RichardContents
There are few people who would deny that money can buy you freedom.
The more passive income you have thanks to investments and savings, the less you need to worry about working for “the man” and the more options open up for you. More money, in general, is a good thing and I don’t think there are too many people who would disagree.
And yet if that’s the case, how come so many of us seem to hell-bent on wasting what money we have?
We seem to spend half our lives working hard to earn money to provide for the future, and the other half sabotaging ourselves by frittering it away on pointless things.
If you want to reach financial independence these self-sabotaging actions need to stop!
Here are 9 ways in which otherwise intelligent, mature individuals waste money. How many are you guilty of…?
New Cars
Ah, that new car smell – you can’t beat it, right?
That’s not to mention the level of service you can expect – and the respect and adoration of your friends – when you sign on the dotted line and become the proud owner of a brand new car.
Except that from a financial perspective buying a new car is ridiculously self-defeating.
For one, experts tell us that the average new car depreciates by 20% the moment you drive it off the car lot.
I don’t know about you but spending a five figure sum on a car only to lose a fifth of that money before I even get the car home sounds little a pretty bad deal to me.
Depreciation aside, let’s also not forget that most buyers of new cars also finance their new vehicle through the garage.
While it may seem to make that shiny new vehicle far more affordable you’ll end up paying over the odds in interest, meaning that you’ll pay even more for your already over-priced vehicle.
The smart money goes on buying second hand cars, where you’ll see lower depreciation and cheaper prices too.
Remember that 20% you lost on the value of your car? That’s like a 20% discount to the person who buys your car after you.
State-Of-The-Art Technology
I must admit that gadgets are one of my guilty pleasures. I love a new computer or smart phone more than most other things. Equally, I’m a naturally frugal person and these two parts of my personality constantly battle each other for supremacy. Fortunately my frugality normally wins.
As soon as the latest iPhone was announced recently I’ve lusted after it. Finally this morning I gave in and got a quote from my provider to see how much it would cost me to upgrade. The sums of money involved nearly knocked me off my feet!
Right now I’d have to increase my monthly contract to one nearly four times as much as the one I have at present to get the phone for “free” or pay hundreds of dollars for it upfront. Here’s the thing though; I can get the model before for free on pretty much any tariff. And that’s exactly what’ll happen to the new iPhone in a few months time.
Retailers charge a premium for new technology. These “first movers” pay over the odds for new cell phones and suchlike as soon as they’re launched, while the prices of these items steadily drop over time. The smart money is on waiting for some months. The gadget you’ve got your eye on will be just as good then, but it’ll cost you a faction of what it would right now.
It worries me, having investigated the costs involved, just how many of my friends are already proudly brandishing their new iPhones. More money than sense in my opinion...
Alcohol
At least here in the UK, drinking is a way of life for many people. I have a number of friends who spend much of their free time in pubs, clubs and bars. And the money they plough through doing so is enough to make you wince. These figures are inflated even higher on Saturday nights in many cities around the world, and even more so on special holidays like New Year.
Now I’m hardly a prude. I’m not tee-total and I’m not against alcohol. What I am against is wasting all your free time in the pub, spending all your hard-earned cash on something that will have left your system by the time you wake up the next morning.
In my opinion there are plenty of more cost-effective, rewarding and enjoyable ways to spend your free time. And your wallet will thank you too.
Designer Wardrobes
When I was at high school you either wore Reebok or Nike sneakers when playing sports. That or you got beaten up. I exaggerate slightly, but the honest truth of the matter is that designer shoes were expected at my school. I’m afraid to say I didn’t make waves; my poor parents were convinced to buy be those unnecessary, overpriced trainers so I could conform.
These days though, things are rather different. (For one I’m twice the size and don’t suffer fools quite so gladly; 😉
When you buy “designer” clothing you’re not just paying for the costs of manufacturing that item. After all no matter how posh the wool is, it doesn’t cost $200 to make a sweater. What does cost $200 are all those fancy commercials on the TV. All those glossy magazine ads. That’s where your money goes.
Branded Food Products
Buying branded food products is rather like buying designer clothing. You’re paying over the odds so that you can contribute to Pepsi’s or Lay’s marketing budget. And while there is comfort in branded products – you certainly know what you’re getting when you buy them (that’s the whole point) – you also need to accept that you’re paying over the odds.
More and more people are discovering the benefits of “shops own brands” – or even the brandless budget supermarkets like Lidl and Aldi – and saving an insane amount of money on their weekly grocery shop.
Takeways
Consider if you will two pizzas. One gets delivered hot to your door. The other tastes just as good but comes in a packet. This second pizza needs cooking at home but costs a third of the price of the other one. The only real difference? The time and “effort” it takes to bake a pizza in your own oven. And let’s be honest; pizza is the single easiest thing in the world to cook.
The same pattern emerges for other types of takeout – from Chinese to Indian food – it all costs multiples of what the same food, prepared at home, would cost you. Again, I have nothing against eating takeout once in a blue moon, just don’t become one of those people for whom it becomes a pattern. Don’t, for example, make Friday “takeout night”. Your budget won’t thank you.
Vacationing At Peak Times
From hotels to flights, vacations operate under strict rules of supply and demand. If you want to to go on vacation when everyone else does you’ll therefore pay a premium for the benefit. Try flying around Christmas or Thanksgiving and see just how much more expensive it is than at other times of the year.
It’s the same with school summer holidays. Most parents either take the family abroad in the first week of that long summer stretch, or cram it in at the very end. Those weeks that book-end the summer break will therefore normally be far more expensive to book.
Just as bad you’ll find that your plane, your hotel, the beach and every attraction you want to see will also be full to bursting point with all the other sheep that had the same idea.
So get creative. Be original. Break the mould. Think for yourself and see just how much money you can save by avoiding peak times when going on vacation.
Throwing Food Away
It has been estimated that we throw away almost half of all the food we buy.
Nowhere else in our lives would this seem acceptable. We wouldn’t buy a new car and then take it to the breakers yard a week later for disposal. Especially if we hadn’t driven it yet. We wouldn’t buy new clothes then give them straight to a thrift store without wearing them. Yet we do this with food all the time.
Get better at managing your kitchen. Make a meal plan. Record best before dates. Read my book. Do whatever it takes to get your gorcery shopping under control and see just how much money you can actually save each month as a result.
Because They Can
Of all the reasons for wasting money mentioned here, possibly the worst of all is simply “because I can”. These are people who want to appear wealthy and so they go out of their way to waste money and let other people see them doing it. The will, for example, refuse to use a perfectly good coupon at the supermarket because “I’m not poor”. They’ll decline their change at the till because they don’t need it.
Get over yourself. If not for you, then at least be a little more careful with your money then donate what you don’t need to charity. At least do something *positive* with the money rather than squandering it “just because”.
What ways do you see other people wasting money? Are you guilty of any of the above “sins”? Please leave your thoughts in the comments section below…
I feel ashamed, because I often do those stupid ways. But I will not do them anymore. Thanks for your explanation, it helps me.
Whew. You kind of had me scared there with the title. But luckily, I sweated for nothing. I may be guilty of some bad money handling, but none on your list! The only thing we even do is sometimes dine out. But only for birthdays and special occasions, so maybe 4-5 times per year.
One of the top ways I see money wasting where I live is with kid’s sports programs. A lot of parents will jump in and not just spend tons of money on high-end uniforms and gear, but volunteer to provide the team with other stuff too, like meals, snacks, rides, etc. Its a big competition to be seen as the “best, most involved mom/dad” on the team…and its so costly that most of them are charging it all to their credit cards every week. Pretty ugly when you see them selling their furniture and stuff later to be able to keep their electricity on and food in the pantry!