5 Stupid Things You Spend Your Money On

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You may be a smart person, but you probably make some dumb purchases. Here are five stupid things smart people buy over and over again.

We all buy dumb things.

I’m reminded of that every time I see the closet full of purses I just had to have. They’re all lovely, but then I look in the mirror and remember I only have two arms and one wallet.

While we all have our individual weaknesses, some stupid purchases seem to cross boundaries. You may have a good reason to buy one of these items, but the following are five things we collectively seem to lose our ability to think rationally about and get sucked into spending our money on something dumb.

1. Gym memberships

You knew this was going to be on the list, right?

There’s a good reason for it: Some statistics indicate that as many as two-thirds of gym memberships are never used. Even some club owners – who are probably more likely to be optimistic about their membership – say 25 percent of members go inactive after six months and half give up on the gym by a year.

Really, unless you are doing some form of training that involves specialized equipment, hit the pavement rather than the gym. And if you can’t resist a membership, at least skip the contract and look for a gym with a month-to-month option.

2. Extended warranties

Now, I know the stores get us at our weakest moment.

You’re going through the checkout, spending your hard-earned cash, and the clerk asks if you want to add the extended warranty. It’s only a few dollars more, and it will protect you in case anything should happen to your new treasured purchase.

Or at least, that’s what we hear. In reality, these warranties come with a laundry list of exclusions.

Plus, they may not be all that extended. Many items come with perfectly good manufacturer warranties. If the manufacturer gives you a year warranty and the extended warranty is covering the same year, what’s the point of paying extra?

3. New cars

I can fess up to buying gym memberships and extended warranties, but I have yet to be seduced by a new car.

Despite what I can only assume is the thrill of being the first and only person to be behind the wheel, I can’t get over the massive depreciation that occurs the minute you drive off the lot. Edmunds.com estimates the value of a car drops nearly 10 percent with the first mile.

Rather than spend through the nose for the privilege of driving new, wait three years for the depreciation drop to level off. Not only will you save money, you may even still get a warranty because many manufacturers offer basic plans that are good for four or even five years.

4. Credit card interest

I don’t care how good your credit card rewards are, paying interest for last month’s groceries and gas is stupid with a capital “S.”

The only time it makes sense to pay credit card interest is when you are self-financing a purchase for less interest than it would cost through a conventional loan. Even then, it might be smarter to save up some cash and skip paying interest, period.

5. Life insurance for your children

Finally, I know those Gerber life insurance commercials and mailings tug at your heartstrings.

After all, what sort of parent are you? Don’t you care about your child’s future? The implication is, of course, that if you really loved your child, you would most definitely be starting their college fund right now by buying a life insurance policy.

Emotionally it might make sense, but financially it’s hard to make a case for child life insurance. The whole point of life insurance is to replace lost income and unless your child is the next Shirley Temple, I’m guessing the kid isn’t pulling in much of a salary at the ripe old age of 3.

You might want to buy a policy if your child has a pre-existing condition that might make it difficult for her or him to buy coverage as an adult. Otherwise, take a pass.

And if you’re feeling guilty about their college fund, start a 529 plan or Coverdell savings account instead. Both offer tax benefits and typically have returns that beat the pants off a whole life policy.

One of the beautiful things about Money Talks News is we have a diverse set of intelligent readers from all walks of life. I’m sure one of you can give a compelling argument as to why everyone should have a new-car experience. Or maybe you can think of another dumb purchase I didn’t mention.

Share your insights and perspective in the comments below or on our Facebook page.

Stacy Johnson

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