Eight Ways We Love to Waste Money
Do you think you might have a wallet-ferry that secretly takes money out of your wallet or purse, and leaves you nothing in return? Do you scratch your head thinking how come all the money you’ve had has disappeared so fast? Well, the culprit is likely the owner of the wallet or purse (as I’ve recently discovered in my case) rather than some mythical creature. The fact is, we often waste money without realizing it on things like:
Designed primarily to extend the profits of the companies that sell them, extended warranties are, for the most part, a waste money. Research shows that most consumer electronics and appliances, if they are going to fail, will fail within the first 90 day of ownership. Well, you are usually covered under the manufacturer’s warranty during that period, so the extended warranty is superfluous. Also, how many of the things you buy break within the warranty period? 1 in 10? So is it worth it buying 10 warranties to cover that one thing? The extra warranty can cost over 25% of the value of the products it’s supposed to cover, and even up to 50% in some instances, so you do the math.
Eating out frequently is another way we love to waste money (and yours truly is particularly good at this). It’s just too easy; no cooking, no washing dishes, doesn’t cost too much… Or does it? If you spend on average $20 for a lunch in a restaurant, than one lunch every day will cost you $5,200 per year. I’m not saying never dine out; but by decreasing the number of weekly restaurant visits by just one, you could easily save $1,000 per year!
What’s the difference between a brand-name product and a generic product? Sometimes there is a real difference, but often the products are more or less the same (drugs and food come to mind). So why do we spend the extra money for the name brands? Because their marketing departments convinced us that the prettier packaging and clever commercials are worth it. Are they?
Designer Clothes for Kids
This one really falls under the category above, but I think it’s particularly wasteful, so I put it in a separate category. Kids grow fast, don’t they? So spending, say $60, on a designer sweater that the child will wear just one season is a good idea because… why exactly? And what financial lesson does the child learn from that?
Memberships and Subscriptions
Do you have a gym membership but never go? Subscribe to a half a dozen magazines that you never read (like I used to)? Get 500 channels on your cable, but only watch 5? Cancel what you don’t use, and save the money.
Turning Down Free Money
Does your employer offer a matching retirement plan? How about a medical savings plan? Are you taking advantage of this? If not, then you are turning down free money.
Small charges can add up to a big amount in no time, and always do so in a stealthy manner. Regularly using another bank’s ATM that costs you $3 to withdraw $20? Just switch to that bank then. Getting hit with overdraft fees? Consider signing up for the overdraft protection. Too many bills to keep track of? Don’t pay late fees – sign up for an automated bill pay service. That mysterious $700 fee a lender wants to charge you doesn’t look like much because you are getting a $350,000 mortgage? It’s still $700 – ask them to waive it.
Buying in Bulk
Discount retailers like Costco and Sam’s Club are great for those who consume in bulk. But not all of us do. So getting a great price on that 5-gallon jug of maple syrup is not really a bargain if you end up throwing most of it away because you just don’t use it or got tired of it. If you have a large family and consume in bulk, buy in bulk, otherwise buy less and save your money.
Each of the above money wasters may not seem like a big deal by itself. But when you add it all up, it may very well be a few thousand dollars each year. So what’s better - putting this money in your savings account or letting the wallet-fairy fly away with it?
Since you read this post all the way to the end, you deserve a reward. Here is another picture of a fancy pug:
Personal Finance Blog
Starting in 2004, this blog series ran for 10 years. Click on the links below to read some of the posts.