What are other large expenditures average Americans pay that prevent them from achieving financial security?
I've covered cars, engagement rings, weddings, houses, and private education so far. What else do you think the average American is spending too much money on?
Sam
;D ;D ;D
Where to even start!
In my work, I have my finger on the 'financial pulse' of the average American monthly budget. There have been times I have struggled keeping a straight face when I hear where folks spend their monthly income. Expensive manicures pedicures add up and families who can't pay the rent are sporting some of the fanciest talons I've ever seen.
Nails are a six billion dollar industry, according to some estimates. I guarantee some of that should be paying rent, car notes and credit card bills.
Another thing I see is what I call 'child indulgence'. Expensive summer camps, horses, cars...at the expense of the parents' retirement funds.
It goes on...house keepers four times a week, fox and hound hunting (when the bills aren't being paid), multiple new cars.
I guess you can categorize these as self-indulgent 'stuff'.
It adds up. I used to teach folks that if they for-go ordering drinks at dinners out for a family of four, you would save enough to get car tires each year. We used to add sugar to lemon water and sure, that's a bit extreme, but we saved small amounts in order to always pay cash for cars.
It adds up.
I think people eat away their retirement/future. I work in a corporate environment where 7/10 members of my team eat out for lunch every single day. My boss told me he spends on average $600-$750 per month on eating out lunch Monday-Friday. This does not include eating out for dinner which he said is at least 2-3 times a week with his family of 6.
I work in the food distribution business, and I can tell you that the meal you pay $30 for at your local Bistro is the same meat and potatoes you can buy at Costco for 1/7 the cost. Eating out is something that should be enjoyed, but it should not steal your future financial goals.
I would also say vacations can sometimes get out of hand. Especially when you start having a family and finding every excuse to go to Disney World or the Bahamas. Vacations should be enjoyed, but the average working American over indulges on their annual trips.
I have a handle on all my financial expenditures except healthcare. Most expenditures are within my control to some extent: I can eat better or worse, I can vacation more or less, I can spend more or less on my kids. I'm a deal hunter by nature; I'm pretty good at getting more with less.
However, with regard to healthcare, even though there are different tiers offered by Obamacare, it feels like a big gamble. I've casually priced it out for my healthy family of 4 and it's expensive no matter the tier. It costs substantially more than what my wife pays for her employer subsidized plan. Even if I resign myself to whatever it costs today, what should I budget for 5 or 20 years from now? What will it cost once we become seniors or if one of us develops a serious medical condition?
I consider myself a risk taker and financially savvy. My wife, as it happens, works for a major health insurance company, so together we understand healthcare costs as well as any expert. Although we can probably weather any healthcare cost at this point, healthcare premiums are a big reason why wife continues to be an employee. Even if I find the best deal I can on healthcare, it still feels like a bad deal.
By the way, I grew up in the United States and didn't have health insurance until I got a real job at 22. Then again, I also didn't wear seat belts, sit in a car seat, wear helmets, visit the dentist until I was rolling in pain, etc. I had immigrant parents and we were comfortable rolling the dice. I guess expectations have changed.
Hobbies!
Moog recently announced a new (admittedly awesome-looking) $8,000 synthesizer, and I'd be willing to bet that most people who have put down preorder money aren't exactly hitting aggressive savings targets...
I used to wonder how so many amateur musicians were able to afford new gear all the time, until I realized that a lot of it is financed thru music stores and credit cards. Same deal with some guys I know who are really into hunting & fishing, they end up making monthly payments with interest on a garage full of hobby stuff. My hunch is that if they paid themselves first & then bought used (or rented) with the leftover money, they would be just as happy.
Quote from: hyperobjeckt on October 09, 2018, 11:26:16 AM
Hobbies!
Moog recently announced a new (admittedly awesome-looking) $8,000 synthesizer, and I'd be willing to bet that most people who have put down preorder money aren't exactly hitting aggressive savings targets...
I used to wonder how so many amateur musicians were able to afford new gear all the time, until I realized that a lot of it is financed thru music stores and credit cards. Same deal with some guys I know who are really into hunting & fishing, they end up making monthly payments with interest on a garage full of hobby stuff. My hunch is that if they paid themselves first & then bought used (or rented) with the leftover money, they would be just as happy.
Hobbies do sometimes drain money. However, sometimes hobbies can turn into profitable ventures. Those are the best kind of hobbies.
Nails, Starbucks are good "death by papercut" items but Vacations are the big one I see people taking when I know they don't have a lot of money and I know they are not saving for retirement. Sam: much like the 1/10 rule for a car, maybe spend your free time devising a vacation rule since there are so many inexpensive options (ex. camping) rather than the all inclusive butler service or Euro vacation.
Eating out on a constant basis will severely hinder a solid financial plan. Add up all those dinners and lunches and one would be shocked at how much is spent..
Quote from: Orphan on October 10, 2018, 03:31:26 PM
Eating out on a constant basis will severely hinder a solid financial plan. Add up all those dinners and lunches and one would be shocked at how much is spent..
Agreed. I encourage my peers to take two weeks and not eat out at all and see how much money it really takes to survive without being too extreme at the grocery store. Usually is comes out to about the same as if you were to go out to eat for dinner 2-3 times. The difference is outrageous.
Quote from: Hayden on October 10, 2018, 03:44:15 PM
Quote from: Orphan on October 10, 2018, 03:31:26 PM
Eating out on a constant basis will severely hinder a solid financial plan. Add up all those dinners and lunches and one would be shocked at how much is spent..
Agreed. I encourage my peers to take two weeks and not eat out at all and see how much money it really takes to survive without being too extreme at the grocery store. Usually is comes out to about the same as if you were to go out to eat for dinner 2-3 times. The difference is outrageous.
12 to 15 thousand a year is not a hard mark to hit. More in higher priced locales..
To me, it's the suburban McMansion. It carries much more than a hefty price tag, which is a large debt repayment, in and of itself. It is positively correlated to more expenses such as:
Driving: usually, suburbs are more spread out from destinations
Furniture: bigger house = more rooms to furnish
Utilities: bigger house = more heating, cooling, etc.
I could keep going. Other things become more expensive like insurance, taxes, HOAs, ongoing maintenance, etc.
A house can be a gateway drug to higher spending in lots of areas.
Quote from: nycrite on October 11, 2018, 01:17:32 PM
To me, it's the suburban McMansion. It carries much more than a hefty price tag, which is a large debt repayment, in and of itself. It is positively correlated to more expenses such as:
Driving: usually, suburbs are more spread out from destinations
Furniture: bigger house = more rooms to furnish
Utilities: bigger house = more heating, cooling, etc.
I could keep going. Other things become more expensive like insurance, taxes, HOAs, ongoing maintenance, etc.
A house can be a gateway drug to higher spending in lots of areas.
I totally agree here. Most people buy too much house than what they need. I loved Sam's post about this. See below.
https://www.financialsamurai.com/the-ideal-house-size-and-layout-to-raise-a-family/
Quote from: Hayden on October 10, 2018, 03:44:15 PM
Quote from: Orphan on October 10, 2018, 03:31:26 PM
Eating out on a constant basis will severely hinder a solid financial plan. Add up all those dinners and lunches and one would be shocked at how much is spent..
Agreed. I encourage my peers to take two weeks and not eat out at all and see how much money it really takes to survive without being too extreme at the grocery store. Usually is comes out to about the same as if you were to go out to eat for dinner 2-3 times. The difference is outrageous.
Sorry Hayden, I accidentally hit the smite button instead of the applaud button. I guess my fingers are too fat.
Quote from: Orphan on October 12, 2018, 10:35:15 AM
Quote from: Hayden on October 10, 2018, 03:44:15 PM
Quote from: Orphan on October 10, 2018, 03:31:26 PM
Eating out on a constant basis will severely hinder a solid financial plan. Add up all those dinners and lunches and one would be shocked at how much is spent..
Agreed. I encourage my peers to take two weeks and not eat out at all and see how much money it really takes to survive without being too extreme at the grocery store. Usually is comes out to about the same as if you were to go out to eat for dinner 2-3 times. The difference is outrageous.
Sorry Hayden, I accidentally hit the smite button instead of the applaud button. I guess my fingers are too fat.
No worries, Maybe you might fall into the category of eating out too much and stealing your financial future from yourself. Haha. Obviously kidding, it happens. :)
Quote from: Hayden on October 12, 2018, 10:49:44 AM
Quote from: Orphan on October 12, 2018, 10:35:15 AM
Quote from: Hayden on October 10, 2018, 03:44:15 PM
Quote from: Orphan on October 10, 2018, 03:31:26 PM
Eating out on a constant basis will severely hinder a solid financial plan. Add up all those dinners and lunches and one would be shocked at how much is spent..
Agreed. I encourage my peers to take two weeks and not eat out at all and see how much money it really takes to survive without being too extreme at the grocery store. Usually is comes out to about the same as if you were to go out to eat for dinner 2-3 times. The difference is outrageous.
Sorry Hayden, I accidentally hit the smite button instead of the applaud button. I guess my fingers are too fat.
No worries, Maybe you might fall into the category of eating out too much and stealing your financial future from yourself. Haha. Obviously kidding, it happens. :)
I think you're spot on. It is the Saturday night steak dinner and beer at the local pub watching college football. It gets me every year..
Quote from: nycrite on October 11, 2018, 01:17:32 PM
To me, it's the suburban McMansion. It carries much more than a hefty price tag, which is a large debt repayment, in and of itself. It is positively correlated to more expenses such as:
Driving: usually, suburbs are more spread out from destinations
Furniture: bigger house = more rooms to furnish
Utilities: bigger house = more heating, cooling, etc.
I could keep going. Other things become more expensive like insurance, taxes, HOAs, ongoing maintenance, etc.
A house can be a gateway drug to higher spending in lots of areas.
Oh, this is a good one. I see friends spending more money on remodeling because they prioritized square footage over everything else when choosing which house to buy, and now they have to change it into somewhere they actually want to live.
Maybe this stretches "expenditure" but watching TV, sports especially, is a huge time sink. Time is money. I like watching american football and not being into sports is almost un-American, but it is easy to waste an entire weekend on the couch. And what does one get for being a superfan, buying expensive memorabilia, jerseys, season tickets...
I watch YouTube, but mainly I like the home DIY channels, so that I can do my own repairs and upgrades. Getting back to houses, paying someone to remodel or repair is a double whammy to the budget. If I pay someone to work, I have been taxed on my earned income, then I pay his income tax and workman's comp. If I do the work myself, no tax and no workman's comp. The economic value of my personal labor cannot be taxed (yet?)
I've found its the nickel and dime expenditures of people who pay no attention. Overpriced cell plan, cell phone, cable, pointless car payment on unnecessary car, eating out, groceries which statistically mostly get thrown out. Impulse purchases and convenience purchases. It all adds up. The sad part being that most will refuse to give up anything in the erroneous idea that they "deserve it." An odd reversal of what would actually help them in the long run.
Designer handbags and heels. Each handbag would cost several thousand dollars and heels around $1k a pair. People have mini collections of these items and save up towards a higher-end one as a goal (e.g., maybe they start out with a LV bag for a couple of thousand and save up to their dream Chanel bag for over $5k). You should check out PurseForum.
One of my friends spends a lot on various gadgets, gaming consoles and similar hi-tech stuff. It feels like wasting money to me since this kind of items deprecates so fast. But I think it really brings him joy to play with those, so who am I to judge? It's not like he's on a FI track anyway.
Pretty much everything on cyber Monday sale today ;D
Definitely agree on eating out at restaurants and excessive entertainment expenses. (Cable box plus hulu netflix hbo amazon prime etc. Having a data plan for phone and tablet while also paying for high speed internet in home.) Going to see movies/concerts excessively. If you make a lot of money none of these expenses are all that big, but I constantly see friends who live pay check to pay check on 30k-70k yearly incomes, with no savings or retirement, blowing $500-1000/mo on these things.
Also, it often goes on a credit card that doesnt get fully paid off at end of every month leading to another expense of credit card interest.
I'd say social media is pretty much the culprit. It allows people to showcase their lives, even if it's not their reality. Nowadays everyone is a 30K millionaire.
Trendy Restaurants - People want to be seen as fun so they go to the new trendy place that has the nice cocktails. Seriously bro, just look at how many results you get from searching #brunch #mimosas #margs on Instagram. Crew breweries included. Proposing a date at a trendy place never gets shot down, bad ROI though.
Clothing - Gucci/Hermes/LV belts, Louboutins, Jordans, etc. People want to look good even if it means spending 30% of their check on designer clothing or some drop shopping store, buy a lot of cheap clothing like FashionNova or PrettyLittleThing.
Student Loans - We all know the usual story. Had a couple of mates go to Baylor to study Education or were in their 6th year of undergrad.
A couple of years back a couple of friends would brag about buying brand new Challengers or F150s, all without mentioning that they were still living at home. Nothing wrong with living with mom and dad, just don't try to flex too hard.
Food!
Even eating at home. We are all conditioned to thinking eating at home is cheap and eating out is expensive. So we never think too much about the actual costs of the meals at home. Especially when high income and the grocery bill "doesn't really matter." We recently came to the realization that we can save $300 - $500/mo or so just on our grocery bill by changing our eating habits at home. No more $9 jar of pasta sauce or $5 imported pasta. Make my own pasta and sauce for a total cost of $1 vs $14. For example. And cooking from scratch is something I enjoy doing and I treat as a hobby anyways. Adding in the huge financial benefit and it's even more motivation.
Have to agree with Cheezus above food in general and not just eating out. I am guilty of this too where I go to the store and buy all sorts of food options which makes food presently the largest line item in my spending. Buying the touted natural/organic options sure do not come cheap.
I'm new here and late to this thread. In all the examples everyone posted I don't see anything wrong in doing any of those things - life is all about living - but in doing so - we must know how to manage our lives.
I'm not big on going out to eat - my wife is. I'm really big on my personal hobbies - I love going to the race track as many weekends I can(motorcycles).
Have a bigger house than we really need - however really enjoy all the attributes of the house.
The name of this thread - what other expenditures r preventing Americans from achieving financial freedom
It is any expenditure that you can't afford - goes back to simple basics - what prevents anyone from achieving financial success - no budget - no plan - and not sticking to it.
I come from the old adage pay yourself first - then go ahead and have fun.
I'm an older guy that learned along time ago need to stick to the plan.
Problem with a lot of folks they truly live for today and don't realize in a blink of an eye 10-20 years just flew past them.
Expensive wedding, keeping with the trend on gadgets, excessive eating out, sports equipment that are rarely used
My biggest discretionary expense would have to be vacations. It's difficult to cut down on vacations when I'm given 6 weeks off a year and I'm encouraged to use my vacation leave. It also doesn't help that we have friends and family that are always inviting us to vacation with them. Every invitation screams "once in a lifetime" experience to me that it's difficult to turn them down. I have to say that I haven't had one vacation yet where I thought it was a waste of money because of the fond memories made. Luckily, we have friends and family that are frugal or very generous so we often get free or cheap lodging, meals , activities, etc. No matter how inexpensive a trip can be, it adds up when I'm taking 5-6 trips a year. However, I'm not going to cut down on traveling. Would I rather travel now while my friends and family are young enough that we can have a crazy good time or would I rather wait until we're all older with less energy and unable to really enjoy a good vacation.
I tend to calculate the time cost of things as much as the financial one. It makes most things more expensive in dollars.
I still lean into BruceV's style of "pay yourself first" and "stick to the plan," but if I maximized for dollars specifically I'd keep a lot more of them.
My feeling, though, is that I'd be poorer for it in my own context.
As far as I see it, from Europe, your health insurances are very expensive. Here in Nordic countries the public healthcare is almost free. And you get a free healthcare from your work also, and it's usually better and faster than the public one.
- NF