- When it comes to must-haves for their lifestyles, many Americans now rank travel and dining out as their top priorities.
- That applies especially to the millennial generation, which spends the most on non-essentials every month, yet is also farther behind when it comes to credit card debt and retirement savings.
- To bring your non-essential spending back in line with your budget, consider cutting frivolous expenses that no longer bring you joy.
Attention millennials: Those expenses you call basics could be blowing your budget.
When it comes to lifestyle essentials, vacation and travel comes in first for millennials. That is followed by dining out and takeout, which came in second, and coffee, which ranked third, according to a new survey from TD Ameritrade.
And those expenses are making a big dent in millennial budgets. On average, they spend $838 per month on unnecessary expenses. What's more, they are the generation most likely to say that that spending affects their credit card debt and retirement savings.
The top reasons millennials cite as driving their spending: friends and family, followed by boredom and social media.
The survey results point to a broader shift in spending, according to Dara Luber, senior manager, retirement at TD Ameritrade.
"Americans now are three times more likely than those in their parents' generation to call things like dining out or taking a vacation as part of the basics in their overall spending," Luber said.
Baby boomers are even more likely to make dining, vacation and coffee a priority. But, in contrast to millennials, they tend to spend more on another priority: gifts for friends and family.
In contrast, Generation X spent the least on gifts for family and friends.
Gen Xers also spent the least on non-essentials, at about $588 per month. Baby boomers spend about $683 per month.
But Gen Xers were twice as likely as baby boomers — 46 percent versus 23 percent — to say non-essential spending contributes to their credit card debt.
Gen Xers were also more likely, at 61 percent, to say non-essential expenses impacted their retirement savings, versus 42 percent of baby boomers.
In order to make sure you don't blow your budget on areas such as travel and dining out, start first by identifying your essentials, Luber suggested.
Those must-haves should include food, clothing, housing and insurance. And it also should include emergency and retirement savings, Luber said.
Aim to have six to nine months' worth of expenses saved up in case an emergency crops up.
"If the roof starts leaking or the boiler goes, you have to make sure you're not putting yourself further in debt to pay for those things," Luber said.
Also be sure not to neglect your retirement goals. The best way to do that, Luber said, is to automate your contributions to your company 401(k) or to an IRA through your checking account.
Once you've made sure you have set aside what you need for essential expenses, identify what non-essentials you want to spend on and why, Luber said.
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Rank those non-essential costs in order according to how much happiness they bring to your life. Then, cut the categories that fall on the bottom off your list.
That could include gym memberships or other fees for services or subscriptions that you no longer use.
Also consider scaling back on other areas of discretionary spending such as travel by taking shorter trips.
Finally, loop those to whom you are closest to in on your financial goals.
"Be honest with your friends and yourself so that at the end of the month you're not looking at a negative number for your budget," Luber said.
The online survey was conducted last September. It included 1,110 adults with at least $10,000 in investable assets.