10 Ways You’re Throwing Away Thousands of Dollars Each Year
Who doesn’t waste money? We all pay too much at times because we want something right now.
And on occasion, if we’re being honest with ourselves, we buy things we don’t really need. We might notice these spending mistakes and laugh about them, and (hopefully) learn from them going forward.
Sometimes, though, we aren’t completely aware of the ways in which we’re throwing away money. It’s time to crunch the numbers and answer the question: How much money do you throw away?
To help you identify potential problem areas (and therefore ways to save yourself money), here are ten common ways people waste money, including typical costs and what you can do instead.
1. Paying Credit Card Interest
Paying interest on consumer purchases is a bad — and expensive — habit. Every dollar of interest is a dollar less for retirement, traveling, education or for enjoying an extra meal out now and then.
How much money are you wasting on credit card interest? You can do the math for your own situation, but with today’s average interest rate of 14.95% on credit cards, carrying a balance of $4,000 means you’ll shell out about $600 annually just in interest charges.
Federal Reserve data shows consumer revolving credit is over $880 billion. It’s a safe bet that won’t be paid off next month. But paying your own credit card balances in full every month is exactly what you need to do to avoid interest charges.
Make a plan to pay down your credit card debt as quickly as you can, and then start a policy of paying in full every month. And if you can’t handle having the benefits of credit cards without getting into trouble, consider closing those accounts.
2. Leaving Electronics Plugged In
Leaving lights on when you’re not in a room is an obvious waste of money. But in addition to turning off your lights, you may want to unplug some devices as well. That’s because many of them use power even when they’re switched to “off.”
Calculate what these “energy vampires” cost you with Duke Energy’s online tool. Leaving your phone charger plugged in will only cost you an extra $2 per year, but a digital cable box left on (even when the TV is off) eats $23 in electricity each year. It all adds up, so you might want to turn off that idling computer and leave the printer unplugged until you actually need it.
3. Buying Premium Gasoline
“Unless your engine is knocking, buying higher octane gasoline is a waste of money,” says the Federal Trade Commission. They say cars designed to use regular-octane fuel (which is most of them) get no advantage at allfrom premium gas. Unless your owner’s manual recommends a higher-octane gasoline you’re throwing your money away buying anything other than regular.
If you use 800 gallons annually and pay 22 cents more per gallon for premium, you’re wasting $176 each year. Buy regular gas.
4. Paying Banking Fees
There’s no reason to pay for a checking account. Many banks offer free checking with reasonable requirements, like maintaining a balance of $500. You might also find a credit union near you to get free checking.
Consider the minimum balance for avoiding fees as your own “zero point” and count only what you have above that as available cash. Monthly fees of $12 add up to $144 per year. If all it takes to avoid paying that is permanently investing $500 of untouchable money in the account, it’s like getting a 29% return on your investment.
Yes, you know that smoking is expensive, and maybe you’ve even done the math: Two packs daily at $6.25 each means this habit costs you $4,562 per year.
But that’s not all. The American Cancer Society says the health-related cost to you is $35 per pack. That’s a price you’ll pay someday if you keep smoking. Put those two costs together and this habit could be the biggest waste of money on this list.
6. Ordering Appetizers
The average restaurant meal has 1,128 calories, which is well over half of what you need in a day, reported ABC News. Then there are the drinks most people order along with their meals. So you probably don’t need the added calories or cost of appetizers.
Alternately, if it’s the appetizers you really want, order your favorites and skip the dinner menu altogether. That can cut your costs and calorie-count.
7. Buying a Gym Membership
67% of people with gym memberships never use them, according to StatisticBrain.com. That’s right, for two thirds of customers, a gym membership is a total waste of money.
You might be one of the disciplined few who maximize their use of a gym membership, but why not do a trial run first? Find a gym where you can pay by the day. Then upgrade to a monthly or annual membership only when you’ve proven you’ll make it there at least twice weekly. Do the math too — it might still be cheaper to pay by the day if you go twice weekly.
8. Subscribing to Premium Cable Packages
With some cable customers reporting monthly bills of up to $265, it makes sense to look at all of your options for entertainment. For example, a subscription to Netflix is cheaper than having extra movie channels, and if you use the streaming option you can watch movies when you like.
Thinking about switching to streaming services? Consider all the potential costs before cutting the cord.
9. Paying for Extended Warranties
Almost a third of consumers buy extended warranties each year, according to a study reported on CardHub.com. These policies provide manufacturers with 50 to 60% profit margins, because appliances and electronics just don’t break down that often.
In other words, don’t buy this expensive insurance. Yes, your printer could break just after the regular warranty expires, and you’ll have to pay cash to replace it. If this happens, just remember all the money you saved by not buying extended warranties on the other items — the ones that didn’t break down.
Better yet, use a credit card that offers extended protection at no additional cost. Typically the good ones add a year to the manufacturer’s warranty period. CardHub.com says American Express is the best, but read the fine print of your credit card agreements to see whether you’re already covered.
10. Buying Low-Deductible Collision Coverage
Insurance is for big unexpected expenses that you can’t afford out-of-pocket. With that in mind, does it make sense to pay more for a low-deductible policy? Raising your deductible from $500 to $1,000 can save you over $100 annually on auto insurance, according to Insurance Panda.
If you want to save money and be totally prepared, put $1,000 in an emergency fund and raise that deductible. If you have an accident, you’ll have the money to cover your share. If not, you’ll keep your $1,000 and save money every year.
If your car is older, you may be wasting money paying for collision coverage at all. Check the blue book trade-in value and subtract your deductible — the resulting figure is the most you’re likely to get from your insurance company if the car is totaled. Is it worth insuring for that? If you’re paying $250 extra each year for a maximum payout of $1,500, you might be better off putting that money aside to buy your next car.
Your Turn: How many of these ways to waste money are you guilty of, and what are you going to do about it?