At one time, I had a home where I noticed some moisture by one of the windows. At first, I thought it might have been some condensation, based on the recent weather. Basically, I just looked the other way. But then, after some heavy rain, I noticed that there was once again moisture by window – but more this time.
It was clear that there was a leak there, and it needed to be fixed. Yet I delayed, or more accurately procrastinated dealing with it. I suppose I just wanted the problem to go away, or maybe correct itself. Obviously it didn’t, because the next time we had a heavy rain storm, there was water that came into the home. I had to fix it, and very soon thereafter I did just that. It felt good to know that my DIY efforts worked!
So, what does this have to do with personal finance? Well, we can have money leaks too!
What can a money leak be? There are probably different ways one can define this, but to me it’s when you’re seeing money spent on things that you either A) clearly don’t need, and you know it; or B) don’t know you’re spending money on.
A good example from my past is one that I’m not fond of admitting. The reason? There was no sense to it. It made no sense for a person otherwise responsible with money to waste money every month like this.
So what did I do? Well, I had a storage unit in which I kept a number of things after a move. The unit cost over $110 per month, and realistically, I kept a bunch of things that I probably didn’t need to keep. Some were definitely worth keeping, but certainly not everything. The thing is, there was some heavy furniture as well as other items that I didn’t want to clutter my place with. I could have done so, but somehow I though it would be okay to get a storage unit.
Now, sometimes a storage unit is needed for a short period of time. There are ways to save on a storage unit that can help ease the costs. However, you don’t want to make it a long-term solution.
So every month, I noticed $110 on the credit card statement. It just blended in with the rest of the expenses, and after a few months it became an afterthought. But after almost a year, I stopped and thought about the storage unit, and quickly did the calculations in my mind: I’d spent well over $1,000 on this storage unit. Soon after, I also got a notice that they were raising the rates.
Anyway, it took my some time (too long), but I eventually got around to getting rid of the storage unit. I actually had to bring some things home, and also get rid of others. Basically, I just paid someone to come remove the stuff. This added to the costs overall, but at least it helped put an end to the bleeding. Overall, a decent sized money leak ended up draining me of a significant amount of money. It was my fault.
While money leaks can be easy to overlook and even miss, they don’t go away and can cause bigger overall problems down the line. I recommend doing the following:
- Track all your expenses
- Review your credit card statements and bank statements
- Account for each and every expense
- Assess each expense and ask yourself if it’s necessary.
- If it’s not necessary, eliminate it.
The more active you are with your finances, and more action-oriented you are, the better you can make sure that you don’t leak any money!