16 Big, Bad Money Wasters
- Wednesday, September 14, 2011
Want to know how to accumulate cash in a hurry? Stop wasting it. One tiny crack in your finances can turn into a major drain through which untold sums are totally wasted. It's time to start plugging the leaks. To get you started, here are sixteen of the biggest, baddest common money wasters:
Buying TV infomercials
Face it, TV products are overpriced and hardly ever turn out as depicted. And those risk-free trial periods? Don't believe it. You'll have to pay the return shipping costs plus a restocking fee, if you even get around to returning it.
Plug the leak. When tempted to buy, take a second to look up the item on eBay. You'll find dozens at a fraction of the price because that's where "as seen on TV" products end up. Ask yourself, "Why so many returns?" By then, the infomercial should be over.
Show me the money. How about two easy payments of $49.95? Plus shipping and handling, and the shipping charges to return it during the "free" trial period.
Remember all the stuff you bought because you were going to bedazzle everything in sight? Or how about the entire scrapbooking outfit you hauled home but never made its way out of the bag? It's way too easy for those of us who share the impulsive gene to make snap decisions.
Plug the leak. Instead of jumping in with both feet, sign up for a class to check out a new hobby. A few sessions will tell you how committed you are to the craft. If you decide it's a go, look on eBay. You'll be amazed what you'll find for sale by others who got a bit too anxious and bought the whole caboodle.
Show me the money. When you consider that enough yarn to knit a sweater can cost $75 or more, or that a beginning scrapbook kit costs about $115, looking before you leap will keep hundreds in your wallet.
Insisting on brand loyalty
Sure, we all have our brand favorites, but opting to pay double for things that don't really matter adds up to a lot of dinero.
Plug the leak. Opt for the store or generic brand whenever it makes absolutely no difference. Flour, sugar, salt, spices, milk, eggs, meat, pain relievers—all must adhere to the same federal standards regardless of brand.
Show me the money. Generic or store brand clones are at least 25 percent cheaper than their name- brand equivalents. Always check and compare.
Fat checking account
Keeping a tidy $5,000 balance in your checking account might give you a sense of security, but you're wasting money needlessly if you are not earning interest on the balance.
Plug the leak. Attach an online savings account (INGdirect.com is a good choice) to your checking account. Now you can move funds back and forth as needed.
Show me the money. Keeping $4,000 of your typical balance in the savings side at 3.5 APR will put $142 in interest into your account each year.
Failure to return
It doesn't fit right, the color is wrong, but who has time to trek back to the store? You do. Failing to return our shopping mistakes is way at the top of the biggest money wasters.
Plug the leak. If you still have receipts, try to get a refund for all the NWTs (new with tags) you're harboring. At least try for store credit. If that doesn't work, there's always re-gifting.
Show me the money. Writing about this prompted me to check my closet. I pocketed $168 by returning a couple of shopping mistakes that had slipped my mind.
Piling on late fees
If you're a late-payer, you know we're not talking about chump change here. Late fees on credit-card accounts, mortgages, car loans, automobile registrations and property taxes are breathtakingly high.
Plug the leak. Instead of waiting for bills to arrive, anticipate the due dates. Better yet, set up for auto bill pay directly with the service provider or use your bank's online bill paying service. If you do incur a late fee, call immediately. Most creditors will waive the fee if you have a good payment record.
Show me the money. Many credit card companies are charging as much as $39 flat for paying late. The typical late fee on a mortgage is 15 percent of the amount due. Ouch!
Want to make sure you never exercise? Sign up for a gym membership and pay $39 a month for the privilege.
Plug the leak. Call immediately to see what it will take to cancel the membership you never use. At the least, switch to a month-to-month plan—then use it.
Show me the money. For every year you can cancel, you'll average $468 in your wallet.
Paying for credit card protection
Credit card theft insurance borders on the ridiculous. You just don't need it. If your card is stolen, by law the most for which you will be liable is $50. These days most banks waive this fee and replace your card, no questions asked.
Equally needless is credit-card disability insurance that promises to cover your payments if you get sick or disabled. While your monthly payments might be suspended, interest will continue to accrue so the debt will pile up.
Plug the leak. First, figure out if you're already paying these silly fees without knowing it. This will appear as "Loss Protection" on your statement or something close to that, and the fee is likely to be about six or seven bucks per month. If you see that you're paying for this, call and cancel. Ask for a retroactive refund since it is not something you requested.
Show me the money. $6.95 per month is typical for these needless protections, or about $84 annually.
Statistically, if an item is going to fail, it will do so early on and the manufacturer's warranty will cover it. Extended warranties are mostly profit for the retailer—as high as 40 to 80 percent, according to Consumer Reports.
Plug the leak. If you can't imagine life without an extended warranty, do this: Open a special account and deposit the money there instead of in a salesperson's pocket. If the item fails (it probably won't), you have the money to cover repairs. And if all is well, you get to keep the money.
Show me the money. I kept the $495 they wanted for an extended warranty when I bought a big screen television eight years ago. It's still working perfectly.
Paying for storage
If you've got so much stuff that you need to pay to store it, you've got too much stuff. Period.
Plug the leak. Take the plunge and unload everything you don't use or need. Turn what you can into cash at websites like Craigs list.org, eBay.com or Half.com. Give things that are still serviceable to charities like Goodwill or the Salvation Army. Check out the FreeCycle.org chapter in your area. Your hard work will be rewarded with a fatter wallet, too.
Show me the money. A postage stamp-sized storage unit can run $50 a month and up to hundreds for larger ones.
Not taking employer's match
If you're eligible for an employer-matching 401(k) but you're not signed up, you're turning down free money. What a waste.
Plug the leak. Find out if you are eligible. If you are, sign up for your 401(k). If your company matches employee contributions, it's like getting a 50 percent return on your money without any risk. You are nuts if you pass that up.
Show me the money. A typical match could mean $1,000 a year. If you are 23 and get that same amount every year (doubtful, since it's based on your annual salary), at 5 percent growth, that free money in your 401(k) will grow to $142,634 by the time you retire.
A small slip-up can easily turn a $5 burger into a $40 overdraft fee. Your bank is quite happy to cover even your tiniest flub—allowing you to swipe the debit card or even write a check for more money than you have in the bank, then slap you with a "courtesy overdraft fee" for covering your mistake with the bank's money.
Plug the leak. Don't assume anything. Check your account every day. Keep track of your bank balance. If you're getting close to $0, don't even think about testing the system to see if you can make one more purchase slide through before payday.
Sign up for overdraft protection that links your checking account to a savings account or line of credit; the fees and other costs involved are generally much lower than when you bounce a check. If you do get hit with an overdraft free, ask your bank to waive it as a one-time courtesy.
Show me the money. Some banks charge a hefty overdraft fee of $30 per item they process over your current balance, then pile on a daily $5 fee for every day your account is overdrawn.
Not racking up discounts
Got a youthful driver in the family who also is a good student? You may qualify for a good student discount. Did you recently install a home protection system? Does your car have anti-lock brakes, side airbags or other safety equipment that is more than the basics?
Most insurance companies give premium discounts for these and many other situations.
Plug the leak. Call your insurance agent and ask for a quick review to determine which discounts you qualify for. As you experience life changes, call again. You may find yourself qualifying for even more discounts.
Show me the money. Expect a 25 percent discount if you have a full-time registered student who maintains at least a 3.0 grade point average.
Buying in bulk
Walking up and down the aisles at the warehouse club, it's easy to get carried away. Truth be told, if it's more than you can reasonably use before the stuff turns stale, rotten or past expiration—or you just don't need it—you're throwing money down the drain.
Plug the leak. Determine how much you really need and then consider the price. If you must buy in large quantities, invest in a vacuum sealing machine or larger freezer for storage.
Show me the money. You can easily save 50 percent of the full retail price when you buy some things in bulk. You will lose 100 percent if it lands in the garb-age because you just couldn't use it up in time.
Wrong cell plan
If you are consistently going over your minutes or find you are coming in way under several months in a row, you've got the wrong plan. That may be costing you dearly.
Plug the leak. Call customer service for a quick review of your last few bills, with the mindset of switching to a plan that better meets your calling needs. Call for a review every three or four months so you stay on top of things as your calling needs change.
Show me the money. If you are overpaying by even $20 a month, that's $240 in a year's time.
Buying a new car
It's a fact: A new car loses approximately 20 percent of its value the moment you drive it out of the dealership parking lot because it is now a used car.
Plug the leak. Give the used car market a fair chance. Rental agencies sell late model, low-mileage vehicles at greatly reduced prices.
Many dealerships offer certified used cars. Check the private ads in your local newspaper or online at AutoTrader.com. Be patient and you're sure to find a real cream puff. You won't even notice the absence of new-car smell, knowing someone else took that big depreciation hit for you.
Show me the money. Twenty percent on a $20,000 car is $4,000 down the drain, the minute that vehicle becomes a used car. Buy used and you can keep the dough!
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