7 Crucial Money Mistakes You Must Avoid

Money mistake
Photo by Krakenimages.com / Shutterstock.com

Americans are terrible savers. Study after study have shown that we can barely scrape together a few hundred dollars, let alone $1,000 or more.

If you are in this camp, don’t give up hope: It is never too late to turn things around. In fact, simply avoiding a few common errors is a great way to boost your savings rate.

Following are some boneheaded mistakes that can seriously dent your ability to build a financial cushion or nest egg — plus, some fixes that can get you on the road to substantial wealth.

1. Buying new when used would do

Bad move: Yes, a shiny new car will impress the Joneses — for a little while. But shelling out $20,000 to $30,000 for a new car is potentially disastrous to your long-term financial picture.

Better move: Let’s say you buy a used car for $15,000 instead of a new one for $30,000. Then, you take the $15,000 you saved, earmark it for a retirement account and invest it in a mutual fund that earns an average 8% a year over the next 30 years.

At the end of that time, you’ll have around $150,000 — and that “compromise” car will be long forgotten.

So, invest in your future and avoid a monster depreciation hit by buying used instead of new. Cars are made better today than ever before, which makes buying used ones less risky.

The choices is yours: A few “oohs” and “ahs” from your neighbor today, or an extra $150,000 in retirement.

2. Paying retail for stuff you rarely use

Bad move: Perhaps you live in a place where you get just a handful of snowstorms every year. If so, does it make sense to go out and spend thousands of dollars on a snowblower you will use three or four times a year?

Don’t spend big bucks on expensive hardware you’re going to use infrequently.

Better move: Borrow rarely used stuff from friends or family. Other options are to rent what you need, or to form a neighborhood co-op to share the expense, storage and use among the people on your block. After all, sharing a few things with a neighbor can reduce both cost and clutter by 50%.

3. Paying extra for a low deductible

Bad move: Everybody hates paying a high deductible. It feels outrageous to first pay an annual or semi-annual insurance premium, then have to fork over $500 or $1,000 per claim before your coverage even kicks in.

But claims are — or should be — rare. Odds strongly favor a higher deductible leading to increased savings over time.

Better move: Self-insure by raising your deductibles to as high a level as you can comfortably afford. Raising home insurance from $500 to $1,000 can cut your premium by 25%, according to the Insurance Information Institute.

4. Buying books

Bad move: Don’t pay $29 for a best-selling hardcover that probably isn’t as good as your friend said. Even if the book is great, how many times are you going to read it?

Better move: Find the same book sitting on the shelves of your local library. Remember, your tax dollars already paid for that book, so you might as well check it out.

Even better, get your book as a free e-book download so you don’t even have to leave your desk. For more, check out “11 Places to Find Free E-Books.”

5. Paying for water

Bad move: Want to feel foolish? Spend $1.50 for a plastic cylinder containing an abundant and freely available natural resource: water.

Better move: Buy an insulated water bottle and fill it yourself. If you don’t trust local water quality, purchase a home water filter.

6. Buying into brands

Bad move: Paying big bucks for name-brand tablets of acetaminophen just doesn’t make financial sense.

Better move: Stop by Amazon, and you can easily get just as many tablets with the same exact ingredients as the name brand, all at a much lower price. Read “20 Products You Should Always Buy Generic” and stop contributing to some big company’s advertising budget.

7. Passing up retirement plans

Bad move: Not participating in your employer’s 401(k) or other retirement plan can be like throwing away free cash, since many employers match a certain percentage of employee contributions. By not participating, you also miss out on potential tax deductions.

Better move: Sock all the money you can spare into a tax-advantaged retirement plan like a company 401(k). If that’s not available, fund your own IRA. To get started, check out:

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
The Worst Nursing Homes in America Are Revealed
The Worst Nursing Homes in America Are Revealed

The nursing homes with a history of providing subpar care previously hadn’t been identified for a government list.

This Is the Best Age to Buy Long-Term Care Insurance
This Is the Best Age to Buy Long-Term Care Insurance

If you wait too long to apply for coverage, you could be denied. So, when’s the sweet spot to apply?

Small Splurges That Make It Feel Like You’re Living Large
Small Splurges That Make It Feel Like You’re Living Large

Cutting costs is the shortest path to financial freedom. However, there are times when a little spending can produce big returns.

7 Ways to Shop at Costco Without a Membership
7 Ways to Shop at Costco Without a Membership

You don’t necessarily need to join to get in on the warehouse store’s savings.

14 Service Providers Most Likely to Lower Your Bill If You Ask
14 Service Providers Most Likely to Lower Your Bill If You Ask

With these companies, it might be easier than you think to negotiate your monthly bill down.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
20 Things That Are Actually Worth Stockpiling
20 Things That Are Actually Worth Stockpiling

You don’t need a year’s supply of toilet paper to survive an outbreak, but consider stocking up on these items.

Can a Twice-Divorced Woman Claim Social Security Survivors Benefits?
Can a Twice-Divorced Woman Claim Social Security Survivors Benefits?

Understanding survivors benefits rules is the key to getting the most from your benefit.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

These Are the 10 Worst Cars for Depreciation
These Are the 10 Worst Cars for Depreciation

Two types of vehicles are especially likely to see steep plunges in value.

11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

Never Buy These 10 Things With Your Credit Card
Never Buy These 10 Things With Your Credit Card

Credit cards offer many conveniences and protections, but sometimes it’s simply smarter to keep the plastic tucked away.

13 Amazon Purchases That We Are Loving Right Now
13 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

10 Things I Always Buy at Trader Joe’s
10 Things I Always Buy at Trader Joe’s

From snacks to sweets to side dishes, stock your cart with these time-tested favorites on your next TJ’s run.

5 Ways Social Security Will Change in 2021
5 Ways Social Security Will Change in 2021

These adjustments will affect both workers and retirees in the new year.

8 Surprising Household Items You Can Sell for Fast Cash
8 Surprising Household Items You Can Sell for Fast Cash

Sometimes, the humblest household items are worth the most money.

11 ‘Disposable’ Items You Should Be Reusing
19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

There are easy high-paying majors available in the U.S. — and no bachelor’s degree is required. We’re here to help you find easy degrees that pay well.

8 Things You Should Buy at Restaurant Supply Stores
8 Things You Should Buy at Restaurant Supply Stores

You don’t have to be a chef or a restaurant owner to shop here.

Cut These 11 Expenses Now If You Hope to Retire Early
Cut These 11 Expenses Now If You Hope to Retire Early

Like the idea of financial independence? Part of the FIRE equation is cutting costs.

Stop Buying These 19 Things Online
Stop Buying These 19 Things Online

The internet has changed how we shop. But for some things, you’re still better off buying the old-fashioned way.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

7 Tips for Building an Emergency Food Supply
7 Tips for Building an Emergency Food Supply

A pandemic or natural disaster could leave you reliant on your existing emergency food supply. Is your pantry well-prepared for emergencies? Knowing what to stock up on for emergencies can be a difficult task and we’re here to help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.