For the third installment of the Ultimate Guide to Financial Stewardship we are going to explore the ways in which we could be wasting our wealth. It is a very materialistic world out there. We humans are prone to seek after our short-term satisfaction and let the long-term take a back seat. And what’s worse, only very few receive any formal training on finances, budgeting, or wealth building. And this can be a scary thought when thinking of how many companies, organizations, and individuals are out to get our wealth.
DEPRECIATING ASSETS
In Part 2, we touched on the idea of spending our wealth on depreciating assets. The things most of us spend our money on do not build wealth, but rather destroy it. Cars, clothes, hobbies, decorations, furniture, and other items like these are what we buy that should be viewed as depreciating assets. They do not retain the value they are purchased for. When they are no longer needed they are either thrown away or sold for a tiny fraction of what they were purchased for. Does that mean we can’t spend money on them? No, of course not. We all need clothes. Most need a car to get around. We need furniture in our homes or apartments. These things possess a needed utility, but to create the mindset of building wealth we must properly understand what is helping and what is hurting us over the long term. Remember that building or destroying wealth comes down to the bottom line being in the green or in the red year after year.
So let’s just look at the value of a car, for example. Say I were to purchase a car for $50,000. It is a nice car, well rated, perhaps has some luxuries that aren’t needed but I thought were cool features. This car is nicer than the majority of my peers. And say I own this car for ten years before I sell it for $10,000 used. That means over those ten years I lose $40,000 on the vehicle. Of course I had to pay the typical maintenance costs and gas and insurance, but I also lost $40,000 on the pure value of the car itself. That’s a -$4,000 per year I’m losing to drive this fairly high value car. Compare that to if I purchase a more reasonable, less luxurious car for $20,000 and sell it after ten years for $4,000. That is a loss of only $16,000, or -$1,600 per year. This disparity gets even worse if you add in the cost of financing, which is likely much worse on the more expensive vehicle. What would we be losing to own the more cost effective vehicle? Well we lose some luxuries that we knew we didn’t need to begin with and we are no longer driving the nicest car amongst our peers. Are those things that we believe are worth the money? Is that difference in standard of living worth multiple thousands of dollars every year?
Vehicles are well known to be one of the worse depreciating assets so this example is the extreme scenario, but it perfectly illustrates what we are doing with throwing money at depreciating assets. The same applies to clothes or golf clubs or home decor or furniture or toys for the kids or that latest model hunting bow or those great looking sunglasses or the latest smart phone. If you went through the work of considering the value into and out of each of these items, it would add to thousands of dollars every year. Some of that is money that we have to spend to live but some self-reflection is needed to determine how much we really need those expensive items. Like I said, there are thousands of companies and products and individuals out there that are pressing us to spend a little more, buy the newer model, or spring for the extra features.
RECURRING COSTS
We also want to explore the recurring items we spend our money on. Part 2 on Saving encourages the reader to create a working monthly budget. In doing this you can see the full list of recurring expenses and you can determine the importance of each item. Have you considered the yearly cost of some of those subscriptions you have? Do you pay for music streaming of some sort? This is typically between $100 and $200 per year. Do you have a gym membership? This can cost anywhere between $150 per year to as high as $1,500 per year and often underused. Do you have children enrolled in too many sports or activities? This can cost thousands of dollars a year; perhaps one activity per year needs to be a limit. Do you have any magazine or website subscriptions you like but rarely use? Do you actually use all of those TV streaming subscriptions? Do you need to pay for cable television as well? All of these are just common examples and I certainly don’t mean to suggest any of these are bad to have. In our household we always have music playing in the house, often in multiple rooms, and therefore we find paying for a music streaming service to be well worth it. The point is that it is VERY easy these days to get into recurring expenses that we wanted at the outset but then our interest died off and we never stopped paying the bill. I would confidently guess the average family is spending well over a thousand dollars per year on recurring expenses that they simply don’t use or don’t need. And if you are spending money on subscriptions you don’t use you might as well be dropping cash into the garbage every day. Try to think of these things in terms of the actual dollars spent vs. the actual times used. Say, for instance, I have YouTubeTV at a subscription for $65 per month. I watch it on average 2x per week. That equates to roughly $7 per sitting. Would you be willing to pay $7 for each time you turn on the TV to watch your favorite show? To me that seems a little steep. Some people are big TV watchers and this cost is worth it to them, but it is up to each individual to decide what is worth the cost and what is a waste.
PETS
One very expensive item we typically turn a blind eye to is pets. A single dog or cat should be expected to cost around $1,000 per year. A big dog is likely closer to $2,000 per year. If your dog or cat isn’t particularly healthy and needs extra vet visits, shots, prescriptions, or special food then you could easily spend over $5,000 per year on your beloved pet. This particular item is near and dear to me because my wonderful German Shepherd of 8 years cost me over $30,000 over the course of her life. This is not something that is fully considered when a family goes to the pet store and wants to take a cute puppy home. There are many households that have multiple pets and it is often among households with lower incomes. Pets are an incredible blessing and can have many benefits but sometimes they are a huge financial burden and could even be what keeps an individual or family from building wealth.
FOOD
Consider the topic that we all love, food. It impacts our health as well as our budget. In today’s world food is readily available in great excess. This is also an area where it is very easy to overspend. It is very common to get fast food or eat out for lunch. The work day can be long and leave you wanting to pay a few bucks for a easy and fast meal. Fast food has always been a budget buster but in today’s world food prices have risen dramatically, only increasing the risks of overspending in this category. It is difficult to find a lunch for less than $10, even at the cheapest fast food chains. To have a $10 lunch three times a week costs just over $1,500 per year. If you are eating more expensive take out meals this could be too conservative of an estimate. To eat leftovers or prepare a lunch for yourself at home will cost on average $2 to $4 per meal. Lunch can be a big area to evaluate if you are wasting money.
Another food related risk of overspending is with eating out. Eating out can be fun and enjoyable. It can also be an easy habit to fall into on weekends when one is tired from the work week and doesn’t feel like making a meal at home. However, just for an individual eating at a middle-of-the-road restaurant it is easy to spend $35-$45 per meal. A nicer restaurant with a couple drinks could run around $75-$100 per individual. You can imagine the cost of going out with a spouse and kids. Consider the cost compared to the benefit. You certainly do have any lasting value from a meal out. The next morning your body doesn’t care if it at a $50 meal from Texas Roadhouse or a $10 meal at home. Can you even remember the last five restaurants you’ve been to? It is money we spend and it immediately is forgotten. It is such an incredibly short-term thinking that leads us to eat out.
Don’t get me wrong, again I’m not saying all eating out is bad. It isn’t. A date night with the spouse can be very healthy for a relationship. Drinks shared with friends out on a Friday night can be very fun. However, as with all of these items we are discussing, they should be kept within moderation. If it is our habit to go out to eat or drink every weekend or frequently throughout the week, we are most certainly wasting money. A lifestyle that includes this could easily cost over $5,000 per year. This is once again money that does not provide any lasting value. Once it is spent it is gone for good.
CONCLUSION
The topic of wasting money is very broad. There are countless ways to conserve what we spend and lower our costs. Through this blog I hope to look at many of them. But in this segment I highlighted some of the most common ways we are working against ourselves from building wealth by focusing on the short-term. A household with multiple pets, a propensity to eat out, and with a few unused subscriptions could easily be spending an extra $10,000 per year than they need to be. And most frightening is this is often common practice among lower income households that do not have this amount of money to spare in their budget.
Now that we have covered the topic of wasting money, I want to get into ways of growing our wealth and putting the savings we do have to work. If you enjoyed this article and want to access more content like this, please subscribe below for email updates.
The Good Steward 
Leave a Reply