4/23/2012 3:11 PM ET|
7 ways you're wasting your money
A mortgage or insurance may be inevitable, but overpaying for it isn't. Here are easy ways to cut common costs in your life so you can get on with enjoying it more.
Wasting money doesn't necessarily mean you're bad with money. You don't have to be a shopaholic or a frivolous squanderer to spend more money than you should. Often, there are leaks in our budgets that could easily be fixed if we knew what to look for. And some of these big money mistakes can be eliminated without even making a significant change to your lifestyle.
So before you vow never to eat out or take a vacation again, try to plug these money leaks that you may not have even noticed.
1. Investing in expensive mutual funds. Unlike utility companies, mutual funds don't send you a monthly statement showing how much of your money they're taking. Even though the cost is hard to find, mutual funds that charge high fees are eating away at your returns. High fees, which can include trading costs and fund management fees, can go unnoticed because investors don't get a bill. Instead, the fees are simply deducted from your account, reducing the overall return on your investments.
Instead of investing in expensive mutual funds, look for funds that charge less than 0.50% in fees annually. You can find index funds that charge less than 0.1%. And if you need some help with your investing, rather than paying 1% or more for someone to manage your investments, use a service like Betterment. This online service makes investing a snap, and it recently lowered its fees.
2. Ignoring your credit score. Everyone knows just how important a good credit score is, but most people probably don't think of it in terms of wasting dollars. Your credit score affects everything from your interest rates to auto insurance premiums. It can even affect your chances of getting a job, as some employers use credit history as part of their hiring criteria. It's simple: The higher your credit score, the more money you are going to have in your pocket.
For example, while you may be able to qualify for a mortgage with a credit score of 620, you won't get the best rates. To qualify for the top rates, you need a score of around 760 or higher. And the difference between a score of 620 and 760 can be more than a full percentage point in the interest rate. Over the life of a mortgage, the better score can save you tens of thousands of dollars in interest. (Do you know your credit score? Take this MSN Money quiz and get a free estimate.)
3. Failing to lower your rates. The only good thing about high interest rates is that they can be lowered. You can lower you rate on just about anything, including credit cards, mortgages, car loans and student loans. There are several ways to get lower rates, but the easiest one is simply to ask. Particularly with credit cards, just requesting a lower rate has proven to be very effective. (Find credit cards with better rates.)
With mortgages, car loans and student loans, refinancing is also an option if rates are lower. And keep in mind that even if prevailing rates have not changed since you took out your loan, you still might be able to get a lower rate if your credit score has improved. With credit cards, consider taking advantage of 0% balance transfer options. There are plenty of opportunities to lower your rates, and not doing so is just throwing money away.
4. Overpaying for car insurance. Auto insurance is one of those necessary evils in life. We all hate to pay for it, but we have to have it. Fortunately, there are many ways to reduce car insurance premiums with just a little effort. For example, you can raise your deductibles or even cancel certain types of coverage for older vehicles. Auto insurance companies offer numerous discounts, and comparing insurance online takes just minutes. (Compare insurance rates on thousands of makes and models.)
5. Buying brand-name products. It's easy to get caught up in buying brand names. After all, these big companies force-feed us with their captivating slogans on a daily basis. Looking past the pretty labels and catchy commercials, however, will save you money. Many off brands are made by brand-name companies, so the product is basically the same, but with a better price. This is especially true for prescriptions and over-the-counter medications.
6. Buying too much life insurance. Like car insurance, life insurance is a necessary expense if others are relying on your income. The key is to buy only the life insurance you need at the cheapest available price. For many, this means buying term life insurance, not a universal or whole life policy that combines life insurance with investment products. And as your life circumstances change, consider whether you can reduce the amount of insurance you need, or even eliminate it completely. (Take this quiz to find out how much life insurance you need.)
7. Failing to get the company 401k match. Getting the most out of your 401k is essential to your retirement planning. Many companies will match a portion of an employee's contributions to a 401k. But to take full advantage of a company match, you must contribute a certain amount, which varies by plan. By not making the most of an employer's matching contributions, many employees lose what would otherwise be free money. So take advantage of your 401k by contributing at least the amount your employer will match. (Will your 401k provide enough for retirement? Find out with MSN Money's calculator.)
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My life has gone from living in a tent, wondering where my next meal was coming from. To having a very scure middle income life style. I never once faulted the next guy for what he had nor blame him for what I did not have. The whole lot of you are pitiful and litteraly make me sick...
1) Doctor's Visits: Unless you're in critical condition, or have a rare disorder, try to get stuff over the counter. If at all possible, you should also try to renew prescriptions over the phone. The moment you walk into a doctor's office they're charging you money, just for a lame 15 minute examination, where they convince you you're a hypochondriac. If you don't need medicine, you'd be much better off not hanging around numerous people coughing.
2) Coffee: Going to Starbucks everyday, over the course of a month, drills a hole in your account, and expands your waistline. Let's say you spend $2.50 each time (I don't get Starbucks coffee so I have no concept). Each month, that adds up to $75 a month, for $900 a year.
3) Subscriptions: If you're the average person, you probably have ten or twenty of these things floating around, from internet subscriptions to cell phones.
4)Smartphones: On that note, I don't even own a smartphone. With a laptop, you can use whatever wireless is available, which if we cut off 4G and improved our wireless, would actually be pretty good. With 4G, apparently you're charged by data, which gets used up with just one video (they did a test on it awhile back). A normal cellphone is fine, thank you very much. And I've had no costs just from buying and watching DVDs. Why do I need to see online video clips anyway? For that matter, there are plenty of streaming sites like Youtube that let me see some movies for free.
5) Housing Repairs By "Professionals": If you get a roof repaired by someone, it should be fixed. Unfortunately, unlike many of the others, this is difficult to avoid, since you'd need to live in an area where reputable people actually exist. If not, spending your money on them is a losing proposition, since that roof leak will not get fixed, period.
6) Car Repairs: Unlike the writer who seems to live in a bubble where nothing bad happens, and all you need to worry about is your 401k, things fail. And this is a biggie. A car repair can wipe out thousands of dollars in about a minute, and there isn't much you can do.
7) Nickel and Dime Expenses: Insurance on videos? Skip it. Use amazon instead of paying shipping and handling. Stuff like that. These little things can add up, both in time, and in what they collectively do to your bank account.
The 7 in the article were obviously written by some braindead socialite with no concept of the average homeowner.
I've run the numbers myself and fully believe term insurance is the way to go. For a whole-life policy, you are paying to the tune of 4x to 8x that of a term policy and although you don't "use it or lose it", your accrual of value is horrendous. Heck, most of the first three years' payments go straight to the agent's commission. Factor in the opportunity cost of that additional money, and you'd be way ahead in several other investment vehicles. "Insurance" is insurance, not an investment vehicle - and it's pretty obvious why when you see what it's worth after however-many-years.
- Investing is about net return so paying attention to all fees is important and mutual fund math is tricky to understand. invest in your education and look for advisors want to help you not do it for you.
- Lowering rates can extend credit terms or support additional consumption. If you save $50 per month...use that money strategically not just spend it.
- Debt-make a decision to get out of all credit card debt in maximum of 3 years even if this requires negotiation of rates or balances.
- Price is not the only consideration in car insurance. Look at the coverage amounts. most cheap policies reduce medical coverage to state minimums and you are responsible for any costs over this amount.
- Life insurance- term is attractive as long as you know the exact date you are going to die. Less than 1% of term policies ever pay a death benefit so this is real cash cow for insurance companies. At very least get convertible term. Educate yourself on how policies work.
- Vesting, penalties, limited investment choices etc. make even employer matched 401k contributions suspect. best investment always YOU and finding your passion, purpose and figuring out how you can serve others and make money from this.
Insurance.. the death of America.For most people insurance should be viewed as protection against getting wiped out financially in a catastrophic event. You don't want to lose everything because you get cancer or cause a car accident or your dog bites somebody.
1. Never buy pop corn and candy at the movie theater.
2. Never buy whole or universal life insurance. Buy term life at a young age.
There are many many more. Have a good idea.
recommmending NOT to buy whole life or universal life insurance is horrible advice!
I am a 47 year old male, who bought a 10 year term insurance policy 9 years & 11 months ago. A few years ago, I was diagnosed w/a condition that has made it difficult to locate ANY type of life insurance at standard rates. I make a nice living, have a wife & 3 kids ages 6-12, and obviously still need insurance coverage. Now, I have a choice...accept the renewal on the 10 year term (won't be able to afford it for very many years, as it continues increasing--like all term policies), go without (which is irresponsible based on my families' needs), or purchase non-standard rated PERMANENT insurance (whole life or universal w/guarantees, that is now more expensive at 47 than it would have been at 37).
My advice..find a reputable agent, purchase all the term you need to protect your family, and supplement it with as much permanent insurance as you can afford, because face it...your need for life insurance is never going to go completely away---LIKE SOME OF THESE FINANCIAL GURUS CLAIM!
Term is what you buy in your thirties to get you through your earning span. 5 to 10 times our annual income to replace what your earnings would have brought to your family. during that term you should be also saving and investing wisely so that when the term expires, you don't need the insurance. That's the goal anyway.
your need for life insurance is never going to go completely away---
I'm your age and my need for life insurance went away 15 years ago. Everyone's situation is different; the key is to know YOUR needs and plan accordingly.
I hope your health problem is treatable and things work out for you.
Two different times, with two different prescriptions, I had seizures after switching to generics.
That's too bad but the problem isn't just with generics, so avoiding them entirely isn't the answer. Even similar, common, brand name drugs cause different reactions in different people.
Eating out every day and night
using a phone as a toy
paying for sorry cable or satelitte with 900 channels and zero on and watching commercials more than programming. Paying for a shop at home channel...wow are you stupid or what?
Getting less than 1% to risk your savings at the bank. Buy a lock box at home.
Getting a 30 year mortgage, get a 15 year or pay extra on equity.
Buying new cars.................Ghee 60,000 for new Caddy? Get a low mileage used one.
Not shopping a Dollar Tree
I use to waste time for TV. Now I watch it and I take surveys on my laptop. Make easy $200 every month which pays my cable bill. I wasn't making much at the beginning because of sweepstake rewards that many of them offer (waste of time), but since I found surveyjet it all took off for me. Now I enjoy TV and I make some cash doing so. Everyone should do it.
Brewing coffee at home saves me easily $400 a year.
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