Where Did My Money Go?

by Guest Contributor · 13 comments

Let’s face it; our wonderful country that prides itself on its many freedoms, opportunities and amazing history doesn’t consist of the smartest people in the world. And with two-thirds of the country not knowing what the Food and Drug Administration does and one fifth of us believing that the Sun orbits around the earth, it’s no surprise that the average American’s financial standing isn’t as good as it can be.

Well, worry no longer! I, the mighty Mr. Moneybags, have decided to temporarily abdicate my secret cave (a.k.a. my blog) in order to cure the world of financial illiteracy, one guest post at a time. So, let’s get started!

Before I can show you how to cure your financial problems and make enough money to afford a platinum knife set encrusted with precious gems (if that’s your thing) we are first going to have to know a little bit more about the financial position of the average American household (according to the U.S. Department of Labor):

The average American household is aged 48.8, has 1.9 cars, earns an after-tax income of $42,901 and has average annual expenditures of $49,638. Meaning, the average household is living beyond its means by $6,737 every year – as much as a high-end home theater system or a used car or 6,737 candy bars.

If you were to invest that same $6,737 every year at an average annual compounded rate of return of 10% you would have $56,000 in five years, $135.500 in ten years and $470,000 in twenty years. That’s a whole truckload of big fat moneybags!

Where Does All My Money Go and How to Keep Some of It

1. Random Expenses
Well, the average household spends $2,698 on entertainment every year, $1,881 on clothes, $457 on booze and $2,668 on takeout. Those are the first places you can and should cut your spending. I can assure you that living is still possible despite not having the complete box set of Battlestar Galactica, nine closets full of shoes, your weekly keg of beer and even your late night pilgrimages to McDonalds.

2. Transportation
Interestingly enough, transportation is the second largest expense (after housing) at $8,578 (17.6%) of yearly expenditures – $3,244 of which goes towards paying for the car, $2,384 of which goes towards gasoline and $3,130 of which goes towards other methods of transportation. Now, let me ask you a question, if you are paying thousands of dollars for a car every year, why the hell would you go out and seek other methods of transportation?

Trust me, you’re not a snob if you drive a car while everyone else takes public transit or cabs. In fact, I drive around in my ridiculously overpriced car and throw gold coins the size of pineapples at pedestrians in order to encourage people to start making more money so that they can afford a car.

If you are worried about high gas prices, mooch rides off of your friends (if you have any) or even consider taking up that horrible concept known as carpooling. If you find people bumming rides off of you a lot of the time, consider charging them for gas money – most will be happy to pay.

Also, it is a good idea to buy what you can afford. Don’t get a Hummer when a Camry will do and reconsider getting the supreme package with the rhinoceros-skin covered seats and the retractable roof complete with jet-engine.

And you’re one of those environmentally friendly people, consider riding a bike to work/class instead of any four-wheeled concoctions of metal and pipes. This way you not only save money on car payments, gas, and maintenance but you also get some exercise which will do a pretty good job of preventing you from spending time off work in the hospital fighting off a massive lard-induced coronary.

Which leads us to our next point…

3. Healthcare
The average household spends $2,853 (5.7%) on health care every year. Considering the staggering obesity rates in the country and the fact that people are finding it more and more attractive to lounge about on the couch all day and watch reruns of Seinfeld while gobbling down a bag of Freedom Fries rather than going out for a jog, it’s no surprise that health care expenditures are this high.

Obesity and its cousin (laziness) cause diabetes, heart disease, weak immune systems and a whole sack of other fun stuff which costs a ridiculous amount of money to treat.

Exercise regularly, eat healthy food, take vitamins, keep a positive mental attitude and you’ll be back to picking dandelions in no time (or whatever it is people do for fun when they are healthy), as will your wallet.

4. Reading
Americans spend a whopping $118 (0.2%) a year on reading!

Maybe if we had spent more time reading up on useful things instead of watching people hit balls with sticks (a.k.a. baseball) while ingesting ridiculous amounts of alcohol and gobbling up chicken wings by the pound, we wouldn’t have $2.5 trillion of consumer debt. We might even have less credit cards than there are people, not panic whenever the DOW falls 100 points (less than 1% of its value) and learn that our best chance of becoming rich is NOT by winning the lottery.

In Closing

You can try to reduce your expenditures as much as you want but if your goal is to become wealthy, you will never get there just by cutting costs. Even if you don’t spend a single cent of your income due to your suspiciously effective saving skills, you will still be held down by your income level.

In order to become wealthy, you will have to increase your income be it through business ventures, investing, the stock market, working more or just by cleverly managing your finances. That’s where I come in at Big Fat Moneybags.

This is a guest post from Mr. Moneybags, who tells me that he is the richest being in the universe ever to have existed and ever to exist. He and his blog is determined to prove to the world that the subject of money shouldn’t make you want to douse yourself in gasoline and run into a forest fire.

Money Saving Tip: An incredibly effective way to save more is to reduce your monthly Internet and TV costs. Click here for the current Verizon FiOS promotion codes and promos to see if you can save more money every month from now on.

{ read the comments below or add one }

  • Ken87 says:

    I can’t believe how many people are always trying to trick me and how easy it is to save money if you just look; that is why I love this blog.

    I was clicking around the other night and noticed an advertisement for a FREE TV with purchase at their stores. I expected to see something pretty cheap, and was surprised to see it was a name brand. I have needed a TV for a while now so I decided to look at this further.

    The fine print is what killed me though:

    Please allow eight weeks delivery for merchandise redeemed online.

    You DON’T ACTUALLY GET THE TV. You get a voucher for a TV — that you’ll get in 8 weeks and will at that point be a lot less expensive.

    So, as I’m want to do, I came up with two options if you need new glasses and would love a new TV.

    Option 1:
    Pearle Vision

    $350 for 1 pair of eyeglasses.
    Your “Free” Camera Arrives in February (if you remember to redeem your voucher)
    Total: $350 (Start taking pictures in February — in overpriced glasses.)

    Option 2:
    Online Retailer, for example http://www.eyeglasses.com (You can use the code UPS1DAY for free 1 day shipping.)

    $120 for 1 pair of eyeglasses.
    Order your Canon A470 from Amazon for $93 + $10 shipping (it arrives the day after tomorrow)
    Total: $143 (Save over $200 and get the TV this week).

    Don’t let these marketers trick you. We are too smart for them.

    • Mr. Moneybags says:

      From a business’ perspective you have to admit that this “Mail-in Rebate” is simply ingenious, not so much for the consumer though. Psychologically the consumer feels as if he/she received a discount but by the time they end up jumping through all the hoops to receive said discount/gift they end up hanging themselves or simply giving up (or both).

  • Betty says:

    Nice article. It really highlights areas for saving and the concept of achieving wealth through investing and actively managing ones finances. I think just having a financial plan is the first step to planning. There is a good book called “The Debt-Free Millionaire” by Anthony Manganiello. It outlines a process for putting together a financial plan. It gave us a good starting point to setup a plan to be debt-free. I like your ideas for saving. We’ll be incorporating some of these into our planning too. Thanks.

  • Finavigation says:

    It’s a shame that some people are wasteful in their spending and don’t make smart financial decisions.

    One thing I especially liked about this post was point #3 about healthcare. People tend to overeat and not get enough exercise, and these are not only going to impact their health but also their wallets, as they end up paying more for:

    1) Food
    2) Things to keep them entertained while sedentary
    3) Medical expenses when their health goes to crap

    I also agree that cutting expenses is not by itself the key to building wealth. You should also be trying pursue a career path that will set you up to make the level of income you want to make doing something you actually like to do. The combination of increasing your income and keeping your expenses under control is extremely powerful in attaining the level of financial freedom you desire in life.

  • Francis says:

    Holy that’s the average in our country? That means that there are people who spend twice the average (over $5300) a year on food alone? Geez. No wonder why we are spending more than we earn.

  • Tim Moon says:

    I’m pretty sure the figure for health care expenses is inaccurate unless that’s just out-of-pocket expenses, not including premiums.

    In any case, the guest post was really good and very informative. On average, we spend almost 4 times as much on alcohol as we do on reading? Wow.

    • Mr. Moneybags says:

      According to the US Department of Labor, that number includes ALL health care expenses, including premiums… although it does look suspiciously low to me as well.

  • John DeFlumeri Jr says:

    Out spending their income by $560 a month–that explains the tremendous debt we all have. You are right if we saved that much instead of spending on stupid stuff, it would amount o a bundle in 25 years,

    John DeFlumeri Jr

  • Charles says:

    The random expenses really make a person either “frugal” or “wasteful”. I go out all the time and see people spending money like they didn’t have to work for it.

    Good list.

  • CD Phi says:

    There can definitely be some cutting expenditures in the random expenses category. It’s ridiculous how that $7,000 can turn in to $56,000 in five years. Great short term goal.

    • Mr. Moneybags says:

      Actually, I’d say cutting expenses is a long-term goal mainly because it applies for the long-term. By looking at something from a short-term perspective it is very likely that you will go back to your old ways after the initial “term” passes.

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