Frugality turns costly
Sometimes you just know you’re paying too much. Buying an expensive latte is a classic example. However, there are other times you could be overspending even when you think you’re being smart with your money. Here’s a look at 10 ways you may be overspending without even realizing it:
Forgetting about autopay services
Companies love to make purchases convenient, and nothing is more convenient than automatic billing plans. “Things that get put on autopay are quite literally on autopilot,” says Jared Snider, senior wealth advisor with Exencial Wealth Advisors in Oklahoma City. And autopilot means you are no longer in control. With autopay, magazines you no longer read get automatically renewed, and the motor club you joined for the free trial could bill for months before you remember you signed up. Many of these fees are small amounts, but they can quickly add up. Set reminders to review these services on a regular basis and purge those that are no longer useful or relevant.
Being loyal to your insurance company
Insurance often gets set up on an autopay system, but this could be a mistake. “Set it and forget it doesn’t work really well for insurance,” Snider says. He recommends shopping for new coverage every two to four years. Many people don’t ever look for cheaper coverage. InsuranceQuotes.com found 39 percent of the adults it surveyed earlier this year said they had never shopped for better auto insurance rates. That may mean they are paying more than necessary. “It’s not uncommon for shoppers to cut their rates by $100 to $200 a year after spending 15 or 30 minutes getting free quotes,” says Laura Adams, senior insurance analyst for insuranceQuotes.com. “[That’s] not a bad return on the time invested.”
Overinsuring yourself and your property
People also overspend on insurance by buying too much of it or purchasing the wrong kind. “The insurance industry sells hard on fear,” says Dan Cunningham, a registered investment advisor with One Day In July, a financial advisory firm serving Vermont and adjacent states. While being uninsured isn’t smart, carefully considering your coverage levels and product choices can save money. “Dropping whole life insurance in favor of term life will save a lot on premiums,” Cunningham says. Some forms of insurance, such as those for phones and electronic devices, may be completely unnecessary. Rather than paying for insurance, consumers may be better off putting the money they would pay for premiums into a savings account instead.
Making unnecessary updates to your home
Buying and renovating a house can be exciting, but it’s also a time ripe for overspending. “Some real estate investors look to replace dated features such as hardwood flooring without considering if the update would take away from the character and value of the home,” says Allen Shayanfekr, CEO of real estate investing platform Sharestates. The same advice can go for homeowners planning updates. It can be tempting to pull out old cupboards and woodwork, but remember older homes were often built with quality materials that are no longer used today. “Replacing features can be costly and may not always be necessary,” Shayanfekr says. He recommends people consider restoration before replacement.
Buying the cheapest option available
Another way people may overspend is by making purchase decisions based on price alone. “Buying something because it is cheaper, with no regard to its quality, will end up costing more in repairs and replacements down the line,” Shayanfekr says. Whether it’s a major home repair or a new pair of jeans, consider the expected lifespan of the product along with the cost to replace it once it has worn out. Buying a more expensive item may be a better deal if it lasts twice as long and does a better job than the cheaper model.
Tossing the coupons that come in the mail
In many parts of the country, people receive mailers of coupons that may offer discounts on small-ticket items such as car washes and dry cleaning as well as more expensive services such as asphalt sealing and window replacements. While you might not need those coupons immediately, don’t throw them in the trash. Even if they are older, you might be able to leverage them for some savings. “You can often reactivate that previous offer if you just [mention] it,” says Gary Mulloy, CEO of coupon service Money Mailer.
Ignoring new technology and services
If you insist on doing things the old way, you may be significantly overspending for a variety of products and services. Cable is one example. “Some of the programming that, up until recently, you had to have a platinum package for, you can now find without paying an arm and a leg,” Snider says. However, to get a deal, you need to be willing to adapt to new technology such as online streaming services. Mobile apps are another way to find coupons and deals. Mulloy notes the Money Mailer app can search any geographic location, which allows users to see if there are better discounts outside their immediate area.
Missing out on workplace or membership perks
You could be paying for services you could get for free through workplace or membership programs. For instance, some workplaces offer complimentary counseling services, financial planning and even gym memberships to employees. Meanwhile, alumni associations, auto clubs and other organizations, such as the AARP, may negotiate discounts for their members. These could save you money on dining, travel, phone service and more. Some organizations may also have reciprocal benefits. That means, for example, you could have a membership with your local museum and get free admittance to other institutions as a result.
Waiting too long to make a purchase
Mulloy says one of the biggest mistakes people make is putting off a needed purchase. “Most people are thinking about a garage door replacement before it needs to be replaced,” he says. However, they don’t actually get around to shopping for a new one until the old one breaks. As a result, they may spend more than necessary in their rush to make a purchase. To avoid overspending in this way, create a list of expected updates and repairs. Then set money aside in savings and begin looking for sales, coupons or other discounts.
Assuming the price is non-negotiable
Many people overspend because they don’t realize a discount is available. While businesses hope customers will pay sticker price, many are willing to bend. Credit card issuers may waive annual fees, phone and internet companies may drop monthly costs and salespeople may be able to slash the price on floor models. Getting a deal may be as easy as asking for a discount. However, in some cases, you may need to show you are willing to walk away from a purchase or cancel a service before a reduced price is offered.
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