Fixing Financial Leaks in Your Life

by RC on November 4, 2009

Sink
Every so often, as I am standing at the bathroom sink early in the morning getting ready for work, I hear a familiar sound-

Drip, drip, drip, drip….

I know where it it coming from, it is the bathtub faucet. If my wife or I forget to turn the faucet fairly tight after giving the kids their baths the night before, the faucet will drip- (I usually blame it on my wife). There does not really appear to be anything wrong with the faucet, but if it is not tightened just enough, it will leak-just a little.

If either of us forgets to consciously turn the faucet off with a little extra effort, we have a leak, and often we don’t address it until the next day, because we didn’t realize it was happening.

Fixing and preventing “financial leaks” takes a conscious effort as well.

Not all leaks are created equal. They could just take a little thought, like my faucet. But they can be a symptom of a larger problem- something, like  in the case of a leaky faucet, could require action on your part, even to the point of calling in a plumber to make a repair.

When it comes to your finances, leaks can cost a little over time (which can add up), or could be leading you down the path to bigger financial problems in the future.

Some causes of financial leaks include:

Forgetting- We all forget things, and sometimes we forget to take care of our finances as well. The results of forgetting things can cost a few pennies at times, but it can be big bucks sometimes as well. An extra couple of dollars for some service you forget to cancel, like premium channels can cost a few bucks a month (small leak), but if you forget to pay a credit card bill, you could end up paying hundreds of dollars (or more) in interest and penalties (large leak that can cause serious damage).

Procrastinating- Similar to forgetting things completely, putting things off until a more convenient time often means we never end up doing them. It is not always convenient to call up a customer service rep to cancel a service you have, or to drive across town to that bank branch with the account fees that are outrageous so you can close your account. But doing so can start saving you money right away.

Not consciously thinking of your money- Do you think about where your money is going on a regular basis, or how you are spending it? Doing so every once in a while can keep financial leaks from “draining” your hard earned cash.

How can you prevent and fix financial leaks in your life?

Stay alert/think consciously about your money- Pay attention to the signals around you. Are you frequently wondering where your money went, or didn’t realize how much you have spent over a period of time? Then it is time to start examining the areas you spend money, and looking for things that can be eliminated.

Write things down- Writing things down helps you “remember” when your mind forgets. Make a list, write down the things you need to do, what you need to take care of, or areas of your finances you want to re-examine so you don’t forget about them later.

Take action as quickly as possible
- As soon as you identify a financial drain on your wallet that isn’t necessary, take action immediately to correct it. Cancel that extra overdraft protection on your checking account or that long distance plan you no longer use. If you put it off, chances are good it could be quite a while before you actually do what you know you need to do.

Are there any financial leaks in your life that you need to get rid of?

Creative Commons License photo credit: Nicholas Smale

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{ 4 comments… read them below or add one }

Netanya November 4, 2009 at 8:32 pm

I enjoyed your post and thought the leaky faucet analogy was a great tie-in to financial issues. If we don’t take care of our finances now, we will eventually have even bigger problems. This is so true. Since I am now on a tight budget, I too, have realized the importance of being alert about my spending. I am now using mint.com to help me keep track of my purchases. Thanks!

Netanya
Money Hackers Blog Ambassador

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RC November 6, 2009 at 8:07 pm

Netanya- Thanks! You are right about small financial problems turning into bigger ones if you don’t take care of them. I have heard good things about mint, I have not tried it out yet but plan to do so soon.

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Neil November 5, 2009 at 8:27 am

One of my most annoying fniancial “leaks” is to forget/not have time to make myself lunch before I leave for work. I then end up spending more money on something bought at lunchtime which is probably not as healthy! I MUST try and stop this :)

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RC November 6, 2009 at 8:08 pm

@Neil- I struggle with that same one quite a bit myself. For me , when I get out of the habit of bringing lunch, it is hard for me to start doing it again.

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