No matter how conscientious you may try to be, certain money wasters can creep up on you. Some may be staring you in the face, but others can be lurking in the shadows just waiting to snatch some of your hard-earned cash. Best to be forewarned. Review these 13 scary (and very common!) money wasters to make sure you're not taken by surprise.
- Credit card interest and late fees--Credit is practically essential in today's world, but it can also be a tremendous drain on your finances if you're not careful. Do you carry a balance month-to-month? Are you sometimes late on your payments? Watch out! Interest rates and late fees can add up quickly and result in paying considerably more for your purchases over time.
- Low credit score--This is a particularly sneaky one. If you have a low credit score, while you still may be able to get a loan, you're likely to pay a lot more for it. A low score usually equals a higher interest rate and higher points on a mortgage. It can even cost you in terms of your ability to rent an apartment--or in some cases--get a job.
- Not having the correct amount of insurance you need--Paying for minimal insurance coverage may save on premiums, but it could end up putting you in financial jeopardy. Not having enough medical, auto or homeowners insurance could mean big bills when you're least able to pay. If you opt for less insurance, be sure you have enough socked away to cover deductibles, co-pays, and the added expenses of self-coverage.
- Paying for unnecessary insurance--On the other hand, don't be lured into buying insurance you don't need. Typical insurance gotchas are things like life insurance if you don't have dependents, life insurance for children, pet insurance, flight insurance, rental car damage insurance--even wedding insurance.
- Taking Social Security too soon--Don't jump to collect if you don't have to. If you take your Social Security benefits at 62, it will be permanently reduced by about 25 percent. That can be a considerable amount of money over time. If possible, wait to collect and your benefit goes up by approximately 8 percent each year you wait past your full retirement age up to age 70. That's potentially a 32 percent bonus!
- Not capturing your employer match--No one likes to leave money on the table, but that's exactly what you're doing if you don't contribute to your 401(k) at least up to the employer match. Not only that, you're missing out on the tax-free growth of your savings. Taken together, that can add up to a pretty scary loss--particularly come retirement.
- Buying a brand new car--A new car depreciates the minute you drive it off the lot. It can be hard to pass up that tricked-out latest model, but try to resist. Even a car with only a few thousand miles on it will cost you considerably less upfront as well as over time if you finance it.
- Cable and Internet fees--A yearly cost increase may seem like a fact of digital life, but you don't have to accept it. Most cable and Internet companies are willing to negotiate. Take the time to call the company and discuss alternatives. You might be surprised at how amenable they are.
- Bank fees--ATM fees, account fees, foreign transaction fees--they can definitely sneak up on you! Review your statements so you know exactly what you're being charged. If you're unpleasantly surprised by the fees you're paying, talk to your bank. Still unhappy? Change banks. There are many no-fee options out there.
- Gym memberships and other things you don't use--We all have the best of intentions. Of course, we'll go to the gym several times a week. No way will we miss a performance at the opera. But be realistic. Unused gym memberships are a classic waste of money. Likewise, unused season tickets. Make sure you're really committed before shelling out money in advance.
- Impulse buys--How many things that you bought on the spur of the moment are haunting your closet or garage? An impulse buy can be fun at the time but end up being a colossal waste of money. Of course, you don't always have to resist. One method I find particularly useful is to keep the tags on your purchase for a week. If you still want it after that time, great. If you don't, return it.
- Extended warranties--They sound like a wise idea but extended warranties are almost always a waste of money. Besides, most credit card companies include extended warranties as a perk. Why pay extra for something you already have?
- Costly kids' things--Halloween isn't the only time when kids' costs creep up on us. Whether it's costumes, toys or designer clothes, kids' stuff isn't cheap. I'm not saying deny your kids; just think of creative ways to give them the things they want. Making costumes and masks can be fun. Clothing swaps are a great way to enhance a wardrobe. Better yet, when your kids have some money of their own, have them contribute to the purchase. They'll appreciate it even more--or maybe even decide they don't want to waste their money!
Looking for answers to your retirement questions? Check out Carrie's book, "The Charles Schwab Guide to Finances After Fifty: Answers to Your Most Important Money Questions."
This article originally appeared on Schwab.com. You can e-mail Carrie at email@example.com, or click here for additional Ask Carrie columns. This column is no substitute for an individualized recommendation, tax, legal or personalized investment advice. Asset allocation and diversification cannot ensure a profit or eliminate the risk of investment losses. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager. Diversification cannot ensure a profit or eliminate the risk of investment losses.
The information provided here is for general informational purposes only and is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager.
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