Money is not the most important thing, my dad used to say. But as I grew up, I realised that it is very close in importance to air (LOL).
You need money 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.
Silly 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 almost impossible, 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—which is very important—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'll print well for about six months to a year before you start to run into clogged ink heads and other issues. ?
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.
Overall, if you think your purchasing decisions through before you make them you shouldn't have too hard of a time realizing when your efforts to cut costs will actually hurt you in the long run.
Silly Thing #2: You Don’t Put Money in Savings Because You Think You Can't Afford It
There are numerous benefits to saving even a small portion of your paycheck that you may not realize—benefits that save you even more money in the long run.
While this probably goes without saying, saving money in a monthly savings plan means you have a reserve of cash at your disposal. It's worth mentioning nonetheless because you may not realize 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.
Contributing to your retirement pot is another great way to save, but many people avoid this because
- retirement seems a long way off, and
- they want to build an emergency fund beforehand, so they’re ready in case of a problem.
Just change your way of thinking. As ace financial advisor David Bach says, ‘Pay yourself first’, and then spend the rest. Basically, put away money each month into your retirement pot, and then you won’t feel guilty about spending money on life’s little things.
He also say, ‘Make it automatic’, which means you can setup a bank standing instruction, or credit card instruction, for the money to go into your retirement pot before you ever see it in your account. This would mean that your savings pot will grow automatically without much effort on your part.
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 times there is a less-costly alternative.
When it comes to your bills, there are two things you can do to lower them. The first simply involves making a few phone calls each year to negotiate your rates. If you pay your bills on time and you've been loyal to the company for the last year or more, it's not hard to get some sort of discount.
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. This even works at big-ticket retailers. You can negotiate prices on televisions, for example, and often get a lower price and/or free accessories (like those overpriced cables). Cars and home prices are also commonly negotiable.
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.
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.
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!