As people grow older, they generally become more financially independent. For instance, with his or her very first full time job, an individual might experience what it feels like to have a little bit of disposable income for the first time. The question, though, is what should that individual spend their new money on? From a young age, many (if not most) people are taught the difference between a ‘need’ and a ‘want’, but whether they prioritize them in the most economically logical way, or not, is often up for question. Although there is a certain level of subjective judgment that goes into deciding between the two, it is believed by some that the line between needs and wants can become blurry for those who skip out on investing during their younger years. Fundamentally, investing requires discretionary income, which is the income that remains after deducting taxes, or other mandatory charges. Unfortunately for some, having discretionary income takes discipline, especially the portion that requires them to determine what falls under the category of “mandatory charges.” In this article, we will explore and ultimately question some expenses that have become ‘norms’ for many people but might not really be necessities:
When we were children, it was nearly a norm for households to have at least one television (if not more) and a cable subscription to go with it. Back then, cable packages were the only efficient ways to watch the programs we desired. The only exception was for movie rentals, but it took a trip to a movie store, such as Blockbuster, to make that happen. For our younger readers, I know…. What a horror it must have been to need to leave the house in order to rent a movie. Further, cable subscriptions continued to evolve and become bigger and better. Eventually, cable packages included thousands of channels and simply became an expense nearly everybody not only accepted, but expected. Essentially, most people started to view cable as a necessity. However, technology has continued to advance and we now have a whole new sector disrupting the cable television industry – online-streaming services.Since there are now services like Netflix, Hulu, and Amazon Prime Video that can provide some of the same content (in addition to exclusive content) for a much cheaper price, should cable still be viewed by most as a necessity? For instance, according to Fortune Tech, in 2016 the average monthly payment for cable surpassed $103, while an individual could have all three aforementioned streaming services for just over $25 per month. For those of us who can have our entertainment desires fulfilled by streaming services, by definitively viewing cable as a want, and ultimately cutting it out of our budget, we can save more than $75 per month, on average. That is an additional $75 in discretionary income that can be added to your portfolio using the Beanstox App!
Right off the bat, most of us can probably admit that we do not need magazines to live. That said, many people still buy them. Best case scenario, you are getting your magazines via yearly subscription and only paying around $2 per issue, but that is not the case for all readers. For many people, magazines are an impulse purchase while waiting in line at the grocery store and they are paying around $3.99 for a typical edition. If an individual is buying even one per week, they could be spending over $200 per year. Keep in mind, most (if not all) of the same information can be found on the internet for free via news sources or secondary sources like blogs! By choosing those options instead of hard copy magazines you could have an extra $200 annually for your portfolio.
To be honest, this one really hits home with me and I imagine it will for many of you too. While the average working American might feel as though they can hardly function each morning without a cup of coffee, it might be chipping away at your bank roll. It might only seem like a few dollars, but it adds up over time and becomes a substantial expenditure. For instance, if you pay $4 for a cup of coffee 5 days a week before work you are spending $20 each week and possibly $1,040 per year (if you work every week)! In order to save some of that money for your portfolio, consider brewing your own coffee at home. According to CoffeeDetective.com, you could spend as little as 27 cents per cup by making it yourself.
Without a doubt, cutting spending on these expenditures (or similar things) is not easy. The reason we buy them is because we feel like we need them. Fortunately, by analyzing each one a little bit closer, we can see how some of the things we think we need are just wants that we have tricked ourselves into thinking are needs. As mentioned before, having discretionary income takes discipline, but we are all capable of doing it.