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People spend a significant amount of money on insurance, and most of it is both necessary (often legally required) and worthwhile. After all, we must carry car insurance, and homeowner's insurance protects us from significant losses. Health insurance is also crucial for most people, and if others rely on your income, maintaining life insurance is the right thing to do.
Still, there are some forms of insurance that everyone should skip. Some of these cost very little, so it seems like a good idea, but those small amounts add up. Skip these types of insurance:
Loan insurance for credit card balances. These types of insurance promise to cover your payments if you become disabled or lose your job. However, the cost is outrageous in most cases—as much as two percent of the monthly balance. So take the money you would devote to the insurance and save it instead.
Car rental insurance. This one has two variants. First, if you have car insurance, you may have the option to add coverage for a rental car in case yours needs to be repaired. The charge for this coverage can be $50 or more per month, and the chances you will use it are small. In addition, many repair places offer loaners or discounts on rentals.
The other insurance related to rental cars is the optional coverage when you rent a car. In most cases, your personal insurance coverage will cover any vehicle you drive, including a rental. Yet the rental car company will charge you a substantial fee for additional insurance.
It’s possible that an extended warranty might be valuable for your car, and if you drop a bundle on cutting-edge technology, then consider it but say no for most other purchases. In many cases, the salesperson gets to keep as much as 90 percent of what you pay—because these sales are pure profit for the retailer. This caution applies to warranties for many appliances, all furniture, games, clothing, and other everyday purchases. Even if the cost is minimal, it's wasteful.
Like appliance insurance, the cost of some streaming services is insubstantial, as little as $5 or $10 per month. Frequently, consumers sign up for these using a free trial. If you don't deliberately cancel the service, the charge kicks in after the trial period. You may overlook the payment on your credit card or from your bank account. However, even a few unnecessary subscriptions can add up to noticeable money.
Even more significant are the expensive memberships. The most common example is a fitness membership, but subscription boxes are fast catching up. USA Today reported last year that 67 percent of people with gym memberships NEVER use them. Many of the rest rarely go but continue paying the charge, hoping they will change their habits.
Subscription boxes often claim that the price is less than the total value of the items included. That may be true, but only if you need and want every item in the box. If some things aren't right for you, you have wasted your money on something you won't use. Like memberships and streaming services, these subscriptions may have small individual costs but can add up.
Buying something online or in person that you didn't plan to buy is likely a mistake. Whether the impulse purchase is something big like a car or even something small like a new blouse, it is more than likely that you don’t need it and didn’t budget for it. A good rule for unplanned purchases is to think about them for 48 or more hours. After that, chances are the urge will pass.
This example is not as trivial as it sounds. Studies show that hungry people spend sixty percent more on food than people who recently ate. But it isn’t just food—shopping for anything while hungry increases the number of items consumers buy.
You can buy a case of water bottles for less than $4, but if you buy bottled water at a sporting event, concert, or amusement park, it might cost $4 for just one bottle. The same is true for other drinks, snacks, and more. So, planning to bring water with you, make coffee at home, and carry sunblock (the markup at an outdoor event is unbelievable) can save big money over time.
The same thing applies to individual portions that you buy in advance. For example, buying a large bag of chips may cost as little as ten percent of the price for the same amount of chips in little individual bags. (Not to mention how all those bags are trashing the environment.) Individual, convenience-sized packages cost more—you can buy in bulk and make your own snack-size portions using reusable bags or containers.
You probably know that overdrawing your checking account is one of the most expensive ways to borrow money. Depending on the financial institution and the frequency of your incidents, these charges can reach $75 or more. Sometimes the bank will pay for the item you didn't have enough money to cover and charge you a convenience fee. However, if the bank doesn't pay it, they will still charge you for exceeding your available balance, and the merchant will assess a fee for the refused payment as well.
Another colossal money waster is ATM fees. Your bank most likely doesn't charge you when you withdraw funds from your account unless you use a different financial institution's ATM. The charge, in that case, might be $5 every time, and the ATM you use is probably also charging you. If you withdraw $100, you might spend 8 to 10 percent on the fees. If the withdrawal was $40, that same $10 fee is 25 percent. Look for a bank with ample access or agreements that allow you to use other banks' machines.
Never assume that the prices are going to be the same somewhere else. It’s amazing how many people will pay 30 or 40 cents per gallon extra by choosing the nearest gas station. If you put 20 gallons in your tank, you8 could waste $8 or more. Do that once a week, and it adds up. The same thing is true for other items that you buy regularly. Make a comparison and find out where you can get the best deal. You might save hundreds of dollars on some high-ticket items, but even saving $5 a day adds up quickly.
In most cases, the store brand of a product is made by one of the major national manufacturers and simply marketed with the “generic” or plain wrap name. This allows the retailer to sell it for less because they avoid the high cost of creating and producing commercials. For example, Costco is a master at selling high-quality items under their store brand for less than half the price charged by the manufacturer.
Similarly, using a coupon for the brand name version may seem like a deal, but often even with the discount, it's more expensive than the store brand or knock-off price. Sometimes you can indeed spot the difference, but in most cases, it's the same product. Compare simple items like pain relievers, and you will be shocked at the cost difference.
Ten percent may not sound like a big deal. Still, if your auto mechanic allows a ten percent discount for seniors, students, active and retired service members, or some other group you qualify for, that could save you hundreds of dollars. In addition, vets, restaurants, boutique shops, and food services often offer discounts if you ask, but they don't offer them if you don't.
The moral of the story? ALL OF THESE THINGS ADD UP TO A MASSIVE DRAIN ON YOUR FINANCES. Knocking these BS money wasters can significantly help your monthly budget. I say this in almost every video, but remember, your goal is to manage expenses so you CAN INVEST AS MUCH AS POSSIBLE EACH MONTH. I’m putting up a video next to me now on the topic of a simple and strategic budgeting strategy that can help you maximize or even START budgeting for investing so that you can achieve your goals financially AS SOON AS POSSIBLE. Click on the link to learn more about how to easily budget stress free every month.
A master in Investment, Marketing, and Capital Raising.
Nic has honed his focus on the Real Estate and debt markets with Saint Investment Group and pursues large-scale Distressed Asset purchases with his partners and syndications.
