From Kiplinger
Almost all of us have holes in our budgets. And as with other kinds of leaks, you may have hardly noticed some of them. But those small drips can quickly add up to big bucks. The trick is to find the holes and plug them so you can keep more money in your pocket. That extra cash could be the ticket to finally being able to save, invest or break the cycle of living from paycheck to paycheck.
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Man burning $100 bill. (Detroit Free Press/MCT via Getty Images via Getty Images) |
We’ve updated our popular list of money-wasters for 2014 with even more tips and resources to help you cut unnecessary expenses from your budget. Consider these 30 common ways people waste money. If any of them sound familiar, start plugging your budget holes right away.
Buying at the Wrong Times
Most things are marked down at certain times each year. So planning your purchases to get big-ticket items when they’re at their lowest price can save you hundreds of dollars. For example, apparel is dramatically marked down at the end of each season and during sales events over long holiday weekends, such as Labor Day and Memorial Day. Furniture is discounted as much as 60% during clearance sales in January and July before new styles are released in the following months. Prices on TVs and computers are slashed on Black Friday — and the list goes on.
Timing your travel purchases right can also help you save big. Fares for domestic flights are at their lowest, on average, 54 days in advance, according to a study by CheapAir.com. For flights to Europe, you’ll get the lowest fares by booking 319 days in advance. And to get the best rate on a hotel room, you typically need to book a stay 14 to 21 days in advance.
Tossing Food Based on the Expiration Date
There’s a good chance you’re throwing away hundreds or even thousands of dollars’ worth of food each year before it has gone bad if you’re using sell-by and expiration dates as gauges for whether food is still edible. These dates are just manufacturers’ best guess of when food is at peak quality and are not related to safety, according to Emily M. Broad Leib, director of the Harvard Law School Food Law and Policy Clinic. Because of confusion over food date labeling, a family of four spends between $1,365 and $2,275 per year, on average, on food that is wasted.
Consumers can usually expect food to be safe for another five to seven days past the sell-by date printed on the package. The best test to tell if something is still good is to smell it or take a small bite. To learn more, see Confusing Packages Lead to Wasted Food, Money.
Paying Checking Account Fees
Yes, it is getting harder to find a free checking account with no strings attached. But there still are banks that offer accounts without fees or minimum-balance requirements — and some even pay interest. We like the Capital One 360 account and the online-only Ally Bank Interest Checking account these days. See Where to Get Free Checking for more details.
Community banks and credit unions, in particular, are more likely to offer free checking. You can search for a community bank near you at the Independent Community Bankers of America site and look for credit unions at www.culookup.com or www.asmarterchoice.org.
And sometimes free checking is a perk with brokerage accounts.
Always Opting for the Senior Discount
Many businesses offer discounts for older adults. But often these special rates aren’t that special and seniors would be better off taking advantage of other deals available to consumers of any age. For example, the Empire State Building, American Museum of Natural History, Metropolitan Museum of Art, Museum of Modern Art and Circle Line Cruises in New York City all offer special rates for seniors. But seniors will pay even less to visit all of those attractions by purchasing a New York CityPASS for $109 (versus $131 if purchased separately with senior rates). Not Adjusting the Thermostat
Don’t waste money heating or cooling an empty house or apartment. When you leave for the day, lower — or raise, depending on the season — your thermostat by several degrees. You can save 5% to 15% (about $180 a year) by adjusting your thermostat 10 degrees to 15 degrees for eight hours, according to the U.S. Department of Energy. A programmable thermostat makes setting your home’s temperature easy.
Shopping at the Wrong Store
Sure, it’s convenient to do all of your shopping at one place. But if you buy your food, medicine, toiletries and paper products at the same store, you’re probably spending more than you have to on many items in your shopping cart.
For example, you’ll get the best deal on cleaning supplies, personal grooming items, greeting cards, gift wrap and bags at dollar stores. You can get a gallon of regular milk for 50 cents to 60 cents less at the supermarket than at a warehouse club, and higher-end grocers, such as Whole Foods and Trader Joe’s, tend to have the lowest prices on organic, almond, soy and other specialty milks. You’ll save nearly 70% per unit on batteries if you buy them in bulk at a warehouse club, such as BJ’s Wholesale Club, Costco or Sam’s Club, rather than the drugstore. See Best Buys at Warehouse Clubs, Grocers and Big-Box Stores, What Not to Buy at Drugstores and What to Buy at Dollar Stores.
Paying Foreign Transaction Fees
If you’re traveling abroad, the fees you pay when using credit cards and getting foreign currency can add up quickly. However, there are several ways to trim costs. For example, credit cards tend to offer better currency exchange rates than exchange bureaus. And be sure you use a card that doesn’t levy a foreign transaction fee, which can cost 1% to 3% of every purchase you make on vacation.
If you need cash, wait until you arrive at your destination to get foreign currency. Then go to a local ATM — it is the cheapest way to get currency, often at a wholesale rate. For more ways to avoid or limit conversion fees, see Save Money on Your Money When Traveling Abroad.
Carrying a Balance
Debt is a shackle that holds you back. For instance, if you have a $1,000 balance on a credit card that charges an 18% rate, you blow $180 every year on interest. Carrying a balance can also cost you down the line in the form of a lower credit score that will trigger higher interest rates on your loans. That’s because your score is based, in part, on your credit utilization ratio — how much of your available credit you’ve used. It’s wise to keep your total ratio and the ratio for each credit line below 30% at all times. See How to Pay Off Your Credit Card Debt in a Year for steps to wipe out your balances quickly.
Buying Brand-Name Instead of Generic
From groceries to clothing to prescription drugs, you can save money by choosing an off-brand over a fancy label. And in many cases, you won’t sacrifice much in quality. Clever advertising and fancy packaging don’t make brand-name products better than lesser-known brands.
For example, generic drugs can cost as much as 80% less than their brand-name alternatives. The lower list price makes a huge difference when you’re in your insurance plan’s deductible period and paying the full price out of your pocket. The coinsurance rates are usually lower, too — often 10% to 15% of the cost for generics, 25% for preferred brand-name drugs, and 50% for nonpreferred brand-name drugs.
Paying Late Fees and Missing Deadlines
If you pay a stack of bills every month, it’s easy to overlook one or two every now and then. But if you miss a credit card payment by even one day, you will pay a late fee of $25 ($35 if it’s the second time in six months). Your credit score could also take a hit if you pay your bill late. Your history of on-time payments accounts for 35% of your FICO credit score — more weight than any other factor. If you pay the bill within 30 days of the due date, the lender might not report the delay to the credit bureaus. But if you let the bill go longer than that, the card issuer is more likely to inform the credit agencies and turn over your case to its collections department.
If you have a good payment record – especially if you have paid on time for an entire year — call your card issuer and ask that the late fee be waived. To avoid missing deadlines, set up payment alerts to be delivered by e-mail or a text message from your credit card company.
Buying Insurance You Don’t Need
You only need life insurance if someone, such as a child, is financially dependent on you. That means most singles, seniors and kids don’t need a policy.
Other policies you can probably do without include credit-card insurance (better to use the premium to pay down your debt in the first place), rental-car insurance (most auto policies and credit cards carry some coverage) and mortgage life insurance (a regular term-life insurance policy is more comprehensive). See 5 Insurance Policies You Don’t Need for coverage that isn’t worth buying.
Overspending on Gas and Oil
There’s no need to spring for premium fuel if the auto manufacturer says regular is just fine.
If your car can use flex fuel — a blend of 85% ethanol and 15% gasoline — it still might be more cost effective to stick with regular gasoline. Even though the average price of flex fuel currently is less per gallon than gas, vehicles get fewer miles per gallon with it because ethanol contains less energy. To lower your gas costs even more, consider one of our picks for the 14 Most Fuel-Efficient Cars, 2014.
And are you still paying for an oil change every 3,000 miles? Many models nowadays can last 5,000 to 7,000 miles between changes, and some even have built-in sensors to tell you when it’s time to change the oil. Check your owner’s manual to find the best time for your car’s routine maintenance.
Keeping Unhealthy Habits
Smoking costs a lot more than what you pay for a pack of cigarettes. The average price per pack of cigarettes in the U.S. is about $6, but the health-related costs per pack are $35, according to the American Cancer Society. Over a year, those added costs can amount to $12,775 for a pack-a-day smoker.
Once you kick your bad habits, you’ll save even more if you institute these six healthy habits.
Paying Too Much for a Mutual Fund
Mutual fund fees can weigh down performance. The average mutual fund expense ratio is 1.08%. If your fund isn’t beating its benchmark, you’re better off buying a low-cost index fund or exchange-traded fund that matches the benchmark. For example, you’ll pay an annual expense ratio of just 0.05% to invest in the Vanguard Total Stock Market ETF (VTI), which tracks the CRSP US Total Market Index. On a $50,000 investment, that’s a savings of more than $500 per year over the average managed fund.
It is possible to outperform a benchmark with a well-managed fund (although it’s not guaranteed). Stick with no-load funds, which can save you more than 5% in sales charges. See our favorite no-load mutual funds in the Kiplinger 25. And watch out for other nickel-and-diming, including low-balance fees or charges for paper statements.
Passing up Tax Breaks
There’s a good chance you’re among the millions of taxpayers who overpay taxes each year by overlooking deductions to which you’re entitled. Failing to maintain a file of tax receipts throughout the year, rushing to file your taxes at the last minute, and fearing an IRS audit are all reasons that may keep you from claiming perfectly valid deductions. See if you’ve missed one of these commonly overlooked tax breaks. If you have, by all means, claim it! That money is yours. Just be sure you have the documentation to prove it.
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