot can be pretty enticing. And those scratch-off tickets can be a lot of fun.

However, one thing many Americans don't realize is that the odds on lottery games are usually so horrible that you'd be better off spending that money in a casino. It varies a bit based on the location, but casinos typically pay out about 90% of bets -- meaning the average person who plays $100 worth of spins in a slot machine can expect to have $90 after. On the other hand, lottery payouts can be as low as 50% in some cases.

5. Banking fees

There are so many excellent online checking and savings accounts these days that it simply doesn't make sense to pay banking fees. Many branch-based checking accounts charge a monthly maintenance fee if you don't meet certain requirements, and these can be well over $100 on an annual basis.

ATM fees are also a waste of money in most cases. Now, there are occasions when you might need to withdraw money from an ATM that isn't free for customers of your bank, but most financial institutions offer vast ATM networks -- and if yours doesn't, maybe consider switching if you regularly need access to cash.

6. Excess insurance

Of course, certain types of insurance are absolutely necessary. In most places, you need auto insurance to legally operate a motor vehicle. And homeowners insurance is an absolute necessity if you own your home, just to name a couple examples.

However, there are several types of insurance that many people usually don't need. For example, too many people purchase rental car insurance even though their standard auto insurance coverage applies to rental cars.

Have you ever purchased travel insurance when booking an airline ticket or hotel? Did you know that most travel credit cards provide travel insurance already? These are just a couple of examples, but the point is that before you buy any type of insurance policy outside of the standard and necessary types of coverage, do some homework to see if you need it.

In addition, it's a smart idea to occasionally check whether you might be paying too much for the insurance you do need. It doesn't take long to get auto insurance quotes from a few carriers, for example, and you might be surprised at how much you can save.

7. Things you want but don't need

Last but certainly not least, you might be surprised at how much you spend on items and services you don't really need. And the data shows this may have gotten worse in the past few years -- The Ascent's COVID-19 Spending Trends research shows that 51% of Americans are still shopping online more than they did before the pandemic.

Many financial planners use a 50-30-20 budgeting rule. This means that 50% of your money should be spent on things you need, such as housing, clothing, utilities, transportation, etc. Then, 30% should be spent on things you want, and 20% should go toward improving your financial situation. This could mean savings for retirement, paying down debt, or building an emergency fund.

One smart exercise to see how much of your income is going toward the "wants" category is to gather the last couple of months of your bank and credit card statements. Go through them line by line and highlight all of the things you didn't need to buy (this is also a great way to find memberships and subscriptions you can get rid of).

The point isn't to get you to stop buying things you don't need entirely -- just to make sure that your discretionary spending is at a reasonable level.

What to do with your savings?

The key takeaway isn't to make you feel bad about wasting money. It's to point out areas where you could cut back on spending with little impact on your lifestyle. Doing so could free up a surprising amount of cash that could be used in more constructive ways, such as saving for retirement, starting a brokerage account, paying down debt, or other ways that will improve your finances or quality of life.