Over the last few months I have been helping clients clean up their books to prepare for their year-end tax preparation. Sadly, for many of them, they have been victims of what I call “phantom expenses”. Phantom expenses are expenses that are small enough to not be noticeable on a bank or credit card statement but in total can really add up. Below are 5 common phantom expenses I see clients paying that I would urge anyone to review or challenge.
#1 Gym Memberships
Many gyms require members to setup their accounts on auto-draft or recurring payment from their credit card. The cheapest memberships are as low as $10 per month while high-end gyms can run hundreds of dollars per month. As long as you use it routinely and are getting the value you’re looking for then rock it out. But if you’re still paying for last year’s New Year’s resolution and haven’t been since the third week of 2017 then it might be time to reconsider if the expense is necessary and worthwhile.
#2 Registered Agent Fees
If you own a business then you may have a registered agent in the state you’re incorporated in. What does a Registered Agent do? A Registered Agent may be necessary if you own a business in another state but for the most part they receive mail for your business. Registered Agents charge anything from $99 per year to $25 per month. What’s the benefit? You get a little identity privacy from the public, which is nice, but if your business has an office or physical address, then you’re getting nothing (in my opinion). Scrap this unnecessary expense and be your own Registered Agent!
#3 Streaming Services
Netflix, Hulu, Amazon, Apple Music, and Spotify are all favorites of mine. Many people have subscriptions to all of these services but do you really use all of them? Consider paying for what you use and rotating between them instead of having them all active at once. If you add up the monthly service cost of each for one user it’s over $40 per month (plus tax). It’s not a crushing amount but the reality is you can get away with spending half that amount for just as much content.
There are also book services such as Scribd & Audible that charge for access per month. If you’re not using your credits or can’t read books fast enough then it might be worth suspending your account until you have more time to enjoy your credits. In some cases, it may be cheaper to just purchase books as you go so you don’t feel pressured to use up all of your credits before time runs out.
#4 Bank Charges
Anyone who knows me knows I loathe bank charges. These are the single largest hidden expense I find when examining client records. Paying a bank fee here and there for an overdraft or wire makes sense but to pay for your account to interface with QuickBooks Online or just because of a bank imposed minimum account balance is ludicrous. My first piece of advice is to scan your financial records each month to ensure you aren’t being charged these fees. If you are, go to the branch where you set up your accounts and politely speak with the manager about reversing the charges. This typically works (they may not refund the full amount but you should get something for your time). It also allows you to build a relationship with the bank manager.
#5 Publications
Many businesses and professionals subscribe to publications relevant to their field or industry. What happens if you have a career change? Do these publications matter anymore? Unless you’re genuinely interested in a specific subject or topic you may be flushing dollars down the drain for content you have no interest in or use for anymore. Consider cutting the subscription and requesting a refund (if you’re mid-cycle) or not renewing when your term comes due.
It may not seem like phantom expenses are significant but when you add them all up over time they can be a drain on your pocket. Before the end of the year you should do a mini audit of your own expenses and see what you can cut out to save yourself money in the new year!
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