Five (More) Dumb Deals and What to Do Instead

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Btw, the reason this story is called five more dumb deals is that I did a story a few weeks ago called “5 Dumb Deals and What to do Instead” If you missed it, check it out.

For about 20 years now, my focus in both my books and TV news has been debt. Specifically, ways to find extra money in your budget to destroy debt (or build savings) without sacrificing your quality of life. In other words, financial gain without financial pain.

Whenever I suggest it’s possible in most budgets to find extra money, it will invariably lead some in the audience to say (or think) something like this: “There’s no way I can tighten my belt any more: I’m squeezing every penny till it screams.”

Maybe. But there are definitely others out there who waste cash in countless ways by spending money on things that are not just unnecessary, in many cases they’re downright stupid.

Ready for the test? Let’s see if you’re guilty of falling for the items on my latest list. Check out the 90-second video below for my five latest dumb deals, then meet me on the other side for more detail.

Here’s another look at those dumb deals, along with a little more information.

1. Low Insurance Deductibles: if you insure yourself so you’ll never lose a penny, you’ll never have a penny to lose! $250 deductibles are common on many car and home insurance policies. Why? Because insurance is normally sold, not bought. In other words, the companies who sell you insurance make more money if you pay more, and you pay more with low deductible policies.

Better Idea: Raise your deductibles from $500 to $1,000 (or even more, depending on what you can afford) on your home or car policy: that can save you 10% – 20%; conceivably hundreds of dollars a year.

Keep in mind that the purpose of insurance isn’t to prevent financial inconvenience: it’s to prevent financial catastrophe. Insure yourself accordingly.

2. Buying Books: Books cost a ton of money and most of us read them exactly once. This is the height of insanity: why are you doing that; because your bookshelves need to have something on them?

Better Idea: Borrow the books you already bought with your tax dollars: you’re storing them at the nearest public library. Like it so much you really do want to read it again? Buy it used at any number of websites.

(Important Exception: Any book I’ve written. These should be purchased at the highest possible retail price, multiple copies if you can afford them, kept next to your bed, reread until they fall apart, then immediately replaced.)

3. Paying for Water: Only a fool would pay big money for something they can get free, or at least virtually free. Which makes us a country full of fools.

Better Idea: If you think your local water is unhealthy, odds are you’re wrong. But even if you’re right, or don’t like the way your local tap water tastes, buy a cheap filter, refill an empty expensive water bottle, carry it around and you’ll blend right in with all the fools paying soda prices for what is often just tap water anyway.

4. Paying for name brands when generics are IDENTICAL: How dumb is it to pay five bucks for a bottle of aspirin (or tons of other things) when right next to it sits the IDENTICAL THING for half the price?

Better idea: Wake up, smell the (generic) coffee and read a label or two! If the label says the ingredients are identical, buy the lower priced item! This applies to dozens of things, from aspirin to bleach to salt. What if they aren’t identical and the generic isn’t as good? Gee whiz, I guess in that case you should buy the name brand.

Never in human history have so many paid so much for so little (difference) based solely on advertising.

5. Paying 20% while earning .2% One of the dumbest, and most common, things I encounter is people with five grand in the bank earning nothing while they carry a five grand credit card balance at 20%.

Better Idea: Use your savings to pay off your debt. I understand the need for an emergency fund. But if you’re paying 20% and earning .2%, you’re on the road to creating an emergency, not solving one.

Exception: if you’re unsure about your job security, you certainly want to marshal the maximum amount of cash possible. But if you’re about to celebrate the twentieth anniversary of your government job, use low-earning savings to pay off high-cost debt.

And if you’re carrying that balance because you’re living beyond your means? Forget all the advice above and head to the nearest non-profit credit counseling agency and get some help, before the hole you’re digging buries you alive.

Well, can you say you’ve never fallen into any of those spending traps? I’m curious, so let me know by leaving a comment. Even better, help me come up with my next list: what are some dumb things you’ve seen people do with cash?

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Comments & discussion

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  • bob

    Good Ideas!

    We were heavily into debt cith credit cards several years ago-paying 90% of the money to interest. Finally got a low cost loan and tore up all the cards. We have only one now. When we use it for a major purchase or travel it is paid off the next day. Nice not to have those phone calls anymore. Actually we do get some wanting us to raise our credit limit. I always respond by saying, "How many ways do you want me to say no!".

    Cheers,

    Bob-Ottawa, Canada

  • Linda

    I have worked for a major insurance company for about 35 years and I can give you the skinny on deductibles. No insurance company with any sense at all is pushing for low deductibles any more. In fact, on homeowners we actually surcharge for any deductible less than 1%. For any amount over 1%, you receive a credit. For autos, we encourage $500 deductibles because most lenders won’t accept any higher. Why higher deductibles? Two reasons: 1- Fewer small claims; 2- Less payout on larger claims.

  • http://www.otcbulletinboard.net otc

    Wow, some great ideas. Love that insurance one, I made that mistake.

  • Maricela

    Sir, I have a question, What Do you think about one million life insurance and at the same time is savings.
    after the 3rd year of payment, the savings duplicate. Do you think is worth it.
    the payment on this life insurance is aroun 1000.00 to 1200.00 a month.
    and we can start withdrawing money at age 65.

    I will love to know if is worth it.