We all buy stupid things every now and then, but for some of us the impulse to buy junk is an irresistible force. The key to financial freedom and independence is to stop wasting money on foolish things so you can invest in more worthwhile endeavors like paying down debt or in funding your Roth IRA.
Here are 5 of the stupidest things you’re wasting money on.
You’ve scrimped and saved to buy that big ticket item like a television set and you’re finally headed through the checkout line when the clerk asks if you’d like the extended warranty. The added protection in case anything should happen would be nice, right? You figure it’s only a few dollars more so why not go for it. Wrong.
It turns out that many extended warranties expire at the exact same time as the manufacturer warranty. Even if they don’t, if you paid with a credit card you may already have added one additional year to the manufacturers warranty anyway.
If you actually use your gym membership, good for you. But if you’re like everyone else, cancel that membership immediately and save your money. While you may be optimistic about your odds of hitting the gym every day beginning on January 1st, statistics show that up to two thirds of gym memberships go unused. The odds say you’ll start strong and then fizzle out weeks later.
Unfortunately because of the way gyms operate, they lock you into 1 to 3 year contracts so even if you want to cancel early, you’ll still have to pay the entire contract off. So until you’ve established going to the gym as a daily routine for a few months, stick to a month to month contract to start.
While it’s always nice to enjoy the latest features and to be the first person to sit behind the wheel, new cars depreciate faster than anything else you own. According to edmunds.com, your car loses 10 percent of its value the first mile you drive it off the lot.
Instead of driving a shiny new car with that new car smell, buy a 3 year old used car in great condition. This way, the previous owner will take the big depreciation hit, not you. You’ll wind up saving money and if you get a low-mileage car you’ll still get all the warranty coverages as well.
Credit Card Interest
Don’t be seduced by credit cards with great reward programs. If something sounds too good to be true, it usually is. Browse the terms entirely to see if there are any yearly fees or if the interest rate is high.
If you end up charging too many things you can’t pay it off in time, you’ll make the stupid financial mistake of paying high interest fees. Only use your credit card when you can pay off the balance in one month. Otherwise, you’re just giving the credit card companies free money.
Life Insurance For Children
You want to be the best parent you can and if you believe those Gerber mailings, children’s life insurance is the hallmark of a loving parent. Besides, if your child makes it through adolescence you can always use the money for their college tuition, right
Unfortunately, the point of life insurance is to replace a lost income and most kids aren’t bringing in any money to family coffer, so you can feel fine about skipping the insurance.