logo

How spending even small amounts on vices can eat up your savings and put you in debt

Ryan Derousseau, special to CNBC.com
John Taggart | Bloomberg | Getty Images

When clients come to visit Clint Haynes, a certified financial planner in Kansas City, Missouri, they're often without a plan. They know they want to save more, get their finances in line and control their spending, but they can't seem to do it.

"They come in knowing they're probably overspending and need to make some changes," said Haynes.

Yet according to the Invest In You Spending Survey released July 1 by CNBC and financial wellness system Acorns in partnership with SurveyMonkey, Americans believe we're a nation of savers. At least, that's how we view ourselves. The national survey, conducted June 17–20, examined the spending behavior of more than 2,803 Americans ages 18 and up.

More than half of respondents — 54% — said they believe they're savers, while just 41% admit to being spenders. As you'd expect, those age 65 and up said they are the most avid savers, at 63%, but so, too, are young Gen Zers, at 58%.

Where's the gap between our belief in our savings' bona fides and the clients Haynes sees? It's not in large purchases, but instead within the small, reoccurring spending on our daily vices, whether it's for takeout, streaming services or for retail therapy through an impulse buy.

It's this spending, where the dollars sift quickly through our hands without us barely noticing, that puts a huge dent into our net worth.

More from Invest in You
Are you spending smart with credit? Take our quiz and find out
One-third of Americans have cut back on spending, and some fear a recession is coming
Gary Vaynerchuk on how to create inner peace and spend less money 

American vices add up

According to the survey, the purchases consumers would be most willing to give up are takeout or food delivery, with 52% claiming they could leave it at the door. Yet when asked what they spent more than $200 a month on, takeout and food delivery came in first by a wide margin, with 28% of respondents. It was followed by vice spending, including alcohol (10%), tobacco (8%), live entertainment and sporting events (7%) and gambling (4%).

Across the board in all age groups, men admitted they are bigger impulse buyers than women and spend more on vices. Of all the vices listed in the survey, women outpaced men in spending more than $200 a month in only one category: coffee out-of-home.

"None of my clients have spent on anything huge," said Diane Nissen, a budgeting specialist and money coach at Alexandrite Group in Tenafly, New Jersey. Clients often come to her with large credit card debt, yet they don't usually have boats or excessive houses (based on their income) or another large item they're paying off. Instead, Nissen sees the negative impact these vices have on their budget — and their financial future.

"It's the smaller purchases that add up," she said.

Since much of this spending is done in small increments, you don't immediately realize you've sapped your monthly budget. In a study last year, consulting firm West Monroe Partners asked 2,500 people to guess how much they spent on subscription services. Their answer: about $79 a month. When the actual spend was calculated, it averaged $237 a month.

If you have trouble paying off your credit card as is, you can see why underestimating by more than $150 can leave you short at the end of the month. And if you're not paying off your credit card each month, then you're accruing record-high interest payments.

Feeling the financial pain

Like Nissen's clients, Americans aren't splurging on big items. According to the Invest In You Spending Survey, 58% said their last impulse purchase was for something that cost less than $100, with 1 in 4 saying it cost under $25. Plus, 11% said they never buy something on impulse, although just 4% of 25- to 34-year-olds identified with that statement.

Only 19% said they had splurged on something over $100. Self-identified spenders were also far more likely to do so, with 27% admitting to such a purchase compared to 14% for savers. Here, again, women out-moneyed men. When buying on impulse, women kept the purchases small, with only 16% saying that their last impromptu purchase stood above $100, compared to 23% for men.

Sometimes, though, we think we're spending only a little on something. Instead, that little purchase, either through the number of purchases or the recurring nature of the payment, adds up, causing a drain on the finances.

Where Haynes often sees this most glaringly is in the app purchases that clients make. They may subscribe to an app for $9.99 a month, thinking it's not too bad. "Those things add up over time," said Haynes, who founded the wealth management firm NextGen Wealth. It's often a shock when clients see the total amount they spend on the apps throughout the year, he added.

Putting a plan in place

Instead of restricting spending within one specific category, Haynes first looks at the entire financial picture. He marks down the fixed costs, such as a mortgage or rent, utilities and car payments. To that he adds the amount the person needs to save in order to reach the goals they have, whether it's to buy a home or plan for retirement.

Whatever is left over gets put into the spending pile. This is a sure way to recognize just how much disposable income is left for discretionary buys on things like Starbucks, Seamless or Netflix.

"If you like getting a coffee every day [and] it makes you feel good, then get the coffee every day," said Haynes. "As long as [you're] saving enough money on a monthly basis to achieve [your] goals ... I'm comfortable for them to spend the remaining paycheck on whatever they want to."

This approach turns that vice into a much deserved treat, whether you consider yourself a saver or not.

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.