Five Small Expenses That Wreck Your Finances

Focus on your cell phone, utilities, and investments.

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It’s easy to focus on the big expenses in life, such as buying a home or a car. But it can be the smaller everyday expenses accumulated over a lifetime that really impact our finances. Some call it the latte factor. Whatever name you give it, watching the smaller, recurring expenses can go a long way to building a solid nest egg.

So let’s take a look at five common expenses that can drain our bank accounts if we let them.

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1. Cell Phones: I can remember the day when nobody carried a cell phone. Today they are viewed as a necessity. I’m sorry to say that I carry two, one for work and one for personal calls. Add data plans, texting, and a cell phone for every member of the family, and the monthly costs can rival a car payment. The key is not to become complacent with this expense. Evaluate whether you need the number of lines you have, whether you need the features you are paying for, and whether you could use a less expensive plan. And even consider a prepaid cell phone plan. Depending on your cell phone use, a prepaid plan could save you a bundle.

2. Credit Card Interest: It starts small at first. You make a couple of purchases on your credit card that you cannot pay in full, and before you know it you’re paying hundreds if not thousands of dollars in credit card interest. Of course, the best approach is to pay your cards in full every month. But failing that, stick with low-interest credit cards, stop going into more credit card debt, and set up a plan to get those cards paid in full.

3. Cable/Internet: The cost of cable and Internet can easily set you back $100 a month or more. Add to that the cost of a Netflix plan and extended cable packages, and the cost goes even higher. So make a point to evaluate your Internet and cable packages at least once a year. Make sure you are really taking advantage of all the cable channels you pay for. If not, change to a lower cost plan. And if you are paying extra for faster Internet service, try a lower cost plan that offers slower Internet speeds. We did and found that we couldn’t tell a difference.

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4. Mutual Funds: Mutual fund expenses are the stealth retirement killer. Because you don’t get billed for these expenses (they are simply subtracted from your returns), it’s easy to forget about them. With index and other low cost funds, you can save tens of thousands of dollar or more over a lifetime of investing. The key is to find funds that charge less than 1 percent annually, and preferably less than 0.50 percent.

5. Gas/Electric: Depending on the climate where you live, monthly utility bills can be a big part of the budget. Fortunately, there are many ways to lower these costs. From CFL bulbs to better insulation, a few simple changes to your home can save you a bundle. While some changes can be expensive (new windows, for example), there are many inexpensive changes you can make to lower your monthly utility bills, too.

DR is the founder of the popular personal finance blog, the Dough Roller, and author of 99 Painless Ways to Save Money.