20 Ways to Waste Your Money

Whether a newbie or seasoned budgeter, nearly everyone has spending
holes -- leaks in your budget that drain money with you hardly
noticing.

These small drips can add up to big bucks. Once you find the holes
and plug them, you'll keep more money in your pocket. That spare
cash could be the ticket to finally being able to save, invest, or
break your cycle of living paycheck to paycheck.

Here are 20 common ways people waste money. See if any of these
sound familiar, and then look for ways to plug your own leaks.


How to waste your money

1. Buy new instead of used. Talk about a spending leak -- or,
rather, a gush. Cars lose most of their value in the first few
years, meaning thousands of dollars down the drain. However, recent
used models -- those that are less than five years old -- can be a
real value because you get a car that's still in fine working order
for a fraction of the new-car price. And you'll pay less in
collision insurance and taxes, too.

Cars aren't the only things worth buying used. Consider the savings
on pre-owned books, toys, exercise equipment and furniture. (Of
course, there are some things you're better off buying new,
including mattresses, laptops, linens, shoes and safety equipment,
such as car seats and bike helmets.)

2. Carry a credit-card balance. If you have a $1,000 balance on a
card charging 18%, you blow $180 every year on interest. That's
money you could certainly put to better use elsewhere. Get in the
habit of paying off your balance in full each month.

3. Buy on impulse. When you buy before you think, you don't give
yourself time to shop around for the best price. Resist the urge to
make an impulse purchase by giving yourself a cool-off period. Go
home and sleep on the decision. If you still want to make the
purchase a day or so later, do your comparison shopping, check your
budget and go for it. Oftentimes, though, I bet you'll decide you
don't need the item after all.

4. Pay to use an ATM. A buck or two here and there may not seem like
a big deal. But if you're frequenting ATMs outside your bank's
network, the surcharges can add up quickly. Put that money back in
your pocket by using ATMs in a surcharge-free network such as
Allpoint or Money Pass.

5. Dine out frequently. A habit of spending $10, $20, $30 per person
for dinner can be a huge drain on your wallet. Throw in a $6
sandwich for lunch and a $4 latte in the morning, and you've got
quite a leak. Learn to cook, pack your lunch and brew your coffee at
home and you could save a couple hundred bucks each month.

6. Let your money wallow. If you are stashing your savings in your
checking account or a traditional bank account, you are wasting
money. You could put it in a high-interest online savings account
and get paid to save. You can even get an interest-bearing checking
account through such reputable companies as Everbank, Charles
Schwab, E*Trade and ING Direct.

7. Pay an upfront fee for a mutual fund. Selecting no-load funds can
save you more than 5% in sales charges. Of course, no matter how
well a fund has done in the past, you can't be sure how it will
perform in the future. But if you pay a load, you'll begin the
performance derby in the hole to the tune of the load. See the
Kiplinger 25 for our favorite no-load funds.

8. Pay too much in taxes on investments. Are you investing in a
tax-sheltered 401(k) or Roth IRA? If you're not maxing out those
accounts before you invest in a taxable account, you're spending too
much.

9. Buy brand-name instead of generic. From groceries to clothing to
prescription drugs, you could save money by choosing the off-brand
over the fancy label. And in many cases, you won't sacrifice much in
quality. Clever advertising and fancy packaging don't make
brand-name products better than lesser-known brands (see Similar
Products, Different Prices).

10. Waste electricity. Of the total energy used to run home
electronics, 40% is consumed when the appliances are turned off.
Appliances with a clock or that operate by remote are typical
culprits. The obvious way to pull the plug on your energy vampires
is to do just that -- pull the plug. Or buy a device to do it for
you, such as a Smart Power Strip ($31 to $44 at www.smarthomeusa.
com, which will stop drawing electricity when the gadgets are turned
off and pay for itself within a few months.

11. Pay banking fees. Overdraw your checking account and you'll pay
$20 to $30 a pop, so it pays to keep tabs on your balance. Plus, are
you still paying for a checking account? Free deals abound -- but
make sure they're really free. For instance, will the bank charge a
fee if your balance drops below a certain level or if you download
your info into a personal-finance software program? That's not free.

12. Buy things you don't use. This sounds like a no-brainer to
avoid, but how many times have you seen something on sale and
thought you couldn't pass it up? Even if something is 50% off,
you're spending too much if you don't use it. href=Couponing, for
instance, can be a great way to save on your grocery bills. But if
you buy things you wouldn't have purchased in the first place simply
for the sake of using the coupon, you're wasting your money. The
same goes for buying in bulk. A bargain is no bargain if it sits
unused on your shelf or gets thrown away.

13. Own an extra car. Okay, so a car is a necessity for most people.
But face it -- cars are a huge drain, from their loan payments to
insurance fees to gas and maintenance costs. Own more than one car
and you'll double or triple those expenses. Ask yourself if that
second or third car is really necessary. Are you holding on to an
old car for sentimental reasons? Can you or your spouse carpool,
take public transportation or bike to work?

14. Ignore your local dollar store. Shopping at the dollar store can
be hit-and-miss, but it's not all kitsch or junk. If you know what
to buy, you can find some real bargains. For instance, my local
dollar store charges 50 cents for greeting cards versus the $3-plus
at a drug store or gift shop. (I have a big extended family so I
figure this saves me more than $100 per year.) You can also score a
deal on cleaning supplies, small kitchen tools, shampoos and soaps,
holiday decorations, gift wrap and balloon bouquets.

15. Keep unhealthy habits. Smoking is not only bad for your health,
it burns up your cash. A pack-a-day habit at $6 a pack costs $180 a
month and $2,190 a year. A junk-food or tanning-bed habit can be
costly as well. Not to mention the money you'll waste on medical
bills down the road.

16. Be complacent about insurance. Your bill arrives and you pay it
without a second thought. When was the last time you shopped around
to determine whether you're getting the best deal? Rates vary widely
from insurer to insurer and year to year. Reshopping your auto, home
or renters insurance might save you hundreds of dollars.

It also pays to evaluate your insurance needs. For instance, upping
your out-of-pocket deductible from $250 to $1,000 can save you 15%
or more on your car insurance. Consider using the same insurer for
your home and auto insurance -- you could snag up to 15% off for a
multiple-line policy. And make sure you're not paying for insurance
you don't need. For instance, you need life insurance only if
someone is financially dependent upon you (such as a child).

17. Give Government an interest-free loan. If you get a tax refund
each April, you let the government take too much money in taxes from
your paycheck all year long. Get that money back in your pocket --
and put it to work for you -- by adjusting your tax withholding.
With a little discipline, you can use that extra cash each month to
get started saving or pay down debt (or make ends meet to avoid
going into debt in the first place). You can file a new Form W-4
with your employer at any time.

18. Pay for something you can get for free. Dust off your library
card and check out books, music and movies for free (or dirt-cheap).
Don't pay to receive your credit report when you're allowed to get
it at no charge by law. Take advantage of kids-eat-free promotions.
And dial 1-800-FREE-411 for free directory assistance.

19. Don't use a flexible-spending account. Your employer may allow
you to set aside pretax dollars to pay for medical costs not covered
by insurance. You can use the money for expenses such as therapy,
contact lenses, insurance co-payments and over-the-counter drugs.
You may be able to do the same for child-care costs.

20. Pay for unnecessary services. How many cable channels can a
person watch? Do you really need all those extra features for your
cell phone? Are you getting your money's worth out of that gym
membership? Are you taking full advantage of your subscriptions
(such as Netflix, TiVo or magazines)? Take a look at what you're
paying for and what your family is actually using. Trim accordingly.