NEW YORK (TheStreet) — Are you drinking and eating your way into debt? We all know that expensive dinners and drinks add up quickly, but how much are consumables affecting your ability to save?
“If most people were asked the amount of their mortgage or car payment, they’d know it off the top of their head, but if asked how much they spend each month eating out, they’d likely have no idea, or at best offer up only a guess,” says Gail Cunningham, director of media relations for the National Foundation for Credit Counseling.
People are notoriously bad about tracking their expenses, particularly the small ones, she explains.
“They think they are so small that they won’t matter. However, little money adds up to be big money, thus any amount of unaccounted for spending — even on food and drink — can wreak havoc on a budget,” she says.
Here’s a look at the top six things that could be eating away at your monthly budget.
“A gracious guest brings a bottle of wine to a dinner party. The generous dad always buys Sunday lunch for the extended family. Wanting to fit in, the new employee joins others for lunch out,” Cunningham says.
As one-time events, any of these unplanned expenses are probably fine. If they start happening once every few weeks, though, it can be rough on your budget.
“A person needs to decide if they want this type of spending to continue, and if so, how they’re going to work it into their budget,” she says.
Even though it can feel good to be generous at a friend’s birthday celebration or treat friends to holiday presents every year, it can mean you’ll need to forgo a vacation you had planned or cut back in other areas.
With cigarettes at almost $15 a pack in New York and at least $10 in many other states, smoking can put a serious dent in anyone’s budget, says Will Waldner, an attorney in New York City.
“They ruin your budget. For the average smoker, that could be anywhere from $300 to $400 a month just on cigarettes,” he says. “It’s a really difficult habit to kick. It’s hard to tell someone not to smoke when they have been smoking for years. Yes, it’s a big expense, but it’s also an addiction.”
Waldner said that with the average per capita income in New York City at around $32,000 annually, it wouldn’t be unheard of for someone to spend between 10% and 15% of their pretax income on cigarettes every year.
“This is the kind of habit that pushes people into bankruptcy,” he says.
Cigarettes have a tendency to “disappear into people’s budgets” Waldner says, because the human brain reasons “It’s just $10 a pack.” People would think about cigarettes differently if they could only buy them monthly for $400 a case.
“As it is, it’s a small payment. It’s not seen as part of the budget. It’s just like a sandwich or a drink. You don’t think about those small expenses. You lose track,” he says.
“My clients spend a fortune eating out every day,” Waldner says. “A lot of them have a commute of an hour and a half each way, and they work an eight-hour day, so they don’t have time to prepare and eat food at home. But what they’re paying in food expenses comes to at least one-third of their net income,” he says.
Waldner advises clients to make time for cooking whenever possible, on nights or on weekends.
The problem of overspending on food affects higher-income individuals just as much as those who are buying fast food three meals a day.
“Some people spend $3,000 a month eating out. They can’t necessarily afford it, but they are getting by,” he says. “Other people are only spending a few hundred, but it’s more than they can afford. They may be in a situation where they don’t want to wake their roommates up by cooking early, but their budgets are suffering.”
Waldner encourages all his clients to opt for more family celebrations rather than going out to restaurants.
“If you can eat in someone’s home or have a potluck celebration, you can save a ton of money,” he says.
The average American spends $1 out of every $100 on alcohol, but frequent drinkers — especially drinkers in expensive cities such as New York or Los Angeles — often spend as much as $500 per month on drinks, Waldner says.
“Alcohol is similar to cigarettes in that people don’t realize how much they are spending. A few drinks here and there, it just doesn’t seem like that much. But when we do their budget and they see the math, they say, ‘Wow, so that is where all my money is going.’”
Much like with smoking, it’s difficult to cut back even when you know you have a problem, especially when your occupation and/or social life seem to demand frequent cocktail hours.
“If you go to a bar, you’re going to pay $7 to $15 per drink. When you see what two or three nights out each week can do, it’s a shocker.”
Health food or supplements
Although health food is generally good for you, it’s not uncommon for fresh raw juices to cost $15 a bottle. Items such as vitamin supplements and protein powders also carry a hefty price tag.
“You can easily spend $800 a month on supplements alone,” Waldner says. “It’s great to live a healthy lifestyle, but I don’t think that living off of juice and protein powder is particularly healthy in the first place. I have a few clients who could drastically improve their financial picture just by cutting out their spending on fad diets and supplements.”
Although many expensive health foods can be good for you, as far as your budget is concerned, overspending on health foods is just as bad as overspending on cigarettes and alcohol.
“It makes no sense to spend $500, $600 a month on supplements when you are making $3,000 a month. Even if you feel like you need it, you have to be practical.”
Most caffeine addicts have gotten the memo that it’s cheaper to brew your own coffee at home than pull into Starbucks every morning. Even so, more than half of the American workforce spends $1,000 each year on coffee, according to a study by recruitment firm Accounting Principals.
“Every time you stop for coffee, it’s going to cost you at least $2. If you work for eight hours a day and take a coffee break two or three times a day, it’s not uncommon to spend $15 per day on coffee products,” Waldner explains.
Many people unknowingly put themselves in a position where every break they take during the day ends up costing them money, he says.
“Find a different way to take a break. Pack snacks from home, brew coffee at home. There’s no need to spend so much money during the work day.”