Spending money on expensive things you don’t need is a surefire way to deplete your bank account and lower your net worth.
Many big-ticket purchases are made on impulse or otherwise represent poor judgment.
If you truly can afford to buy a costly status symbol, go right ahead. However, if you want to get the most out of your money, there are many expensive items that you can and should live without.
Here are several examples of big expenditures you shouldn’t make.
Unless you know exactly what you’re getting into, you should avoid the complications of buying into a timeshare vacation home.
A timeshare property has divided ownership or rights of use.
Nowadays, timeshares commonly take the form of vacation interval plans. These arrangements entitle “owners” to points they can redeem for stays at various properties — but generally still require owners to pay ongoing property maintenance fees that can cost hundreds or thousands of dollars annually.
Perhaps unsurprisingly, it tends to be much harder to sell a timeshare than it is to buy into one. As Money Talks News founder Stacy Johnson notes in “Is Buying a Timeshare Ever a Good Idea?“:
“I’d bet timeshares are the source of more questions I’ve gotten over the years than any other. I can’t count the number of emails I’ve received from desperate owners looking to unload.”
2. Recreational vehicles
The idea of taking a vacation in a home on wheels may sound enticing, but consider what you’ll do with an RV once the trip is over. How often will you use it?
Some communities have laws against parking RVs on streets or in driveways for prolonged periods. If you have to rent storage space for your RV when you’re not using it, you’ll have an ongoing expense — on top of unavoidable ongoing costs like gas and maintenance.
Unless you plan to do a lot of traveling on the highway, renting an RV is probably more practical.
Services like RVShare let you rent an RV directly from its owner. And it’s possible to rent one from an RV company for as little as $1 a day if you have enough flexibility in your vacation plans to take advantage of what are known as relocation deals.
3. New cars
New cars start losing value the moment you drive them off a dealership lot. Typically, they depreciate by 20% during the first 12 months of ownership, according to Carfax, which records automobile histories.
If you buy a used car, you let someone else absorb the loss from the initial depreciation.
4. Designer clothing
When you spend big bucks on designer clothing, you’re paying for the brand name and the bragging rights that go along with wearing something exclusive. You’re probably also trying to impress others.
When fashions change, your designer clothing probably will gather dust in your closet. It makes more sense to buy quality clothing at reasonable prices and invest the money you save.
As Stacy notes in “The 10 Golden Rules of Becoming a Millionaire“:
“Diverting your investable cash into things like cars, clothing, vacations and houses you can’t afford will make you look rich now, but prevent you from actually becoming rich later.”
5. The latest technology
Technology companies depend on the public’s appetite for new devices to fuel their sales. After all, it’s fun to have the latest gadget. But if you wait a while, you usually can buy the same item for a reduced price.
So, before you make a purchase, you should ask yourself if you think that smartphone, tablet or laptop is obsolete simply because there’s a new model available.
It doesn’t make sense to buy a new version of a gadget you already own, unless there is improved functionality, says Eric Tyson, author of “Personal Finance for Dummies.”
“People who get caught up in cutting-edge technology get it in their head that they need a specific model,” he tells Money Talks News. “Are you really getting extra value for your money?”
6. Toys for grown-ups
You can spend a bundle on grown-up toys that end up sitting in your garage for long periods. Snowmobiles, Jet Skis and all-terrain vehicles can be fun, but they require big cash outlays. They also may require periodic servicing by a mechanic.
If you rarely use them, your money will be wasted. So, before you make a purchase, be honest with yourself about how much use you’ll get out of items, suggests Tyson.
“It’s important for people to think through how often they are going to use such things,” he says.
7. Watches that cost a bundle
Because you can buy a reliable timepiece cheaply, there’s no need to purchase an expensive wristwatch.
“For well under $50, you can get a watch that keeps time perfectly well,” Tyson says.
If you decide to pay hundreds or thousands of dollars on a high-end watch, you likely will be buying it for prestige.