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Slide Show | June 2012

25 MORE Ways to Waste Your Money

By Erin Burt

Follow @Kiplinger

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Psst. Your finances are leaking.

Don’t be embarrassed! It happens to everyone. We all have holes in our budgets that waste money, often without our knowledge. Last year, we identified 25 common money-wasters, and our list proved so popular that we’re back with a fresh collection of even more ideas to help you locate and plug spending leaks.

Some financial leaks are gushers; others are small drips that can add up to big bucks over time. Either way, stop pouring your hard-earned cash down the drain and put it to better use. For instance, you could use the money you save to pay down debt, bolster your savings or pad your budget to break your dependence on credit cards.

25 MORE Ways to Waste Your Money

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25 MORE Ways to Waste Your Money

1. Pay Too Much for a Mutual Fund

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Mutual fund fees can weigh down performance. The average diversified U.S. stock fund charges about 1.3% a year in expenses. If your fund isn’t beating its benchmark, you’re better off buying a low-cost index fund or exchange-traded fund that matches the benchmark. For example, you'll pay an annual expense ratio of just 0.06% to invest in the Vanguard Total Stock Market ETF (VTI), which tracks Standard & Poor's 500-stock index. On a $50,000 investment, that's a savings of $620 per year over the average managed fund.

It is possible to outperform a benchmark with a well-managed fund (although it’s not guaranteed). Stick with no-load funds, which can save you more than 5% in sales charges. (See our favorite no-load mutual funds in the Kiplinger 25.) And watch out for other nickel-and-diming, including low-balance fees or charges for paper statements.

1. Pay Too Much for a Mutual Fund

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25 MORE Ways to Waste Your Money

2. Mismanage Your Credit

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You already know that debt is one of the biggest money-wasters of all. So if you carry a balance on your credit card, stop it!

But even balance-conscious credit users can waste money on their cards. Make sure your credit card company pays you for choosing its plastic.. Get a rewards credit card, use it to pay for everyday items, pay your balance in full each month, then sit back and enjoy perks such as cash back, discount gas, frequent-flier miles and more.

If your rewards credit card charges an annual fee, make sure your rewards outweigh your cost. Many don’t, especially when you consider that there are plenty of no-fee cards available. Shop for the best credit card deal for you.

2. Mismanage Your Credit

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25 MORE Ways to Waste Your Money

3. Coupons for the Sake of Couponing

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It’s tempting to go hog-wild clipping coupons. But remember that coupons only save you money if you use them on items you were going to buy anyway. If you buy something you didn’t need, you didn’t save money—you bought something extra. Most coupons are for brand-name items, so be sure to compare prices with the generic brand. Learn how to save money on groceries without coupons.

3. Coupons for the Sake of Couponing

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25 MORE Ways to Waste Your Money

4. Shop without a Plan

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Before you go shopping—for anything—conduct an inventory of what you have and what you need. For groceries, map out the week’s meals in advance and look through your cupboards to see what ingredients you don’t have. For clothing, comb through your closets to identify holes in your wardrobe so you don’t wind up with yet another blouse you don’t need—or one that won’t match anything else you own.

For investments, take a look at your portfolio to see what areas may be over- or under-represented before you jump on the latest hot stock tip. (Try Morningstar's free portfolio x-ray.) When buying insurance, do your homework and decide what your actual needs are instead of waiting for a salesperson to educate you. It pays to shop with a plan.

4. Shop without a Plan

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25 MORE Ways to Waste Your Money

5. Buy an Entire CD

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There are a few albums that grab you from the opening note to the closing chord. Most of us, however, end up listening to a few favorite tracks and ignoring the rest—yet we paid for every track. Instead, buy the songs that you really want individually. Downloads typically cost between 99 cents and $1.29 per song at Amazon.com, iTunes.com and other digital music stores. And if really want an entire album, you can often download the entire set of songs for less than the price of a traditional CD.

Also, you can listen to music without purchasing it via free (and legal) online music streaming services, such as Pandora.com or Spotify.com.

5. Buy an Entire CD

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25 MORE Ways to Waste Your Money

6. Guzzle Gas

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Driving a car that gets good gas mileage can save you hundreds of dollars a year on fuel. (Find out which cars are cheapest to own.)

It’s not just the car you drive that matters. It’s how you drive. On the highway, you’ll save gas money if you slow down and switch on the cruise control. Smoother rides with less pedal pushing can improve your fuel economy by about 35%, according to Edmunds.com. On the other hand, high speeds, quick starts and squealing stops burn more gas and money. Make sure your tires are properly inflated and your trunk is clear of extra weight that can slow you down. Even better: Carpool or take public transit to work to cut your fuel bill more.

6. Guzzle Gas

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25 MORE Ways to Waste Your Money

7. Refuse to Buy in Bulk

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We’re not saying you should buy that five-gallon jar of pickle relish. (In fact, please don’t.) But for family essentials you know you’ll use, buying in bulk can save you money overall because the price per unit is often lower than if you buy items individually.

Watch for sales, and stock up on nonfood basics that can’t spoil, such as toilet paper, paper towels, aluminum foil and zip-top bags. It’s also smart to keep a supply of family food staples on hand, including canned goods, bottled sauces, rice, oil, flour and sugar. They won’t go bad if you don’t eat them right away, and they could eliminate the need for costlier last-minute runs to the grocery store at dinner time.

7. Refuse to Buy in Bulk

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25 MORE Ways to Waste Your Money

8. Buy a Home for the Wrong Reasons

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Don’t ever buy a home because the “experts” say now is a good time. Or because all of your friends or family seem to be doing it. And for heavens sake, never fall for the line: “Buying a home is an investment.” Just ask the millions of Americans who have recently lost money on their home sales, are upside down on their mortgages or are facing foreclosure. A house is a place to live.

Still interested in buying? Make sure your personal finances are ready. You’ll need a sizable down payment and 3% to 6% of the purchase price for closing costs. Then be sure your budget can cover the monthly mortgage payment, property taxes, utility bills and homeowner’s insurance premiums. Plus, you’ll need to have enough money saved to cover the leakiest (and most unpredictable) part of a homeowner’s budget: maintenance and repairs. Take our quiz to see if you’re ready to buy a home.

8. Buy a Home for the Wrong Reasons

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25 MORE Ways to Waste Your Money

9. Break the Rules

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Are you letting traffic fines broadside your budget? Speeding tickets cost $150 on average and can result in higher auto insurance premiums. Parking tickets typically run anywhere from $10 to $115, depending on your location and particular offense. Pay attention to the laws, and stick to them.

That goes for other areas of your finances, too. Following the rules of your health insurance, apartment and car lease, bank and credit cards, and IRA and 401(k) accounts can help you avoid costly surprises.

9. Break the Rules

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25 MORE Ways to Waste Your Money

10. Don't Bundle Up

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If you’re paying for services a la carte, you may be paying too much. Instead, check out the prices for a package deal. For instance, bundling your phone, Internet and TV service with the same provider could save you money—plus you’ll only have one bill to pay and one company to call if you have a technical or billing issue.

When shopping for auto insurance, check with the company that provides your renter’s or homeowner’sinsurance—you could snag up to 15% off for a multiple-line policy. And for vacations, try pricing your flight, hotel and/or rental car together.

10. Don't Bundle Up

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25 MORE Ways to Waste Your Money

11. Pass Up a Tax Break

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Are you claiming all the tax deductions you’re entitled to? Don’t pay Uncle Sam a dime more than you owe.

Failing to maintain a file of tax receipts throughout the year, rushing to file your taxes at the last minute, and fearing an IRS audit are all reasons that may keep you from claiming perfectly valid deductions. If you earn a tax break, by all means, claim it! That money is yours. Just be sure you have the documentation to prove it.

11. Pass Up a Tax Break

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25 MORE Ways to Waste Your Money

12. Ignore Your Home's Energy Leaks

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Mom always said you lose a large amount of your body heat through your head. Your home is no different. You could save hundreds of dollars on your heating and cooling bills each year with a well-insulated attic. (Find out how much insulation you need.) Expect to spend about 82 cents per square foot upfront, and you will quickly recoup your costs.

While you’re at it, caulk your drafty windows and weatherstrip the doors around your home to save even more money on those energy bills.

12. Ignore Your Home's Energy Leaks

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25 MORE Ways to Waste Your Money

13. Go Deep into Student-Loan Debt for a Low-Paying Career

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Your education is probably your most important financial investment—make sure it pays off. Racking up $200,000 in student loans for a career that pays peanuts will take ages to pay off, creating a leak in your finances for years (and years) to come. For a reality check, the Student Loan Advisor calculator at FinAid.org will reveal the amount you can afford to pay for your monthly loan payment based on a future salary.

Look for colleges that deliver a good value: a high-quality education at an affordable price. (See our picks for best values in public and private colleges.) You might also consider starting at a community college and transferring to a four-year school. See 7 Strategies to Avoid the Student-Debt Trap for more advice.

13. Go Deep into Student-Loan Debt for a Low-Paying Career

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25 MORE Ways to Waste Your Money

14. Pass Up Commuity Resources

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Do you or your children want to pursue a new hobby or interest? Joining a team or taking a class through a private business can be pricey. Instead, you could save hundreds of dollars by taking a dance class, learning to swim or joining a sports league through your community recreation department or local community college.

Public libraries and parks are also great resources for stretching your mind and your legs. Community senior centers may offer group classes and outings, provide fitness equipment and negotiate discounts on entertainment in your neighborhood.

14. Pass Up Commuity Resources

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25 MORE Ways to Waste Your Money

15. Invest in Taxable Accounts First

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If you’re investing for retirement or college in taxable accounts before maxing out your IRAs, 401(k)s or 529 college-saving plans, you’re wasting money on taxes on your earnings along the way. Cram as many dollars into these tax-sheltered investments as you can first.

For instance, say a 25-year-old invests $5,000 each year in a Roth IRA until she retires, and she makes an average annual return of 8% on her investment. She could have $1.4 million saved by the time she turns 65. However, if she stashes that cash in a taxable account earning the same return, she'll only have about $1 million (if her earnings are taxed at only 15%). That's 28% less money.

15. Invest in Taxable Accounts First

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25 MORE Ways to Waste Your Money

16. Race through Online Check-Out

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Shopping online is a great way to compare prices and find bargains (here are 15 Web Sites for Finding Deals). Once you’ve made your choice, however, take a minute to search the Internet for discount coupons or free-shipping offers. A simple Google search can often turn up money-saving codes for you to enter at check-out.

16. Race through Online Check-Out

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25 MORE Ways to Waste Your Money

17. Pack Unwisely

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You’ll pay $25 to $35 per checked bag each way on most major airlines. You’ll pay even more on international flights. And Spirit Airlines charges $30 to $45 for your carry-on, too. That can add up fast, especially when you’re bringing the whole family. Factor in baggage costs when shopping for your airfare. And don’t forget that Southwest and JetBlue still allow two bags to fly free.

Cramming two suitcases’ worth of stuff into one bag could cost you as well. If your luggage tips the scales at more than 50 pounds, you’ll pay between $50 and $200 per bag.

17. Pack Unwisely

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25 MORE Ways to Waste Your Money

18. Pay a Low Insurance Deductible

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A low deductible may seem appealing as you ponder a costly claim down the line, but you’ll pay a lot more in higher premiums along the way. Upping your out-of-pocket outlay from $250 to $500 or even $1,000 on your auto or homeowners insurance can save you 15% to 30% on premiums. Besides, when you have a low deductible, you might be tempted to file claims more frequently for small amounts. Insurers don’t like frequent claims on your record and can punish you with higher rates.

Before raising your deductibles, however, make sure you have enough cash in your emergency savings account to cover them if you ever file a claim. You won’t have to rely on costly credit cards to bail you out.

18. Pay a Low Insurance Deductible

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25 MORE Ways to Waste Your Money

19. Be Careless with Your Personal Information

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More than 11.6 million adults were victims of identity theft last year, and on average they spent $472 out of pocket to set things right.

Protect your good name—and good money—by securing sensitive information in a locked safe or behind unique online passwords. Don’t expose personal information on social networks or via mobile devices. Sign up for automatic bill-pay to avoid sending paper checks by mail. And never use a shared computer or public Wi-Fi network to shop online, pay bills or access bank accounts. See our ID Theft Prevention Kit and 10 Ways to Guard Against Identity Theft When Traveling for more tips.

19. Be Careless with Your Personal Information

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25 MORE Ways to Waste Your Money

20. Overpay for Healthcare

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Making unwise health care choices can really add up. For starters, if you don’t need to go to an emergency room, you can save hundreds of dollars by getting treatment at an urgent-care center or convenience-care clinic (such as Minute Clinic at CVS). Some insurers boost the co-insurance rate for nonemergency visits to the ER and waive your co-insurance payment entirely for convenience-care centers.

Plus, make the most of new laws that require insurers and Medicare to provide certain preventive procedures, such as blood-pressure and cholesterol tests, mammograms and colonoscopies, flu shots, routine vaccines and well-baby visits without co-pays or deductibles (see www.healthcare.gov for the list). Many employers offer incentives to participate in healthy-living programs—for example, a discount on health premiums if you enroll in a tobacco-cessation program. Your body and your wallet will thank you.

20. Overpay for Healthcare

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25 MORE Ways to Waste Your Money

21. Be an Early-Adopter

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Many gadget-lovers plunk down big bucks on first-generation—or next-gen—products only to see better, cheaper versions come down the pipeline. The first Kindle, introduced in 2007, cost $400; the latest version sells for as little as $110 without ads, is lighter and has way more memory and battery life. And you can snag a third-generation iPhone for as little as $50 (down from $600 at its 2007 introduction).

For even better deals, look for refurbished tech products, which often come with warranties.

21. Be an Early-Adopter

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25 MORE Ways to Waste Your Money

22. Buy Shoddy Merchandise

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Sometimes a bargain isn’t a bargain; it’s just cheap. If you’re going to spend your hard-earned cash on something, make sure it’ll last. For instance, if that bargain-bin footwear falls apart in a matter of weeks, forcing you to buy another pair, you would have been better off getting something well-made, even if it cost more. You shouldn’t have to replace pots and pans every year or two. Children’s toys shouldn’t break after getting dropped on the floor. An appliance should work flawlessly from day one—and it shouldn’t fail the day after the warranty expires.

It helps to inspect merchandise in person before purchasing, to scour the Internet for user reviews and to seek recommendations from friends and family. See if you can spot the real deals in our Bargain or Trap quiz.

22. Buy Shoddy Merchandise

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25 MORE Ways to Waste Your Money

23. Pay Unnecessary Travel Fees

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When renting a car, you can count on getting the hard sell for a collision damage waiver, which typically costs $20 to $30 a day. The thing is, you may already be covered. Rental-car damage and liability are covered by your auto policy, and most credit cards will pick up your deductible and miscellaneous fees. See How to Avoid Unnecessary Rental Car Fees to learn more.

Speaking of credit-card perks, it pays to know what your card offers. Some cards come with travel insurance and roadside assistance. Your card may even cover the cost of one checked bag on your next flight. Other cards include free extended warranties on purchases. Why pay extra for these services if you’re already covered?

23. Pay Unnecessary Travel Fees

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25 MORE Ways to Waste Your Money

24. Go Overboard on Parties

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Whatever happened to inviting the neighborhood kids over to your house for birthday cake, ice cream and a few games? Now families are spending hundreds of dollars on over-the-top birthday party venues, bounce-house rentals and elaborate gift bags for each guest.

And then there are weddings. Don’t get us wrong: We love weddings. We just don’t like the $27,000 bill that accompanies the average couple down the aisle. Starting your newlywed life under a crushing debt load is a bad idea. Rein in your wedding costs and do your marriage a favor. (Foisting that outrageous price tag on your parents -- who are trying to save for retirement and may have just helped you pay for your education -- is simply uncool.) See Wedding Bells on a Budget and Save $10,000 on Your Wedding for advice.

24. Go Overboard on Parties

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25 MORE Ways to Waste Your Money

25. Be Lazy

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You read this article because you were interested in plugging some spending leaks and saving money. Now you know what you can do. But knowing isn’t enough—you’ve got to act.

It’s easy to get stuck in spending habits that we’re too lazy to break. Take the time to make just one change—plug one spending hole in your budget. Once you see the savings adding up, you’ll wonder why you didn’t plug two holes, or 20.

Want even more ideas to get you started? See last year’s list of 25 Ways to Waste Your Money.

25. Be Lazy

Start Over

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25 MORE Ways to Waste Your Money

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