5 Ways You Could Be Wasting Money

When Hollywood producer Aaron Spelling died, he left only $800,000 of his half billion dollar fortune to daughter, Tori Spelling. Tori reportedly wasted most of that money and by 2016, she was being sued for failing to pay a $37,000 credit card bill. Most of us never have that much money at one time, but ordinary people waste money too. Here are a few ways that you could be wasting money.
1. Leaving money on the table
One of the main ways that people leave money on the table is failing to take advantage of employer matches in retirement plans (401Ks or similar). For instance, if your employer matches your contributions up to 3%, and you contribute nothing to the plan, you’re giving up cash that could be worth thousands of dollars over several years. If your money is tight, start contributing $10 every payday. As you get raises, add a little more.
Another way that people leave money on the table is by getting thousands of dollars in tax refunds every year. If you usually receive a $2,000 tax refund, at a minimum you’ve left 1% interest on the table because the money could have been in a savings account growing interest. If you have credit card, student loan, car or mortgage debt, you left even more money on the table because the money that you overpaid to the IRS could have been used to pay down debt, and you would have paid less interest. If you’re getting large tax refunds, you simply need to adjust your withholding so that you’re not overpaying your taxes.
Financial planner Chris Hogan says that interest earned is a reward, and interest paid is a penalty. Keep that in mind if you’re getting large tax refunds.
2. Lifestyle creep
This is the bad habit of allowing your expenses to increase as your salary increases. Or worse, once you pay off a car, student loan or credit card, you start recklessly spending the money that you were using on the payment. There’s nothing wrong with celebrating when you get a raise or when you pay off a big bill, just put a time and money limit on the celebration and be wise and deliberate with how you spend the extra money.
Another way to insure that your retirement savings keep pace with your income is to have a percentage of your income automatically deposited into your retirement plan. It’s a good idea to look at the percentage a couple of times a year and try to increase it, but even if you don’t increase the percentage, your contribution will increase every time you get a raise.
3. Making loans to friends and relatives
Nothing ruins relationships faster than money disputes. Here’s a simple way to handle requests for loans. Decide how much you can afford to cheerfully give the person and then give the person the money. You’ll never have to wonder why the person is going on a cruise when she still owes you $500! You won’t be angry when she comes to your home driving a new car. If you can afford to give her the money, give it to her and allow that transaction to be over. If you can’t afford to give her any money, politely decline her request for a loan and ask if there is another way that you can help her.
4. Being loyal to a bank
Perhaps you started banking at a particular institution because they were giving away tee-shirts and ball caps when you were in college. Are you still doing business with the first credit union that gave you a car loan? Start checking with other banks and credit unions to see if you can get better rates. You shouldn’t pay for checking, and you should be earning interest on your savings. Yes, it’s a hassle to change banks, but look at it this way, if you’re paying $10 a month now for a checking account, and it takes you two hours to switch to a credit union that doesn’t charge for checking, over the course of a year, you’ve saved $120 after spending two hours. Basically, you made $60 an hour.
5. Choosing to be ignorant
The internet is at your fingertips. You can investigate online banks, strategies for saving money and strategies for making your money grow. Many libraries and community colleges offer money management classes. Books and money management magazines are available in stores and online. If you don’t know how to manage money, you can learn, and you can learn for free.
Are there other ways that you were wasting money? Why did you decide to stop?

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