Spending Leaks

I have been thinking a lot about spending leaks recently. Both in my own life and in working with participants, those extra few dollars that seem to disappear each day have become a major theme. In the REAP curriculum, we officially define a spending leak as “a reoccurring expenses that is not included in your cost of living plan” and list examples such as soda, cigarettes, birthday gifts, and dollar store ‘goodies.’ In REAP class, I often define a spending leak as “how that $5 you started the day with turned into $2.” For me, this tends to be through the purchase of beverages of various types. For others, it might be things like buying cigarettes by the pack rather than the carton, vending machine or drive thru food, purchasing things because they are on sale, even if they aren’t really needed, or buying candy in the grocery store line to keep kids under control. The things all spending leaks have in common are:

1) They are not accounted for in some one’s budget, causing shortfalls at the end of the month.

2) Spending on them may be able to be adjusted, eliminated, or added to ones cost of living plan if you want to make a change.

3) Their cost adds up over time.

For example, I have a habit of spending around $3.00 on various beverages about 3 days a week, through a combination of drive thrus, coffee shops, and vending machines. Each individual purchase is small, but the cost over time adds up, as we see below:

$3.00 x 3 times a week = $9 a week

$9 a week x 52 weeks =$ 468 a year

$468 / 12 months = $39 a month

Knowing this gives me information, and power. I can choose to add $40 a month to my cost of living plan to account for it, I can choose to curtail my beverage habit, decreasing my consumption and opening up money to use for other purposes, or I can choose to continue at my current rate (3 times a week) but purchase cheaper drinks. Many of our participants, even those on very restricted incomes, have spending leaks that they can make choices about. As an advocate, you may be able to sensitively help participants identify and think through their spending leaks, helping them find where that last $20 is going to come from to balance a budget or to put toward paying down debt.