Personal Finance: How
to Waste Your Money
It is an unprecedented phenomenon of the 2000s that
most of us living in this era has holes in our budgets. Unfortunately, we are
usually unaware of these holes. The
unhappy truth is that those small drips from these holes can quickly add up to
large sums of money. This means that if
you are really interested in keeping more money in your pocket, the first
practical step to take will be to find these holes and plug them. Following
this simple trick can mean a significant financial stability for you: You can
at last save money, invest some of it and break the cycle of living from
paycheck to paycheck. To help you
identify what you might be wasting your money on I presented a list of 8 money wasters below. Because I am convinced
that you don’t actively seek ways to waste money, and hence will like to plug
your budget holes right away, I also explained the tips and resources that
would help you cut unnecessary expenses from your budget.
For most mums in America, coupons are the prime
apple pie: They are convinced that using coupons is a time-tested strategy for
stretching their budgets and saving
money. So if a company attempts to take it(coupons) away from them they will
scream, boycott, petition, and even threaten to sue the company. It is thus not surprising that most mums
often go ho-wild clipping coupons. But, in a practical sense, coupons can be a
waste of time and money when used inefficiently. There are three reasons for
this. First, except for those coupons you usually get along with products or in
the mail (or online), to get a coupon, you must buy a newspaper or a magazine.
And when you buy a newspaper, you’ve spent some money. To make up for this loss
of money you will need to use more coupons just to breakeven, which, in most
cases, also means that you have to use even more coupons to come out ahead. The
unhappy truth thus becomes that this does not include the value of the time you
spent clipping and organizing the coupons – a precious time which may be better
spent on another activity.
Second, from a financial perspective, coupons only
save you money when you use them for items you actually want to buy. It will be
logical, therefore, to say that if you buy something you didn’t need because
you have the coupon, you didn’t save
money – instead it means that you bought something extra[i]. Besides, most coupons are for brand-name
items which are usually expensive. So if you are using coupons for your
shopping, you will need to compare
prices with the generic brands before you make the actual purchase[ii]. The third reason is that couponing can be
addictive: Unless you are a die-hard bargain hunter, coupons can tempt you to
always buy something you weren’t planning
on getting anyway.
The bottom line is that to save money with coupons,
you must have smart coupon habits: (1)Use coupons only for the products you’d
buy anyway; (2) Don’t get enticed into spending more; (3) Always read the fine
print on the coupons[iii].
ATM
Fees
It is common for credit and debit card holders to
get hit with multiple charges whenever they use ATMs that is not in their
bank’s network – a fee from their own bank and a fee from the bank that owns
the ATM. In general, you as a cardholder should expect to throw away as much as
$2-$4 each time you use an ATM that’s not owned by your bank. There are two
ways to avoid or minimize these fees.
First, you may consider switching to a bank that do not charge ATM fees. A good
example of this is the Ally Bank. The second approach is to get cash back when
you make a purchase at a grocery store or drugstore, particularly when you are
in a neighborhood where there’s not an ATM in your bank’s network nearby.
Household
Electronics as Cash Vampires
To power their devices while they are off or on a
standby mode, a typical U.S. household waste an average of $100 a year, according to Energy Star – a U.S. Environmental Protection
Agency(EPA) voluntary program that helps businesses and individuals save money
through superior energy efficiency. So if you don’t pull the plugs on your
electronics, especially those electronics that have a clock or operate by
remote, you are losing money. The bottom line: unplug your electronics when you
are done with them or when you are not at home. Alternatively, if you are too
tired or lazy to pull the plug on these energy vampires, you can buy a device
that’ll do it for you, such as the Smart Strip Power Strip(see www.smarthomeusa.com). This device stops drawing electricity when your electronic
gadgets are turned off.
Why
Pay for the Things You Don’t Use?
One thing that is certain in life is that the rich
didn’t make their fortunes with frivolous spending. In a broader sense, paying
for the things you don’t actually use does not make any sense. The bottom line:
Getting smart about money and expenses means taking a look at what your family
actually uses and trimming accordingly. For instance, asking yourself the
following questions can help you do this a lot: Do you really need those extra
features you have on your phone? Those magazines you subscribed to, which you
never have time to read anyway, do you really need them? How about your cable
channels, Netflix, etc, do you really watch all of them? Of course having a gym
membership is good – regular and consistent exercise promotes health. However,
you are not getting your money’s worth when you seldom use the gym. So it will
be in your best interest to reconsider your membership. Besides, dancing, taking
long walks, jogging, step-climbing are just a few list of the free exercises
you can do to stay fit without going to the gym.
Bottled
Water
According to the Center for Disease Control(CDC)
Americans spend billions of dollars every year on bottled water. There are
three main reasons why people chose bottled water: as a substitute for other
beverages, health concerns, and for
aesthetic reasons(for instance, taste).[iv] However,
unless you live in an area with polluted water supply or a locality where the water
supply is not properly treated by the Water Board, why buy bottled water? Almost all the bottled
waters you spend your money on came out of the tap anyway. Besides, the U.S. Environmental Protection
Agency(EPA) reported that both bottled
and tap water contain at least small amounts of some contaminants which may not
necessarily indicate that they poses a health risk.[v]
Your excuse may be that you don’t like taste of your local water. In that case,
you can use a filter.
Not
Reading the Fine Print
Sometimes it may not be a good idea to transfer the
balance on your high rate credit card to a low rate one. However, if you had to
do it, you should then be very smart about it: read the fine print carefully.
According to the available published evidence, many credit card companies charge
up to 5% for balance transfers.[vi] In addition, while some banks may offer you
free checking accounts, you need to watch out because these accounts are not so
free anymore: Such accounts can be free only if, and only if, you meet certain
criteria required by the bank, such as maintaining a minimum balance.
Otherwise, the bank will charge you some fees. Your bank can charge you other
fees, which can be as much as $10 per month, for services such as using their
teller for deposits and withdrawals or downloading information into Quicken(the
personal finance program). If you have a cell phone(which everyone does these
days) you will discover that your service carrier’s contracts are also full of
fine prints about fees for various services, including for early termination of
your contract. The bottom line: always read the fine print so can avoid these
financial traps.
Buying
New Instead of Used
Buying pre-owned items or goods can save you a lot
of money: you can get many of them for up to 50%-75% less than the price you
will otherwise pay if you buy them new. If you are like me who goes to Thrift
Stores or Yard sales on a monthly basis, you will discover that you can
sometimes find used goods that have hardly even been used. As a matter of fact,
some used items such as tablets and smart phones are practically new again
because retailers or manufacturers refurbish and repackage them before putting
them up for sale. So you can see that you are wasting money if you always buy
new items instead of used items. Note that I am not saying you should buy only
used items: there are some things you are better off buying new, such as safety
equipment(for instance, car seats and bike helmets), mattresses(you don’t want
to have bed-bugs in your house), linens and shoes.
Being Disorganized
You
can lose hundreds of dollars each year if you are not well-organized: You will
be surprised how much money you can lose due to lost bills and receipts,
forgotten tax deductions, late payments of bills, and clueless spending. One of
the cardinal rules for a thrifty lifestyle is to be well organized: Get a handful
of files to organize important receipts, tax
documents, insurance policies and other important documents. In this
digital stage, the most organized way of doing this will be to convert your
paper files into digital files or to get your budgets and finances in order
online by using some online tools such as Mint.com, SmartyPig.com, Manilla.com
and LearnVest.com.
REFERENCES
[i]
Burt E., Huddleston Cameroon (2013): Ways to Waste Your Money. Yahoo Finance. Retrieved September 30,
2013 from http://finance.yahoo.com/news/ways-waste-money-slide-show-040001799.html?page=2
[ii]
Fontinelle A.(N.D.): 8 Reasons Why You
Shouldn’t Use Coupons. Investopedia. http://www.today.com/id/38234532/ns/today-money/t/reasons-why-you-shouldnt-use-coupons/
[iii] Kandel Bethany(2013): Does Clipping Coupons Save You Money? Better Homes and Gardens. Retrieved September 30, 2013 from http://www.bhg.com/health-family/finances/tips/does-clipping-coupons-save-you-money/
[iv] Center for Disease Control(2013): Commercially Bottled Water.
Retrieved October 4, 2013 from http://www.cdc.gov/healthywater/drinking/bottled/
[v] Environmental Protection Agency(2005): Bottled Water Basics. EPA
Water Health Series. Retrieved October 4, 2013 from http://www.epa.gov/safewater/faq/pdfs/fs_healthseries_bottlewater.pdf
[vi]
Burt E., Huddleston Cameroon (2013): Ways to Waste Your Money. Yahoo Finance. Retrieved September 30,
2013 from http://finance.yahoo.com/news/ways-waste-money-slide-show-040001799.html?page=2
