Personal Finance and Big Data

Big data is more than just a marketing tool. It’s a way to aggregate together useful information and draw interesting conclusions. For example, banks and other companies that compile data about consumer purchases are starting to learn things about how people spend money and ways that they could save. In this post, we will talk about some of the insights and conclusions that have come out of applying big data analysis to personal finance. You will learn about three key spending categories and how to change your spending in each of them to save the greatest amount of money per month.

Coffee Spending

It is a common trope that some people seem to spend a lot of money on Starbucks and other coffee drinks. When these products cost $4 and up for each trip to the cafe, it’s not surprising that one financial directive that pops up for young people is to stop buying so much coffee. However, it turns out that most people who go to Starbucks actually spend less than $25 per month. Compared to other spending categories, that isn’t much. Cutting out all coffee drinks will save a few hundred per year, but that isn’t a big savings for losing coffee. The stereotype of the person who is buying a large latte twice a day is an extreme version of the true level of spending. Most people are treating coffee as nothing more than an occasional treat, with reasonable spending levels on a monthly basis.

Cable Packages

On the other hand, the cost of cable service tends to be much bigger. Big data analysis shows that many people are spending over a hundred dollars a month on cable. With the rise of streaming services, less and less people need a large cable TV package with plenty of channels and features. It’s more common to have some combination of Netflix, Hulu, Amazon, or Roku and use the TV, laptops, and tablets to watch the content. Downgrading to a smaller package will make a major difference every month. The biggest hole in streaming is live sports, which are still mostly owned by cable networks. However, even the major sports leagues are starting to experiment with offering their own streaming options or selling the rights to stream to a provider like Twitter or Amazon.

Phone Service

Wireless phone service can be quite expensive, especially with data included. A family plan will run into the hundreds of dollars per month. Data work shows that there is an option for saving money that most people aren’t taking advantage of: alternative wireless providers. T-Mobile, Verizon, AT&T, and Sprint are the most well-known choices, but there are several smaller providers like Virgin, MetroPCS, and Boost that cost significantly less each month. This is because these companies do not own the cell towers and do not have to pay to maintain them. They pass the savings on to consumers. Unlike cable, there is no real alternative to wireless phone service itself, but you can find less expensive ways to get it.

Coffee, cable service, and wireless service are common spending categories, but the data shows that they have very different meanings for how to create the best personal budget. If you want to save more money, even though coffee seems like a luxury, you probably aren’t really spending enough on it to make a difference. Dropping down a tier on your TV package or switching to a small wireless carrier can mean a difference of hundreds of dollars per month, though, so look into what options are available in your area. If you are in one of the best places to live in NJ, for example, you will have more choice.



by: Rick Delgado