Money. You need it to live, but whether you're a spendthrift or a miser, money can make you do foolish things. You'll waste it trying too hard to save, spend it on things you don't need, and simply overpay on regular expenses every month. Here's how to avoid being stupid with your hard-earned cash.
Stupid Thing #1: You Spend More by Trying Too Hard to Save
Frugality has its downfalls. When you try too hard to save, sometimes you end up wasting your money in the process. This may seem illogical, but it happens when you try so hard to cut costs that you stop paying for things you actually need. Doing this leads to more problems down the road -- problems that are far more costly.
For example, skipping regular checkups at the doctor and the dentist can save you a few hundred dollars each year, but there will come a day when your lack of preventative care will earn you a much higher bill.
Buying cheaply made products is another way to throw away your money. It may save you cash in the short term, but you're bound to find yourself replacing it far sooner than a well-made product.
If you've ever purchased a cheap inkjet printer, you know this works. It will print well for about six months to a year before you start to run into clogged ink heads and other issues. While the printer may be under warranty, manufacturers will often just replace them because it's less expensive than the cost of repair. This is not only bad for the environment, it can be bad for your wallet if you end up paying any of the costs yourself. It's always better to look for a good deal on a well-made product than sacrifice quality manufacturing for the sake of a discount that will possibly cost you more in the long run.
Buying in bulk can also cost you more in the long run if you don't use everything you buy. Bulk food can be great for multi-person households -- especially those with children -- but buying in bulk isn't necessarily ideal for just one or sometimes even two people. Before you make your way to Costco, ensure that you're going to actually use everything you buy and that you're actually getting a good deal.
Overall, if you think your purchasing decisions through before you make them you shouldn't have too hard of a time realising when your efforts to cut costs will actually hurt you in the long run. A little thought is enough to solve the problem.
Stupid Thing #2: You Don't Put Money in Savings Because You Think You Can't Afford It
When you aren't bringing in as much as you'd like with each pay, it's hard to reduce that amount by cutting out a chunk that's just going to sit in a bank account and earn minimal interest. In some cases, you may think you can't even afford to save. Neither option looks particularly attractive, but there are numerous benefits to saving even a small portion of your pay that you may not realise -- benefits that save you even more money in the long run.
Saving money means you have a reserve of cash at your disposal. It's worth mentioning nonetheless because you may not realise that you can end up spending more money in the long run when you don't save at all. This not happens because you can quickly rack up credit card debt by buying things you can't afford, but because using your savings to purchase an item means you have the freedom to spend at the most optimal time (such as when a good deal comes along). If you don't have the necessary savings when that deal arises, you'll have to put it on a credit card that you can't pay off immediately and the interest will quickly negate those savings. If you have cash at the ready, you won't face this dilemma.
You can save money even if you don't have a lot of cash reserves -- just start small. If it hurts to take a chunk out of your pay each month, consider saving a dollar or two every day. Funelling it into a jar won't seem quite as difficult as watching about $60 each month disappear straight away. Contributing in small amounts will grow your savings slowly, but as you get in the habit you may feel more comfortable increasing the amount. If you're really having trouble finding the money to put in your savings account, consider where you can cut back and use the leftover cash to sock away each month.
Cooking at home is one of the biggest savers. If you cut out prepared food and coffee runs on most days, you can save a lot. Buying store brand goods -- which sometimes gets you an identical product for less -- is a great way to save money further. You can also save a lot by reducing your electricity usage, which can often be as simple as remembering to turn things off and using more efficient light bulbs.
You'll also want to consider what you actually have to buy and what you can reuse. Razor blades, for example, can be used for a couple of years with a simple sharpening technique. Consider what can be kept before you toss it in the garbage.
Stupid Thing #3: You Overpay On Bills (And A Lot Of Other Stuff)
When you see a price tag on an item you want or receive a monthly bill in the mail, the general assumption is that this price is not negotiable -- but that's where you'd be wrong. You can end up easily overpaying by quite a bit if you just accept the price you see. Often there is a less-costly alternative.
When it comes to your bills, the simplest strategy involves calling your provider and seeing if any deals are available. It won't always work, but it never hurts to ask. All you have to do is ask what they can do to help you get a lower price and be persistent.
As for in-store prices, people tend to think they can't haggle when they often can. Big ticket items like furniture, appliances and mattresses are rarely set in stone and you can make a deal if you try. Cars and home prices are also commonly negotiableWhile you don't want to haggle for absolutely everything you buy, when the cost is higher than average it never hurts to ask. You may not get a discount, but if you do that quick negotiation will prove worthwhile.
Stupid Thing #4: You Carry Credit Card Debt
We're lucky enough to live in a world with plenty of great products and so it's easy to turn to a credit card to buy them when you don't have the cash. Just because racking up unnecessary credit card debt is common these days doesn't make it a healthy practice. Carrying debt that you take time to pay off can amount in huge interest charges that don't take long to get into the range of thousands of dollars even if you always make your minimum payments. There's rarely a good excuse to carry debt on your cards, so if you do you it's time to put together a plan to stop right now.
If you really have a spending problem, you need to find ways to prevent yourself from using your credit cards. Enforcing a mandatory waiting period on your purchases or switching to a cash-only policy are two practical ways to start. Simply taping over the magnetic strip and writing "DON'T USE ME" can work as well as a reminder is often enough. However you choose to go about it, take the necessary measures to ensure you don't actually use your cards.
To eliminate the debt, you need to make a plan. Figure out how much you can pay every month and how long paying that amount will take you to become debt free. Debt can seem insurmountable at times because it can take years to pay off, but if you're patient and persistent it will be worth it in the end.
What stupid things have you done with your money and how did you fix them? If you've got advice to share, post it in the comments!