With the recession showing little signs of recovery, it’s not uncommon for people to be wondering where the hell their income is going every week. Even the least frugal among us are starting to ask themselves how they can make their disposable income go a little further.
While there are certainly some expenses that there’s no way of getting around, most people waste money unnecessarily on purchases that are the very opposite of frugal. Here are ten of the most common ways for people to find themselves short on cash unnecessarily.
1. Purchasing a New Car
It doesn’t matter how you slice it, purchasing a new car never makes financial sense. A used car mightn’t be as much of a status symbol but it will get you from A to B for a fraction of the cost. It also won’t depreciate like an exploding building. Thanks to the recession, used cars have never been cheaper and thanks to modern technology, they’ve never been more reliable.
2. Gaining 1.5%, Losing 15%
Putting money into a savings account makes sense but not when you owe money to a credit card company. The interest rates on credit cards are so high that paying them unnecessarily is one of the worst financial mistakes that you can make. Other than a small financial cushion for emergencies, saving money when you could be paying off credit card debts is simply not logical.
3. Grocery Shopping Without a List
Don’t underestimate the power of supermarket design for making you purchase things that you don’t need. When you head to the supermarket without a list, the odds of you getting out of there without wasting money on impulse purchases are slim to none. Shopping both with a list and the discipline to stick to it is the only way to shop for groceries.
4. Unnecessary Bank Charges
The worst thing about bank charges is that most consumers don’t even know that they’re paying them. Between withdrawal fees, overdraft fees, and annual account fees, the cost of owning a bank account can be surprisingly expensive. If you don’t know what you’re currently paying, chances are you are paying too much. You might be surprised by how much you can save by switching banks.
5. Purchasing the Latest Gadgets
Wanting a smartphone makes sense, wanting the latest and greatest, not so much. Being the first one of your friends to own the latest piece of technology is a very expensive hobby. Consumer electronics tend to drastically drop in price once they’ve been on the market for a mere six months. Smart consumers are patient consumers. And last years technology is still faster than anyone really needs.
6. Failing to Comparison Shop
In the past, comparison shopping involved quite a bit of legwork. Nowadays all you have to do is turn on your computer. The best prices on insurance, broadband, and heating are all just a click away and when you don’t take the time to look for them, you are almost guaranteed to end up paying more than you have to.
7. Paying for Brands
Branded products are typically three times the cost of generic alternatives and the value simply isn’t always there. While branded electronics are usually worth paying for, the same cannot be said for branded clothes, branded food, and branded pharmaceuticals. Pharmaceuticals, in particular, are a perfect example of why paying for brands is crazy, the ingredients are literally identical.
8. Bottles of Water and Cups of Coffee
The mark up on water, when sold by the bottle and coffee when sold by the cup, is truly ridiculous. Neither are expensive individually but over the course of a year, those small purchases can easily add up to over a thousand dollars. Coffee is practically free provided you own a coffee machine. And water is literally free provided you own a refillable thermos. You’ll also spend considerably less time standing in line.
9. Purchasing Hardback Books
Averaging at around twenty-five dollars and generally being read only once, the purpose of purchasing hardcover books has always baffled me. Libraries are free and the average cost of a Kindle book is $6.45. Purchasing DVD’s when you could just join Netflix is an equally unwise financial decision.
10. Wasting What You Do Manage to Save
Finally, being smart with your money isn’t just about spending less, it’s about saving more. For example, skipping your morning coffee in Starbucks is an excellent way to spend less. But what are you actually saving if you use Starbucks money to eat a more expensive lunch?
If you decide to save money by avoiding any of the purchases outlined above, be careful not to throw it away on other questionable purchases. Every time you come up with a new way to spend less, decide to save more.