Can You Give Up Online Impulse Purchases and Streaming TV?
Extraneous spending may vary greatly, depending on how you define nonessential expenses. The average American spends as much as $1,497 per month, or nearly $18,000 a year, on nonessentials such as coffee drinks, dining out and entertainment, according to the most recent research released last year, commissioned by life insurance company Ladder and conducted by OnePoll.
The survey of 2,000 Americans found these monthly spending averages:
- Dinner out at a restaurant, $209.38
- Drinks out with friends or co-workers, $188.68
- Takeout or delivery, $177.88
- Purchasing lunch, $173.62
- Impulse purchases,$108.97
- Use a rideshare for nonessential trips, $96.11
- Receive personal care, $94.25
- Subscription boxes, $93.96
- Cable TV, $90.57
- Online shopping for nonessentials, $84.11
- Gym, fitness classes and/or a personal trainer, $72.53
- Paid apps, $23.24
- Streaming services for movies/TV, $23.09
- Streaming services for music, $22.41
- Coffee, $20.25
- Bottled water, $17.47
Cutting back certainly won’t be easy. Nearly a quarter, or 22%, of Americans say they would not be able to last a month without spending on nonessentials, according to the results of a survey released in January 2019 by TD Ameritrade.
The TD Ameritrade survey found Americans spend somewhat less, an average of $697 a month, or $8,364 annually, on nonessential expenses, led by Millennials ($838 per month), followed by baby boomers ($683 per month), with Gen X regarded as the least wasteful ($588 a month).
Looking for places to cut back? Quitting caffeine isn’t an option for those who love their java. Approximately 39% of the 110 adult investors with at least $10,000 in investable assets surveyed by TD Ameritrade between Sept. 10, 2018, and Sept. 16, 2018, said it would be hard to live without coffee. In the April magazine, we explored how to save money by roasting your own coffee beans. Even without making that leap, you can cut $20 a month by consuming all coffee drinks at home, which gives you $240 a year to invest in your portfolio.
Many Americans became a home chef or at least adept at basic food preparation after the COVID-19 pandemic forced us into quarantines, lockouts and restricted us from dining out. But more than half, or 59%, of those surveyed by TD Ameritrade consider dining and takeout “basics to your lifestyle.” Even if you cut that luxury in half and continue to hone your home cooking skills, you can save nearly $105 a month, or $1,260 a year on restaurant meals, and about $103 a month, or $1,236 a year on takeout or delivery, for a combined $2,496.
Most studies warn of the health risks associated with alcohol consumption, but researchers at the University of Oxford in 2017 took a different approach and determined that sharing a drink with friends improves social cohesion, given its long association with human social activities. British pub culture is very different from the bar experience in the United States, but the benefit of socializing while toasting with friends is universal.
A $12 margarita served at a restaurant or a bar has a pour cost of 20% and a profit margin of 80%, which means the cost of the drink itself, the pour cost, is $2.40, explains BinWise, an online bar and restaurant beverage inventory management system. If you invite your friends over for cocktails and split the bill for ingredients, you could save $151.20 a month, or $1,814.40 a year, based on the OnePoll average.
That can add up to almost $18,000 a year — or more than a $1 million over the course of an adult lifetime. It can be good to treat yourself to something that brings you happiness, but the OnePoll survey found the average respondent does a bit more than that.
If you’re already scaling back on dining out and plan to host happy hour at your home, you probably don’t want to cut the cord entirely or scale back on streaming services. Besides, starting by making a few small changes is more likely to endure than wiping out all the nonessentials that have given you joy or comfort.
By enjoying coffee at home, dining out and ordering in half as often (in the post-pandemic future), and forgoing the bar experience, you will have some $4,450 a year to invest in stocks for the long run. That deserves a cheers, at home, of course.
This article was originally published in the June/July
2020 issue of BetterInvesting Magazine.
Natasha Gural is a veteran award-winning journalist who has held top management and executive roles at The Associated Press, Dow Jones, and Markets Media. Natasha is a theoretical scholar, writer, editor, and strategist with deep domain expertise in the global financial markets.