Ever wondered where your money goes? You may think you are spending wisely, yet your savings are not meeting your expectations. The reason is financial leakage, those small, unnoticed expenses that gradually drain your money. Identifying and stopping these hidden expenses is the first step toward strengthening your financial situation.
In this article, learn to take control of your spending, cut unnecessary expenses, and boost your savings and investments.
What is Financial Leakage?
Financial leakage refers to money being spent on things you don’t actively notice. These expenses may recur monthly, quarterly, or annually. Sometimes, you see these charges in your bank statement but fail to understand the details or forget what the money was spent on.
Ajay’s example illustrates this well. After changing jobs, he opened a new salary account but didn’t close his old one. A few months later, as per the bank’s guidelines, the corporate salary account was converted into a regular savings account due to unsuccessful salary credits for a certain period. The bank then started charging fees for not maintaining the minimum balance.
Multiple Subscriptions: The Biggest Money Leak
The biggest money leak is subscription services. Many of us sign up for streaming platforms, gym memberships, or cloud storage and then forget about them. Even if you do not use them regularly, they continue to charge you every month. The best way to fix this is to review your subscriptions and turn off unnecessary auto-pay. Once you set up auto-pay for any service, it will keep charging your account every month until you cancel it.
Bank Fees and Hidden Charges
Bank fees and hidden charges are another way your money gets unnecessarily deducted. Banks charge maintenance fees, ATM withdrawal fees, and penalties for not maintaining a minimum balance. Over time, these small fees add up to a significant amount. To avoid them, consider switching to a zero-balance account, using only your bank’s ATMs, and setting up alerts to prevent overdrafts or late payments.
Take the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) as an example. Suppose you subscribed to this scheme when it was launched. This policy charges an annual premium of Rs 436 for a term life insurance cover of Rs 2 lakh. Later, if you purchase another term life insurance with a higher cover and no longer need the PMJJBY plan, the annual premium might still be auto-debited from your bank account.
Cost of Online Shopping and Food Delivery
Online shopping and food delivery are two habits that can quickly drain your money. Impulsive buying with just one click is easy, and frequent food deliveries can be far more expensive than home-cooked meals.
A simple trick is the 24-hour rule, wait a day before purchasing non-essential items. Additionally, unsubscribing from promotional emails and setting a monthly budget for eating out can help control these expenses.
Free Trials
A common mistake is forgetting to cancel free trials, which then turn into paid subscriptions. Many companies offer free trials, but once the trial ends, they automatically start charging. To avoid this, always set a reminder to cancel before the billing cycle begins. You can also use virtual debit cards that expire after the free trial to prevent unexpected charges.
Hidden Costs in Electricity Bills
Another hidden expense people often overlook is high electricity bills due to unnecessary energy usage. Keeping devices plugged in, running the AC for long hours, or leaving lights on can significantly increase your bill. To save on electricity, unplug devices not in use, switch to energy-efficient appliances, and use timers or smart plugs to control power usage.
Practical Ways to Avoid Financial Leaks
To avoid financial leaks, the first step is to identify them. Scan your monthly credit card and bank account statements. If there are bank accounts, demat accounts, credit cards, etc., that you no longer use, close them.
For various subscription plans, you will usually find an option to unsubscribe through the app or website. Go to the ‘Manage Subscriptions’ section and cancel them. Once you identify and stop financial leaks, you will realise that you have extra money to invest toward your financial goals.
Wrapping Up
If financial leaks are not identified early, they can cost you a significant amount of money in the long term. Money is often spent on services that are either unused or unnecessary. By identifying and stopping these leaks, you save money that can be directed toward your financial goals, helping you achieve them ahead of schedule.
By making small changes, you can free up extra money for savings, investments, or even a dream holiday. Start today! Review your expenses, cut unnecessary costs, and take control of your financial future.
*The article is for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
