A Breakdown of Clark Howard’s 3 Spending Categories – Technologist

If you’re like most people, you likely spend a certain amount of money every day. It could be a small amount here or there, but it adds up.

What Are You Spending Money On Today, This Week and This Month?

“It’s crazy when you start adding up the cost of walking around money,” explains money expert Clark Howard. If you look at where your money goes it’s likely being spent in three main categories…

Spending Categories:

• Housing and Transportation
• Monthlies
• Little Purchases

What would happen if you could save some of that money?

In this article, we’ll take a look at three categories that people typically spend money on every day, week and month. At the end, we’ll give you a homework assignment to benefit your wallet.

“So the big money is not in the coffee. It’s not in the sandwich,” Clark says. “It’s what you pay for housing and transportation. “Those two things are the big numbers” — and the first of the three categories we’ll discuss. Let’s get into it.

Category #1: Housing and Transportation

Clark says with housing, most people are dependent on whatever the market costs in that specific area.

He says, “Where you live has a big impact on housing.”

For example, let’s say you’re interested in a three-bedroom home, which is the traditional dwelling across most of the United States.

Among the coastal states out west, you’re looking at an average of $576,819 for a traditional home, according to a report by GoBankingRates.

Conversely, in the 12 Southern states, you’ll pay anywhere from $163,380 in West Virginia to $387,663 in Florida, the site says. In the Midwest, that house ranges in price from $204,988 in Ohio to $417,658 in Idaho.

Action Plan (Housing)

You might not be able to relocate to a cheaper city (although some places will pay you to move there), but there are some things you can do to reduce housing costs:

• Improve your credit score: The higher your credit score, the better your mortgage loan approval rate and the lower the interest rate.
• Downsize like Clark did. “We utilize a much higher percentage of the dwelling, and our overhead with the property is much, much lower,” he says. “And so it worked for us; it might work for you if you’re looking for a place.”
• Save at least 5-10% for a downpayment: Contrary to what you see and hear, do not put 1% down on a downpayment even if your lender allows it. That’s how you pay more in mortgage costs — and you could even end up upside down on your loan.

Want more tips? Use these calculators to see how much home you can afford.

Action Plan (Transportation)

“For transportation, the costs come at you day after day and month after month,” Clark says. Among some of the expenses you’ll have to account for are gasoline (unless it’s an electric vehicle) and regular maintenance and repairs time and time again.

Some ways to save include:

• Buy a used car: Clark says this is one of the smartest money moves you can make.
• Taking care of easy repairs yourself: Can you change your own air filters or headlight bulbs? Going the do-it-yourself route will agree with your wallet.
• Using Gas apps: “If you use an app like GasBuddy, you’re able to see right on your phone right near where you are the cheapest price for a gallon of gas,” Clark says. Also, the Upside app gets you cash back on gas purchases.
• Filling up at retail gas stores: Save at the pump if there’s a Costco or Kroger near you.

Read our comprehensive guide on how to save on gas.

Category #2: Monthlies

“Then we have this second category, and that’s the monthlies,” Clark says. “That’s what you pay for your cell phone, internet connection, gym membership, anything that’s a monthly bill that you have a lot of discretion over.”

In addition to those things, here are some more monthlies I was able to think of:

• Streaming services (Netflix, Disney+, etc.)
• Store memberships (Costco, Sam’s Club, Walmart+, etc.)
• Cloud storage services (DropBox, Google Drive, iCloud, etc.)
• Newspaper subscriptions (New York Times, etc.)

Let’s take cell phone service as an example. The big three carriers — Verizon, AT&T and T-Mobile — have their top unlimited plans that cost anywhere from $70 to $90. By switching to Mint Mobile, which uses T-Mobile’s cellular network, you can cut your cell phone bill down to as low as $15 a month. Read our in-depth review of Mint Mobile.

Action Plan

Switching cell phone providers can save you big money. The other good news is that changing cell phone plans is easy, quick and Clark even did it. To compare cell phone providers, take a look at our cell phone plan finder tool.

Also, take a good look at your subscriptions to see which ones you’re actually using regularly.

Category #3: Little Purchases

Small purchases that we don’t put a lot of thought in can wreck a budget in short order, Clark says. “It’s one of those things we know but in the noise and busyness of life, we say ‘I want this. I want this coffee,’ or whatever.”

Some small purchases that can quickly add up include:

• Cup of coffee
• Snacks from the vending machine
• A bottled water or soft drink
• Parking fee (typically $4 to $5 for 30 minutes or so)
• Lottery ticket

I’m sure you can think of other little purchases you make on any given day. Now how can we cut back on any of those?

Action Plan

Get serious about your finances and commit to living below your means. That means you’ll have to re-evaluate your spending by creating a way to track your finances.

In essence, come up with a budget. 

Check out our free budget worksheet to track your finances.

“If you see what’s there and you start working on those bills, it’s crazy how much money you can put back into your wallet. It’s in the thousands per year,” Clark says.

Bottom Line

“So do you solve all of your financial ills by making your own cup of coffee at home? No. Nobody is perfect with everything,” Clark says. But he adds that every time you spend a little here and a little there, you should acknowledge that you’re paying for things that may not be going toward creating financial security.

How do you rein in your spending? Clark has stressed for years the need to scrutinize your checking account statement, credit card bill and similar financial statements.

If you’re getting email statements and you rarely look at them, Clark wants you to turn your paper statements back on and go line by line through your bill to look for discrepancies and to see what you’re buying.

“With a paper bill, people will actually look, more likely than not, at their individual charges,” Clark says. “When they get an e-bill, they only look at the balance, the minimum payment due. They don’t actually look at the individual charges they have, because it’s more difficult with an e-bill by far than it is with a paper bill.”

Homework

“Whatever it is, think of one thing that you spend money on day after day, without really thinking about it,” Clark says. “Change that one thing and then see how much money that brings back into your life and how much financial security that brings back into your life.”

Want more financial advice? Check out clever and unusual ways to save money.

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